The S&P 500 has just logged its third straight year of double-digit gains.
AI-linked shares have been a major tailwind for the benchmark, as enthusiasm around the technology stayed hot.
That showed up in 2025 moves: Nvidia (NASDAQ: NVDA) rose about 40% and Palantir Technologies about 140%, while CoreWeave surged more than 300% from its March initial public offering through June—despite dipping afterward, it still put up a significant annual gain.
It’s the annual reset button: 2025 is done, 2026 is here, and the market is already forcing the same two questions back onto everyone’s screen. Can the S&P 500 keep climbing after three consecutive double-digit years—and if it does, who does the heavy lifting?
Nobody gets to answer that with 100% certainty. But you can look at the setup and sketch a few reasonable scenarios. Last year, my view was that artificial intelligence would remain the market’s engine, and that’s broadly how it played out. Nvidia advanced about 40%, Palantir Technologies jumped about 140%, and CoreWeave delivered a dramatic run—up more than 300% from its March initial public offering through June—before giving back some ground while still ending with a sizable annual gain.
So what changes in 2026? Here are my five predictions.
1) AI winners and losers will finally separate
Over the past couple of years, “AI exposure” has been enough to move share prices—whether a company is building AI, enabling it, or simply positioning itself close to the narrative. In some cases, even businesses far from profitability have seen their stocks take off because investors want a seat at the table.
In 2026, I expect the market to become less forgiving. Some not-yet-profitable AI names may keep running, but investors are likely to demand clearer proof points: a visible path to profitability, defensible positioning, and credible long-term prospects. In other words, the easy phase of “AI by association” should fade.
That’s when leaders tend to stand out. Well-established players such as Nvidia and Amazon come to mind, but smaller and younger companies can still qualify—if they can show execution and staying power as the boom moves into its next stage. If you’re buying AI stocks this year, focus on track record, competitive pressure, and where the company sits in the broader AI stack.
2) The market won’t be an “AI-only” story
Even if many AI names keep posting wins, I don’t think 2026 leadership stays locked in one theme. The S&P 500—which I believe will climb—may also be pushed higher by industries that haven’t been the center of the spotlight, from pharmaceuticals to consumer-oriented companies.
Why would that happen? AI stocks have had a multi-year run. While the long-term case may remain strong, early winners often attract profit-taking and portfolio rotation as investors look for the next area of upside. If you’re heavily concentrated in AI, broadening across sectors in 2026 is sensible either way—whether this prediction lands or not, diversification tends to hold up across market environments and over longer horizons.
3) Dividend stocks get more attention
Dividend payers have had a tougher time competing with the headline momentum of AI. Some mature tech companies do pay dividends, but the most consistent income profiles still tend to show up in areas like healthcare, consumer goods, and industrials.
If investors lean harder into diversification in 2026, dividend stocks could benefit—especially for those who want some return that isn’t purely dependent on day-to-day market mood. For anyone looking for a starting point, the “Dividend Kings” list is one screen to consider: these companies have raised their dividend payments for at least 50 straight years, a signal that shareholder payouts are embedded in the culture and may remain a priority.
4) Valuations come down from elevated levels
As of Dec. 31, 2025, the S&P 500 Shiller CAPE ratio stood at 39, a level the index has reached only once before across its history.
Shiller CAPE looks at price relative to earnings per share over a 10-year period, which makes it a useful way to step back from one-year noise and gauge valuation more cleanly. At today’s reading, the message is straightforward: in aggregate, stocks look expensive.
My expectation for 2026 is that this valuation pressure eases as investors—many of whom have already voiced concern about pricing—lean toward more reasonably valued opportunities. If that plays out, it wouldn’t be bad news. Lower valuations can create the kind of entry points long-term investors usually want.
5) Quantum computing could deliver sudden bursts of upside
Quantum computing stocks have been climbing in recent years on the promise of a technology that, in theory, could tackle problems beyond the reach of even the most powerful supercomputer. The field draws on quantum mechanics, and progress has come from both pure-play companies such as IonQ and large platforms like Alphabet.
The catch is complexity: turning quantum computing into something broadly useful could still take years. But markets don’t wait for the final product. Milestones along the way—technical breakthroughs, partnerships, or clearer commercialization paths—can move shares quickly. For growth investors, that can mean selectively building exposure to a few credible players early, while having the patience to hold through the long timeline.
A note on Nvidia and “top stock lists” often promoted alongside this topic
Some services publish rotating “top 10” buy lists and note that Nvidia wasn’t one of them at the time of publication. They also highlight historical examples—such as Netflix on Dec. 17, 2004, where a $1,000 investment would have become $490,703, and Nvidia on April 15, 2005, where $1,000 would have grown to $1,157,689—and cite a total average return of 966% versus 194% for the S&P 500. (Those figures are presented as part of that promotional framing, not as a guarantee of future results.)
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The above content was completed with the assistance of AI and has been reviewed by an editor.
