U.S. stock markets continue their northbound journey in 2026 after the astonishing bull run of the last three years. Likewise, Wall Street’s popular adage “Sell in May and Go Away” is not matching this year.
With just two days of trading left, the three major stock indexes — the Dow, the S&P 500 and the Nasdaq Composite — are all in positive territory in May. Similarly, mid-cap-centric S&P 400 and small-cap benchmarks — the Russell 2000 and the S&P 600 — are also in green.
May’s performance was primarily attributable to the solid performance of the technology sector, specifically the rejuvenated artificial intelligence (AI) trade. Month to date, the tech-heavy Nasdaq Composite has advanced 7.2%. The Technology Select Sector SPDR (XLK), one of the 11 broad sectors of the S&P 500 Index, has surged 15.6%. The Philadelphia Semiconductor Index (SOX) jumped 20.9%.
At this stage, we recommend five AI bigwigs that have provided lucrative returns year to date. Despite this, their current top Zacks Rank indicates attractive price upside potential in the short term.
The stocks are: Ciena Corp. CIEN, Lumentum Holdings Inc. LITE, Teradyne Inc. TER, Microchip Technology Inc. MCHP and Texas Instruments Inc. TXN. Each of our picks currently sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
The chart below shows the price performance of our five picks year to date.
Image Source: Zacks Investment Research
Ciena Corp.
Ciena has been benefiting from accelerating AI-led demand from cloud and service provider customers. Powered by strong cloud and service provider momentum, CIEN has gained 2 points of optical market share year to date and expects further gains in 2026.
CIEN continues to capitalize on WAN connectivity needs across subsea, long-haul, metro networks and DCI. Better pricing, Hyper-Rail innovation and cost optimization are expected to boost gross margins, ahead. For fiscal 2026, adjusted gross margin is projected at 43.5-44.5%.
With the first half exceeding expectations and supply challenges being managed, CIEN now expects first- and second-half gross margins to be roughly similar. It is managing supply conditions effectively and expanding capacity, but demand is expected to exceed supply for the next several quarters. For the second quarter, CIEN expects revenues of $1.5 billion (+/-$50 million).
Ciena has an expected revenue and earnings growth rate of 28% and more than 100%, respectively, for the current year (ending October 2026). The Zacks Consensus Estimate for the current year’s earnings has improved 0.2% in the last 30 days.
Lumentum Holdings Inc.
Lumentum Holdings designs and manufactures optical and photonic technologies for high-speed telecommunications, data centers, and advanced manufacturing. LITE provides components, such as transceivers and lasers for fiber-optic networks, supporting the rapid growth of AI, cloud computing, 5G connectivity, and beyond.
LITE’s technology leadership in high-speed optical components has positioned it as an essential supplier to hyperscale customers deploying next-generation network architectures. Moreover, LITE has a strong collaboration with NVIDIA for developing NVDA’s silicon photonics ecosystem, especially for deploying the latter’s Spectrum-X Photonics networking switches.
Lumentum Holdings has an expected revenue and earnings growth rate of 84.8% and more than 100%, respectively, for the next year (ending June 2027). The Zacks Consensus Estimate for the next year’s earnings has improved 12.3% in the last 30 days.
Teradyne Inc.
Teradyne benefits from strong AI-related demand that is driving significant investments in cloud AI build-out as customers accelerate the production of a wide range of AI accelerators, networking, memory, and power devices. AI computing is witnessing technological progress, which is bringing rapid transformation to design, process, and packaging technologies.
TER benefits from AI-led test demand as hyperscalers and semiconductor vendors ramp compute, networking, memory, and power devices. Teradyne’s wafer-to-AI data center strategy is translating into demand across Semiconductor Test, Product Test, and Robotics, supported by a portfolio that spans wafer, package, board, and system-level needs.
Management noted it more than doubled UltraFLEXplus shipments over the last nine months while sustaining 12-to-16-week lead times. New platforms like Photon 100 for silicon photonics and Omnyx for server board test extend TER’s reach from wafer to data center, and recent MultiLane and TestInsight deals broaden high-speed interconnect and design-to-test software.
Teradyne has an expected revenue and earnings growth rate of 42.1% and 79%, respectively, for the current year. The Zacks Consensus Estimate for the current year’s earnings has improved 14% over the last 30 days.
Microchip Technology Inc.
Microchip Technology benefits from growing AI investments. The company’s Gen 4 and Gen 5 data center products are witnessing strong sales growth. MCHP’s new products are expected to gain traction with the launch of the industry's first 3-nanometer-based PCIe Gen 6 switch that powers modern AI infrastructure.
These switches offer double bandwidth, lower latency, advanced security and high-density AI connectivity for next-generation cloud and data center performance. The success of the restructuring plan also bodes well for MCHP’s prospects. The company also entered the PCIe retimer market in the June 2026 quarter as a companion device for Gen6 switches, and disclosed an OEM design win that displaced a competitor.
MCHP has expanded connectivity, storage and compute offerings for AI and data center applications as well as intelligent power modules for AI at the edge. These factors are expected to drive top-line growth in the long term.
Microchip Technology has an expected revenue and earnings growth rate of 31.5% and 84.2%, respectively, for the current year (ending March 2027). The Zacks Consensus Estimate for the current year’s earnings has improved 17.5% in the last 30 days.
Texas Instruments Inc.
Texas Instruments is benefiting from solid AI-powered data center demand, which is boosting its prospects in the enterprise systems market. As AI infrastructure scales from data centers to edge devices, vehicles, and industrial systems, TXN’s chips are becoming critical components in the broader buildout.
TXN has a strong position in the foundational analog and embedded processing semiconductor markets, which are critical for long-term growth in key industries like industrial, automotive, personal electronics and AI data center.
TXN is expanding rapidly in the high-growth data center market, a segment that has become a key long-term opportunity for the company. In 2025, its data center business reached an annual run rate of about $1.2 billion, growing more than 50% year to date. The company supplies critical analog and power management chips used in servers, networking and power delivery systems.
Texas Instruments plans to report data center as a separate market starting in 2026, highlighting its strategic importance. As cloud and AI workloads continue to rise, TXN’s strong portfolio and manufacturing scale position it well to benefit from sustained demand for efficient, high-performance power solutions in data center infrastructure.
Texas Instruments has an expected revenue and earnings growth rate of 17.4% and 40.6%, respectively, for the current year. The Zacks Consensus Estimate for the current year’s earnings has improved 1.2% in the last 30 days.
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Texas Instruments Incorporated (TXN): Free Stock Analysis Report
Ciena Corporation (CIEN): Free Stock Analysis Report
Microchip Technology Incorporated (MCHP): Free Stock Analysis Report
Teradyne, Inc. (TER): Free Stock Analysis Report
Lumentum Holdings Inc. (LITE): Free Stock Analysis Report
This article originally published on Zacks Investment Research (zacks.com).