Wall Street has had an impressive run this year despite geopolitical tensions and a spike in inflation that has time and again raised concerns. The S&P 500, particularly, has been one of the biggest gainers this year, with the index hitting a fresh all-time closing high on Monday.
The index is getting a boost from optimism surrounding AI and an impressive performance by mega-cap tech stocks.
Given the solid bull run, it would be ideal to invest in S&P 500 stocks, such as Cisco Systems, Inc. CSCO, Analog Devices, Inc. ADI, Applied Materials, Inc. AMAT and Datadog, Inc. DDOG, which have strong potential in 2026. Each of these stocks currently carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
S&P 500 Hits New High
The S&P 500 added 21.99 points, or 0.30%, on Monday to close at 7,405.73 points, a new all-time closing high. The index has now reached its 24th all-time record closing high this year. The rally has largely been driven by solid first-quarter earnings by mega-cap companies and robust investments in AI.
The S&P 500 started the year on a high but gave up all its gains in March as tensions in the Middle East intensified. The index lost 8% in March and April. However, it bounced back after President Donald Trump announced a temporary ceasefire and assured to work on a peace deal with Iran.
Although not much has progressed on the peace deal and the ceasefire remains fragile, continued enthusiasm surrounding AI has kept investors optimistic. Major tech companies have been investing billions of dollars in AI.
Year to date, the S&P 500 has gained 8.2%, led by tech stocks. Tech stocks have been clearly the outperformers, with the Information Technology Select Sector SPDR (XLK) gaining 25.2%. Among tech stocks, semiconductor stocks have emerged as the sector’s darling, thanks to robust demand for chips as new ground continues to be broken in the AI space.
The Philadelphia Semiconductor Index is up around 73.6% year to date. The S&P 500 looks geared up for a rally in the coming months. Major brokerages have also raised their targets for 2026. According to a Goldman Sachs report, the index is projected to gain 12% in 2026.
4 S&P 500 Stocks With Upside
Cisco Systems
Cisco Systems, Inc. enables enterprises and service providers to deliver highly secure connectivity from workplaces to data centers worldwide. CSCO delivers a unified architecture with integrated, end-to-end solutions that help customers simplify complex challenges.
Cisco Systems’ expected earnings growth for the current year is 12.3%. The Zacks Consensus Estimate for current-year earnings has improved 2.9% over the past 60 days.
Analog Devices, Inc.
Analog Devices, Inc. is an original equipment manufacturer of semiconductor devices, specifically, analog, mixed-signal and digital signal processing (DSP) integrated circuits. ADI’s product line is composed of amplifiers and comparators; analog to digital converters; digital to analog converters; video encoders and decoders; embedded processing products and DSPs; MEMS and temperature sensors; RF/IF components and converters; power and thermal management ICs, audio/video converters, amplifiers, CODECs, filters and processors.
Analog Devices’ expected earnings growth rate for the current year is 59.3%. The Zacks Consensus Estimate for the current-year earnings has improved 9.1% over the past 60 days.
Applied Materials
Applied Materials, Inc. is one of the world's largest suppliers of equipment for the fabrication of semiconductors, flat panel liquid crystal displays, and solar photovoltaic cells and modules. AMAT also offers deployment and support services related to the equipment supplied.
Applied Materials’ expected earnings growth rate for the current year is 27.6%. The Zacks Consensus Estimate for current-year earnings has improved 8.3% over the past 60 days.
Datadog
Datadog, Inc. is a monitoring and analytics platform for developers, IT operations teams and business users in the cloud age. DDOG’s business runs around its portfolio of over 1,000 out-of-the-box integrations, including public cloud, private cloud, on-premise hardware, databases and third-party software.
Datadog’sexpected earnings growth rate for the current year is 16.6%. The Zacks Consensus Estimate for current-year earnings has improved 12.7% over the past 60 days.
Radical New Technology Could Hand Investors Huge Gains
Quantum Computing is the next technological revolution, and it could be even more advanced than AI.
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Analog Devices, Inc. (ADI): Free Stock Analysis Report
Cisco Systems, Inc. (CSCO): Free Stock Analysis Report
Applied Materials, Inc. (AMAT): Free Stock Analysis Report
Datadog, Inc. (DDOG): Free Stock Analysis Report
This article originally published on Zacks Investment Research (zacks.com).