The summer season isn’t quite over yet, and neither are the gains for the S&P 500, which is just one more good day away from passing the 6,600 level for the very first time. Undoubtedly, this market winning streak has been quite unexpected, especially since September tends to be a wake-up call for investors who haven’t yet taken some profits off the table.
Either way, staying invested for the long term stands out as being wiser than trying to get out with the intent of getting back in after the market rolls over into a valley of sorts. Indeed, I was never the biggest fan of selling in May or September and going away. It may work some years, but it could fall flat in others. It’s best to focus on the individual companies themselves, as there can be relative winners, even when markets flatline or head south.
The S&P may be getting pricey, but it could get pricier if tech earnings continue delivering
You’ve probably heard that it’s best to mute your expectations for potential returns in the decade ahead. While higher valuations may pave the way for below-average annual gains, the AI revolution stands out as a major wild card that may justify today’s higher multiples. Of course, the market is paying close attention to those AI earnings. And while many firms aren’t getting a suitable return on investment (yet), I do think that the 5% or so of firms that are (according to an MIT report that showed 95% of AI pilots fail to deliver) will clear the path for the remaining firms to walk down.
Indeed, it’s an exciting time to be a new investor, but also a nervous time if the S&P 500 completes the hat-trick of posting three straight years of gains north of 20%. It’s going to be a close call. If the S&P can nudge out a 7.5% gain or so, it can accomplish the rare feat. Either way, JPMorgan (NYSE:JPM | JPM Price Prediction) analysts think S&P at 7,000 is a possibility by early 2026. Such a surge entails a gain of about 6% in the next few quarters, and while it’s hard to tell which names will lead the way, the following trio of AI performers, I think, could lead the charge.
Nvidia
Nvidia (NASDAQ:NVDA) has experienced a bit of a late-summer slowdown, as investors digested the company’s quarterly earnings results, which showed subtle signs of slowed growth in the data center segment. Indeed, if this sore spot marks the beginning of a trend, things could have the potential to get really nasty for Nvidia.
However, I think it’s a short-lived blip that will be forgotten about come the next round of quarterly earnings results. Indeed, if the S&P is going to march past 7,000 in the first few months of 2026, I think Nvidia must lead the way.
With the unveiling of the Rubin CPX AI chip, I do think there’s plenty for investors to get excited about as the GPU king caps off another year for the books. Add the potential for new AI partnerships and the enhancement of the ecosystem into the equation, and Nvidia stands out as a wide-moat company that’s being unfairly punished in recent weeks.
ASML
ASML (NASDAQ:ASML) is a Dutch semi equipment maker that’s pretty much operating in a monopolistic environment. The relative value play has done next to nothing in the past four years, but with a low bar ahead of it (management is cautious on 2026) and the potential for AI chip demand to accelerate again, I like ASML’s risk/reward at current valuations.
Even if chip demand falls off in the new year, I suspect it won’t take too long before we’re all focused on the foundry expansions, which will bring forth the need for more extreme UV (EUV) lithography machines and all the big-ticket equipment that goes into making semis. At 26.6 times forward P/E, shares look like an interesting comeback play for those seeking value and multi-year catalysts in the semis. If the S&P is en route to 7,000, ASML isn’t a name I expect will be left behind.
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