Stocks to buy for 2026 as the AI trade comes under pressure

MW Stocks to buy for 2026 as the AI trade comes under pressure

By Philip van Doorn

Also, year-end retirement and tax-planning tips

The hefty bill for financing the generative AI-hardware build-out may well be worth it for hyperscalers over the next several years, but it could put pressure on the stocks in 2026, according to Savita Subramanian, the head of U.S. equity and quantitative strategy at Bank of America.

This has been a banner year for generative artificial intelligence, with billions of people making use of ChatGPT and competing chatbots, such as Google's Gemini.

But as hyperscalers - companies such as Alphabet Inc. $(GOOGL)$, Microsoft Corp. $(MSFT)$, Meta Platforms Inc. (META) and Oracle Corp. $(ORCL)$ that are footing the bill for construction, expansion and upgrades of data centers - increase their borrowing, their stocks could rerate and begin to trade at lower price-to-earnings ratios. This possible pressure on the hyperscalers was behind a warning from Savita Subramanian, Bank of America's head of U.S. equity and quantitative strategy, who said last week that AI-related stocks could hit an "air pocket" in 2026.

Oracle's stock fell 11% on Thursday after the company reported quarterly results, with cloud and infrastructure software revenue coming in shy of analysts' estimates. At the same time, Oracle increased its capital-spending projection for next year by $15 billion.

Digging deeper: Oracle is the canary in the coal mine for Big Tech's debt-fueled AI spending spree

Investors who believe Subramanian is on the mark with her warning might be able to get ahead of a rotation to lower-priced stocks of companies away from AI. They might focus on companies that seem to be on the rebound or whose executives expect to achieve operating improvements next year.

Michael Brush looked into trading patterns among corporate executives. He named four familiar companies away from the AI trade whose stocks are attractively priced and whose executives have been buying shares with their own money.

Read: Eight stock picks to play one of the healthiest corners of the market

This underpins the stock market's record level

Despite all the worry over AI-related stock valuations and some hefty recent declines for shares of hyperscalers, the S&P 500 SPX continues to set records, including one on Thursday.

Joy Wiltermuth and Gordon Gottsegen described the forces bolstering the broadening bull market.

More from the Markets team:

-- Strategist who said passive investing is 'worse than Marxism' says AI plays are only making the problem worse

-- This bond-market 'mystery' could be a sign of trouble ahead, Wall Street economist says. Here's why all investors should pay attention.

More Big Tech news

After soaring ahead of the S&P 500 and its information technology sector, shares of Meta Platforms have tumbled since late October.

The above chart shows a fascinating trading pattern for Meta's stock over the fourth quarter. Meta's sharp decline helps make the case for buying the stock now, according to Brian Nowak, an analyst at Morgan Stanley.

Broadcom Inc. $(AVGO)$ reported a banner set of quarterly numbers on Thursday after the stock closed with a 76.5% return for 2025, including reinvested dividends. But the stock was down 10% Friday morning. Britney Nguyen broke down Broadcom's results and explained investors' negative reaction.

More: Rivian teases its AI future, but its stock drop shows Wall Street isn't impressed

Need to know: Bezos and Musk target AI through space. These Earthly stocks could benefit.

Fighting back: OpenAI strikes back in the chatbot race against Google with new ChatGPT model

Trump's influence

Shares of Gemini Space Station Inc. (GEMI) rose 32% on Thursday. Here's why the company's founders, Tyler and Cameron Winklevoss, credited President Trump for some good news on the regulatory front.

More from the MarketWatch Companies team:

-- Cruise and other travel stocks keep climbing, with a little help from the Fed

-- Lululemon's ousting of CEO draws praise from activist founder Chip Wilson

-- Berkshire has problems brewing after Buffett leaves, but losing stock picker Todd Combs isn't one of them

-- GE Vernova is riding the electrification wave, and the stock sees a record rally

Time to refinance?

On Wednesday, the Federal Open Market Committee cut its target for the federal-funds rate by another quarter point to a range of 3.50% to 3.75%. But disagreement among committee members about further rate cuts might keep the short-term interest rates stable next year.

Mortgage loan rates have come down during President Donald Trump's second term, and Aarthi Swaminathan spelled out how significant the decline has been when it comes to monthly payments for residential borrowers. She also had advice for people considering refinancing their homes.

Fed aftermath and a look ahead:

-- What the stock market's post-Fed-meeting optimism may be getting wrong about the U.S. economy

-- Hassett's prospects dip, but he's still the front-runner for Fed chair, with Trump's decision likely to come next month

Practical advice from the Moneyist

Quentin Fottrell is the Moneyist.

Financial- or investing-advice columns are typically designed to help people who already have a lot of money saved up. But for some people, a combination of a new approach to expenses, paying down some debt and boosting retirement-account contributions can make a difference over the long term.

This week, Quentin Fottrell - the Moneyist - helped a woman who had been handed $10,000 to make the most of the opportunity.

More from Quentin Fottrell:

-- 'The stress at my job is getting worse every day': I'm 61, earn $177K, and have a 401(k) with $965K. Do I retire and downsize?

-- 'It's a perilous choice': I've been offered a part-time job. Do I file for Social Security at 67 or 70?

More about planning for and during retirement

In the Help Me Retire column, Alessandra Malito answered questions from a reader who was trying to break a good habit. Can he start to ease back on his retirement account contributions?

Beth Pinsker had detailed tips for action you can take before the end of the year to minimize your taxes on Roth IRA conversions.

This might be your biggest year-end worry

The American Rescue Plan Act was signed by former President Joe Biden in March 2021. It included enhanced subsidies for health insurance premiums for policies obtained under the Affordable Care Act. The subsidies are set to expire at the end of this year. Andrew Keshner explained how this might increase your premiums in 2026 and the likelihood of another round of significant cost increases in 2027.

More on health insurance: My insurance company hit me with a $2,000 bill to remove a mole. Can I fight it?

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-Philip van Doorn

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December 12, 2025 11:43 ET (16:43 GMT)

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