Top 3 Stock Convictions For 2026

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Introduction

Welcome to 2026 — the messy middle of a transformational market.

This is the phase where markets still make money, but only for investors with the patience to ride the volatility designed to shake out weak hands.

The foundation of the US market remains solid. Earnings, liquidity, and narrative, the 3 forces that ultimately drive returns - are all still working. Earnings continue to grind higher as the AI boom evolves into the largest capital-spending cycle since the internet era. At the same time, cooling inflation and a slowing labour market give the Fed room to cut rates, improving liquidity as political uncertainty rises.

2026 is not about perfect timing. It’s about staying invested, staying selective, and understanding the powerful forces still pushing the market forward.

With that backdrop, here are my 3 high-conviction views on the U.S. stock market in 2026.

1. The Market goes higher, but the ride is brutal

Even if the S&P 500 ends the year significantly higher, 2026 is likely to deliver multiple 10%+ drawdowns along the way. Not because the bull case fails, but because we’re entering the phase of the cycle where everything suddenly matters.

This is Year 4 of the AI boom. And history is clear: Years 4 and 5 of transformational booms are simultaneously the most profitable and the most punishing.

By this stage, the narrative dominates. Positioning is crowded. Expectations are stretched. And every minor crack in the story gets treated like a structural break.

At elevated valuations, the market doesn’t need a recession to fall 10–15%. It just needs rates to back up, one hyperscaler to pause a project, a financing headline, or a loud “margins are peaking” chart making the rounds.

We’ve seen this movie before. In 1998 and 1999, Years 4 and 5 of the dot-com boom, the Nasdaq suffered 6 separate 10%+ corrections. Not because the boom was ending, but because it was maturing.

Expect the same dynamic in 2026: sharp advances, violent pullbacks, and constant tests of conviction.

Key Takeaway

Volatility isn’t the enemy of this bull market, it’s the admission price. If you want 20%+ upside from a concentrated, AI-led growth engine, you don’t get it without repeated “what if this is 1999?” moments.

Ironically, the more right the long-term trend is, the harsher the counter-trend moves become because the trade gets crowded.

So yes: higher highs.
But with punches.
Plenty of them.
And no warning label.

2. AI Leads but the Boom Turns Brutally Selective

AI remains the center of gravity in markets. Not one theme among many. Not an optional growth story. AI is the industrial buildout of this decade, the force reshaping capital spending, labour markets, and competitive advantage across the economy.

That’s why AI stocks should remain market leaders in 2026. But the boom is entering a more unforgiving phase.

This is the pivot from “spend at all costs” to “spend efficiently — or explain yourself on the earnings call.” The market is done rewarding capacity for its own sake. It now rewards utilisation.

The 1st phase of the AI boom asked one question:
How fast can we get compute online?

The next phase asks a harder one:
How much profit does that compute actually generate?

That shift doesn’t end AI spending. It concentrates it.

In 2026, leadership increasingly belongs to companies that:

• control the bottlenecks — performance per watt, networking, memory, cooling, power delivery

• show real demand — contracts, utilisation, revenue attachment

• and fund growth with cash flow, not “vibes and a bond deal”

Key Takeaway

AI remains the dominant growth engine of the market in 2026 but the easy phase is over. The boom is no longer about building capacity at any cost; it’s about who can turn AI infrastructure into profits.

Winners will be companies that control critical bottlenecks, show real demand, and fund growth with cash flow. Losers will be those relying on leverage, vague monetisation stories, or permanently cheap capital.

For investors, this means AI leadership continues but index concentration rises and stock selection matters more than ever. The upside is still there, but it will accrue to fewer names, not the entire theme.

3. Space Stocks Shine: Where Defence, AI and Data Converge

Space in 2026 stops being a standalone theme and becomes a force multiplier for defence, AI, and data and that’s why the opportunity broadens and deepens at the same time.

A potential SpaceX IPO would do more than spotlight launch economics. It would reframe space as critical infrastructure, the physical layer that enables modern defence systems, AI models, and real-time data networks. Satellites are no longer about exploration; they are about secure communications, surveillance, navigation, and resilience in an increasingly contested world.

At the same time, rising defence and national security spending is accelerating demand for space-based assets. Governments are investing heavily in satellite constellations, missile detection, earth observation, and redundancy, all of which generate massive volumes of data that only AI can process efficiently.

That’s where the flywheel forms. Space creates the data. AI turns it into intelligence. Defence and commercial users pay for the insight. The more data flows from orbit, the more valuable the AI layer becomes and the more strategic space infrastructure looks.

For investors, this convergence means space is no longer a speculative frontier. It’s an enabling layer for AI-driven decision-making and defence modernisation, with recurring revenue, long-duration contracts, and high barriers to entry. The winners won’t just launch rockets, they’ll own the data pipelines, the analytics, and the mission-critical systems built on top of them.

Key Takeaway

Space is no longer a standalone bet, it’s the infrastructure layer that powers defence, AI, and data-driven decision-making. As space-based assets generate more real-time data, AI becomes the intelligence engine that converts it into actionable insight, while defence and commercial users provide long-duration, recurring demand.

For investors, this convergence means the space theme in 2026 shifts from speculative to strategic. The biggest winners will be companies that own critical infrastructure, control data flows, and sit closest to mission-critical use cases, not those selling launches or ambition alone.

The Bottom Line

2026 will reward focus, efficiency, and conviction. AI remains the engine of U.S. growth but only for companies that turn compute into real profits. Space becomes the infrastructure powering defence, AI, and data, creating high-barrier winners with recurring revenue. And across the broader market, volatility is the price of admission: sharp pullbacks will test nerves, but outsized gains go to those who stick with structural leaders and play the cycle smart.

In short: pick the winners, embrace the swings, and let execution drive the upside.

Happy Investing in 2026 !!