Following three consecutive years of above-average returns from the S&P 500 index, if there is to be a fourth the stock market will have to climb a steep mountain. From my recent market observations, I have come to the conclusion that two current booms will come to an end.
Firstly, capital spending on anything to do with AI will prove no different from previous bubbles fuelled by investors following the zeitgeist. Excessive capital spending caused by a supply shortage is almost always followed by a downturn once supply is satisfied. Die-hard AI enthusiasts can simply look to CoreWeave’s recent collapse or the market’s incredulous response to Open AI’s forecast for capital expenditure (capex) and revenue: the sums just don’t add up.
With greater scrutiny comes better price discovery and, at least for some operators, discrepancy and conflict on the value of assets. Against this backdrop of uncertainty for 2026, here are three stocks that could climb the proverbial stock-market mountain next year.
Three US stocks taking on Goliath
The skilled climber takes the riskiest direct route, straight up the north face. If he doesn’t fall, he will be in his deckchair at the summit swigging a beer long before his companions join him. MongoDB(Nasdaq: MDB) is a $30 billion-software provider of databases for unstructured data (such as emails, telephone-call recordings and social-media posts, which don’t fit neatly into traditional databases). Unstructured databases are a rich source of information for advanced AI programs.
From its $2 billion-revenue base camp, Mongo will attack Oracle, a giant of the sector that’s 50 times larger. A new CEO and a better product should help it chip large chunks off the old block of the competition.
The hiker, a well-prepared adventurer, takes a more cautious approach, avoiding the trickier parts of the climb. The US former Dow Jones constituent, aluminium producer Alcoa(NYSE: AA), is my choice in this regard.
The balance between demand and supply is becoming more favourable, with China curtailing supply. Expect asset sales to act as levers to pull, in addition to relying upon the demand cycle: what do you think goes in all those data centres?
Taking the easiest long route and avoiding tough obstacles is the pathfinder. Enter pharmaceuticals giant Pfizer (NYSE: PFE). The stock is cheap, having lacked growth since the company’s Covid vaccine was launched in 2021. At just 14 times earnings and a 7% dividend yield, investors have a margin of safety built in while we find out if Pfizer’s purchase of Metsera and its obesity drug pays off in the long term.
