The 1 Tech Stock I Think Has More Upside Than Anything Else in the S&P 500 Right Now

The world is infatuated with anything artificial intelligence (AI) or energy in 2026. These trends have driven the S&P 500 index up 7% year to date, despite fits and starts amid the U.S. conflict in Iran and the closure of the Strait of Hormuz. Some stocks, including Micron Technology, are up by more than 100% so far this year.

Index fund investors have gotten quite rich in this environment. But the index has also been driven to a high price-to-earnings ratio (P/E), with many stocks trading at expensive levels. For contrarian investors, now is the time to look away from the heavy hitters of the S&P 500 to cheaper stocks around the world.

Here's one technology stock I like more than anything in the S&P 500 right now: MercadoLibre (NASDAQ: MELI).

E-commerce acceleration

MercadoLibre is the largest e-commerce player in Latin America, with a presence in every large economy in the region. Over the years, the company has compounded its revenue in a similar way to Amazon, driving growth by expanding its product selection and improving the availability of fast, free shipping for premium members.

In recent years, competition in e-commerce in Latin America has increased, driven by players such as Amazon. To maintain its lead in Brazil and other places, MercadoLibre is pressing the accelerator to offer better selection and faster shipping across all items sold on its marketplace. This approach includes lowering free shipping thresholds, increasing the number of cross-border merchants from the likes of China and the United States, and adding first-party selections sourced by MercadoLibre to widen its selection for consumers.

All of these investments are paying off with accelerating revenue growth. For example, in Brazil, gross merchandise volume (GMV) sold on the platform grew 38% year over year in local currency last quarter, its fastest growth in five quarters. The more volume processed through MercadoLibre's network, the more leverage it will obtain on its fixed infrastructure costs and free delivery benefits.

In the short run, this situation is leading to margin compression. Income from operations decreased by 20% last quarter, but, as with Amazon in the United States, these investments are setting MercadoLibre up for steady growth over the next decade.

Image source: Getty Images.

More monetization layers

What is underrated about MercadoLibre is the high-margin monetization levers it has built, which it can layer on top of its e-commerce network. First, there's advertising revenue, which grew 63% year over year in local currencies last quarter, faster than overall revenue. This is high-margin revenue that can offset the slim margins in standard e-commerce and delivery sales.

On top of retail, MercadoLibre has a massive financial technology empire that spans everything from processing payments on its own platform to payment terminals to personal loans to credit cards. These are not only tools to boost spending on MercadoLibre (for example, credit card rewards points) but also self-sufficient lending and payments revenue streams.

For example, total payment volume through its acquiring/payment processing division grew 41% year over year last quarter, with overall financial technology revenue up 54% in constant currency. That's highly impressive for a company of its size and shows the opportunities still available in digital payments and online banking in Latin America, similar to what happened in the United States 15 years earlier.

MELI Revenue (TTM) data by YCharts

Why MercadoLibre stock is better than anything in the S&P 500 today

Right now, MercadoLibre's shares trade at a P/E ratio of 42, which may not seem like a bargain against the S&P 500, which has an average P/E of 32 and is full of AI beneficiaries.

MeracdoLibre's P/E ratio understates its true profit potential for investors who hold over the next decade. It generates only $31.8 billion in annual revenue, giving it a huge growth runway compared to Amazon, which does more than $400 billion in sales just in North America. Latin America remains a decade behind its northern counterparts in online shopping and digital payments adoption, giving MercadoLibre many years to grow at a pace close to today's.

Profits are being suppressed right now, but they could easily be much higher in a decade, driven by continued growth in advertising and high-margin financial technology revenue. If MercadoLibre's revenue grows to $100 billion within five years and its net margin expands to 15%, that's $15 billion in revenue versus its current market capitalization of $81 billion, or a P/E ratio of just 5.4. That is dirt cheap, and it's the reason MercadoLibre stock is better than anything in the S&P 500 today.

Brett Schafer has positions in MercadoLibre. The Motley Fool has positions in and recommends Amazon, MercadoLibre, and Micron Technology. The Motley Fool has a disclosure policy.