The Stock Market Tumbled After the Midterms. History Says This Sector Could Rally More Than 30% in the Next 12 Months

Is there trouble brewing for artificial intelligence (AI) stocks? Last week, the U.S. midterm elections took place, and the Democrats were the big winners, capturing both chambers of Congress. This led to a broad equity sell-off as investors fear that one of the Democratic Party's priorities will be to stall the massive ongoing AI infrastructure build-out. Should you follow the crowd and offload shares of top AI stocks? Not if history is any guide. Here's what typically happens to equity markets, and the tech sector in particular, after the midterms.

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The tech sector tends to perform well

Elections can create uncertainty, which investors don't like. But at least some of the uncertainty is resolved once we have the results. There is plenty of risk remaining -- the difference between risk and uncertainty is that with the former, we can reliably assign probabilities to possible outcomes, whereas with the latter, we cannot. Equity markets prefer risk over uncertainty.

Perhaps that's why stocks tend to perform well after the midterms. According to some data, the average return for the S&P 500 in the 12 months following midterm elections has been about 15%. However, there is evidence that the technology sector has performed even better than that. Consider, for instance, that the tech-heavy Nasdaq-100 has gained an average of 37% in the year following the midterms since 1990.

Of course, this historical trend may not hold this time around. But even if tech stocks or broader equities don't perform well over the next year, we have good reasons to expect them to rise over the next five to 10 years, regardless of which party holds the majority in both chambers of Congress in 2028, 2030, or any year after that. With that in mind, let's consider two stocks to buy right now that could deliver strong returns over the long term.

Capitalizing on the AI boom

The first tech stock I think investors should consider right now is Meta Platforms (NASDAQ:META). The social media leader boasts one of the largest ecosystems in the world: Roughly 3.64 billion people visit at least one of its websites or apps every single day.

That allows Meta to generate consistent sales from ads. In the third quarter, Meta Platforms' revenue increased 26% year over year to $64.6 billion. Here's the best part. Meta could unlock significant new monetization opportunities thanks to AI. The technology has already helped the company improve its ad business through AI-powered algorithms on its websites that make it easier for users to find what they are looking for, thereby boosting engagement.

Now, Meta has launched its Muse AI agent. Muse became popular quickly. Meta is looking to monetize the agent by charging retailers small fees for each transaction Muse helps people complete.

The small-business version of Muse could also open up monetization opportunities, and Meta continues to invest small fortunes in its AI ambitions. That's why free cash flow has declined in recent quarters, but in my view, it's worth it. Meta could beat the market over the next five years and beyond as its AI investments continue to pay off.

Another AI stock to consider buying right now is Marvell Technology (NASDAQ:MRVL), a company that designs custom AI chips. Soaring demand for these products, which are often cheaper than market-leading GPUs (graphics processing units), has boosted Marvell's revenue and earnings.

In the second quarter of its fiscal year 2027, which ended on Aug. 1, Marvell's revenue grew 37% year over year to a record $2.7 billion. The company's GAAP earnings per share were $0.33, up 50% compared to the year-ago period. Marvell sees demand for its AI chips accelerating over the medium term.

Management expects the data center addressable market to be $385 billion by 2030, expanding at a 50% compound annual rate. Note that Marvell's trailing-12-month revenue is only $9.45 billion. Marvell won't capture the entire market on its own, and the company could face lower-than-expected demand. But even with these caveats, Marvell's financial results and partnerships with hyperscalers such as Alphabet (NASDAQ:GOOG) (NASDAQ:GOOGL) make the stock a fairly attractive pick to hold over the next five years.

Prosper Junior Bakiny has positions in Alphabet and Meta Platforms. The Motley Fool has positions in and recommends Alphabet, Marvell Technology, and Meta Platforms. The Motley Fool has a disclosure policy.