Prediction: This Unstoppable Vanguard ETF Will Beat the S&P 500 in the Second Half of 2026

The S&P 500 (SNPINDEX: ^GSPC) is a diversified stock market index made up of 500 companies from 11 different economic sectors. But then there is the S&P 500 Growth index, which exclusively invests in the top 145 growth stocks from the regular S&P 500, while disregarding the other 355 stocks.

Therefore, the Growth index has much larger positions in the trillion-dollar technology giants that typically lead the broader market higher, resulting in consistently better annual returns compared to the S&P 500. However, many of those stocks -- which I'll highlight shortly -- have actually underperformed the market so far this year.

The Vanguard S&P 500 Growth ETF (NYSEMKT: VOOG) tracks the S&P 500 Growth index. I think the sluggish performance in some of America's largest stocks will reverse in the second half of this year, so here's why I think the exchange-traded fund (ETF) will beat the benchmark index over the next six months.

Image source: Getty Images.

America's top growth stocks took a breather in the first half of 2026

The S&P 500 Growth index chooses stocks based on their momentum and the sales growth of the underlying companies. As a result, it has relatively large positions in each of the "Magnificent Seven" stocks: Nvidia, Apple, Alphabet, Amazon, Tesla, Meta Platforms, and Microsoft.

Those seven companies have a combined market capitalization of $21 trillion, representing 34.3% of the S&P 500's total market capitalization -- but a whopping 50.8% of the Vanguard S&P 500 Growth ETF's market capitalization.

Data source: Vanguard. Portfolio weightings are accurate as of May 31, 2026, and are subject to change.

Except for Alphabet, each one of the Magnificent Seven stocks underperformed the S&P 500 in the first half of 2026. The worst performer -- Microsoft -- was down by a staggering 22.9%.

GOOGL data by YCharts

Given its enormous exposure to those stocks, it's remarkable that the Vanguard S&P 500 Growth ETF is keeping pace with the S&P 500 at all this year. However, it also has larger positions in artificial intelligence (AI) infrastructure stocks like Micron Technology, Advanced Micro Devices, Lam Research, and Applied Materials, each of which more than doubled in the first half of the year, helping them pick up some of the slack.

LRCX data by YCharts

The Vanguard ETF has a stellar track record against the S&P 500

The Vanguard S&P 500 Growth ETF delivered a compound annual return of 16.9% from its 2010 launch through June 30, handily beating the S&P 500, which returned an average of 15.1% per year over the same period. This track record alone suggests the ETF should pull away from the S&P 500 in the remainder of 2026, but past performance isn't always a good indicator of future results.

To pull off a strong return over the next six months, the Vanguard ETF will need a big contribution from the Magnificent Seven stocks, considering they make up over half of its value. The good news is that most of them are quite cheap right now.

As of June 30, Nvidia stock was trading at a price-to-earnings (P/E) ratio of just 30.6, less than half its 10-year average. Meta, Microsoft, Alphabet, and Amazon each have P/E ratios below 30, so they are much cheaper than the Nasdaq-100 technology index, which trades at a P/E of 34.1. All four companies are expected to grow earnings in 2026 and 2027, making them even cheaper on a forward basis.

Tesla is the only stock in this group that can genuinely be considered expensive, mainly because of the company's shrinking earnings. Fortunately, it has a much lower weighting in the Vanguard ETF than its peers, so it won't be a major drag on performance.

In summary, I don't think Wall Street can ignore the value on offer in some of these tech giants for much longer. They are among the highest-quality companies in the world and operate at the forefront of rapidly growing industries like AI. As a result, I predict they will turn around in the second half of 2026, leading the Vanguard S&P 500 Growth ETF to another market-beating annual return.

Anthony Di Pizio has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Advanced Micro Devices, Alphabet, Amazon, Apple, Applied Materials, Lam Research, Meta Platforms, Micron Technology, Microsoft, Nvidia, and Tesla. The Motley Fool has a disclosure policy.