The S&P 500 Could Jump 18% Over the Next 1 Year. Here Are My Top Growth Stocks to Buy Before That Happens
The S&P 500 index recovered impressively in the second quarter of 2026 following a difficult start to the year. The benchmark index has appreciated just over 10% so far this year, fueled by an impressive 11% rally over the past three months. The good news for investors is that the S&P 500 is predicted to…
The S&P 500 index recovered impressively in the second quarter of 2026 following a difficult start to the year. The benchmark index has appreciated just over 10% so far this year, fueled by an impressive 11% rally over the past three months.
The good news for investors is that the S&P 500 is predicted to reach almost 8,920 over the coming year, according to financial data provider FactSet. That suggests a potential 18% increase from current levels. It is easy to see why Wall Street is bullish about the S&P 500’s direction over the coming year.
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After all, S&P 500 companies’ earnings are projected to increase by 23.3% in the current quarter, well above the five-year average of 16.4%. Even better, the index’s forward price-to-earnings ratio is now lower than at the beginning of the year. That’s why now is a good time to take a closer look at some top growth stocks that could ride the broader market’s rally and deliver solid gains to investors.
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Tech stocks could be the top beneficiaries of the S&P 500’s rally
Tech stocks have outperformed the S&P 500 this year, as evidenced by the 38% jump in the Nasdaq-100 Technology Sector index in 2026. That trend is likely to continue, as FactSet notes that the information technology sector’s earnings could jump by an impressive 63.3% this quarter, well above the projected growth in the S&P 500 index’s earnings.
So, now would be a good time to buy tech stocks such as Micron Technology (NASDAQ: MU) and Advanced Micro Devices (NASDAQ: AMD). Both companies are S&P 500 components, and they have witnessed a big rally so far in 2026. Micron stock has jumped by 210% this year, while AMD has also delivered terrific gains of 149%.
Importantly, both companies are on track to clock impressive earnings growth this year. Micron’s earnings are forecasted to jump by 784% in the current fiscal year and 104% in the next one. AMD, meanwhile, is estimated to clock a 77% increase in earnings in 2026, followed by a 78% jump next year. The S&P 500 index, for comparison, could see earnings increase by 23.6% in 2026 and by 18% in 2027.
Micron and AMD, therefore, are well placed to sustain their impressive stock market momentum. Both companies are benefiting from the massive investments in artificial intelligence (AI) infrastructure.
Micron’s memory chips are in such strong demand that customers are now entering into five-year agreements with the company to secure long-term supply. It signed 16 such agreements last quarter that will generate at least $100 billion in cumulative revenue. Clearly, Micron remains one of the best ways to play the AI infrastructure boom as its memory chips solve a key bottleneck in AI data centers.
On the other hand, AMD has been gaining ground in the AI chip market. The company’s Epyc server processors, Instinct graphics cards, and Helios server racks are gaining traction among customers, allowing it to make a dent in the lucrative AI chip market, which has been dominated by Nvidia so far.
AMD has landed major customers such as Meta Platforms, OpenAI, and probably Anthropic as well for its AI chips. It is worth noting that investment bank Citigroup sees the server CPU market’s addressable opportunity increasing to $132 billion in 2030. AMD has been gaining share in server CPUs from Intel at a nice clip, suggesting that it could capture a big chunk of this opportunity.
So, AMD has ample catalysts suggesting that its robust rally will continue, making it an ideal growth stock for investors to capitalize on the S&P 500’s rally.
An AI software stock to buy before it is too late
Software stocks are finding favor with investors once again after a difficult start to the year. The iShares Expanded Tech-Software Sector ETF, which invests in software, cloud, and digital media companies from North America, has jumped 20% over the past three months. Cloud-based data platform provider Snowflake (NYSE: SNOW) has been one of the biggest beneficiaries of the turnaround in software stocks.
Its shares have jumped by 97% in three months, with the company’s latest quarterly report proving a major catalyst. Snowflake has been integrating AI solutions into its cloud-based platform, allowing customers to do more with their data.
Not surprisingly, there has been a rapid jump in the number of Snowflake customers using its AI tools. The number of customer accounts using Snowflake’s AI tools jumped by 2.6x year over year in the previous quarter to 13,600. What’s more, the company now sees its total addressable market (TAM) at $460 billion in fiscal 2031, more than double the $225 billion in fiscal 2026.
Given that Snowflake’s customers are now spending more money on its platform, as evident from an increase of two percentage points in its revenue retention rate to 126% in the first quarter of fiscal 2027, the company is likely to deliver stronger earnings growth as it capitalizes on its huge addressable opportunity. This is precisely what analysts anticipate.
Data by YCharts
Snowflake’s earnings are poised to grow at a faster pace than the S&P 500, which is likely to translate into more upside. As such, investors looking to benefit from the productivity gains AI is delivering would do well to take a closer look at Snowflake, as this software stock has the potential to rally further following its parabolic move.
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Harsh Chauhan has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Advanced Micro Devices, Intel, Meta Platforms, Micron Technology, Nvidia, and Snowflake. The Motley Fool has a disclosure policy.
The S&P 500 Could Jump 18% Over the Next 1 Year. Here Are My Top Growth Stocks to Buy Before That Happens was originally published by The Motley Fool
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