Stock funds gain 11.5% in 2026 as tech rally fuels gains

U.S. stock funds gained 11.5% year-to-date through early June, driven by a technology-fueled rally in May, the Wall Street Journal reported.

"S&P 500 revenues have been growing by 10%, but profits have been rising faster, while operating margins have increased to roughly 16%, an all-time high," Fidelity Investments said in a research note. "A lot of this growth has been driven by the technology sector, particularly AI development."

The iShares Semiconductor ETF (SOXX) surged about 92% year-to-date, while the Invesco AI and Next Gen Software ETF (IGPT) gained 72.5% and the Global X Artificial Intelligence & Technology ETF (AIQ) rose 36%, per fund data. The S&P Kensho Global Artificial Intelligence Enablers Index advanced 49.9% in the same period.

The rally reflects surging capital expenditure by major technology companies on AI infrastructure. Alphabet, Amazon, Meta Platforms and Microsoft have projected roughly $700 billion in spending on AI data center buildouts in 2026, according to Fidelity. The question for investors heading into the second half is whether earnings growth can sustain valuations after the run-up.

The technology sector's outperformance this year has been broad-based, with semiconductor, software and infrastructure companies all contributing. Nvidia Corp. rose 17.2% year-to-date, while Eaton Corp., a power management company benefiting from data center demand, gained 32.2%. Out-of-home advertising firms Lamar Advertising and OUTFRONT Media rallied 19.2% and 30%, respectively, as national advertising demand improved.

The rally has not been uniform. Palantir Technologies fell 20.8% year-to-date, with the stock dropping 10% after a June 2 executive order tightened AI innovation and security rules. Super Micro Computer gained 47.6% but faced renewed pressure in early June as investors took profits on momentum-driven technology stocks.

S&P 500 operating margins have reached roughly 16%, an all-time high, according to Fidelity, with technology companies leading the expansion. Capital expenditures as a percentage of S&P 500 revenue have doubled to 9% since the launch of ChatGPT in late 2022, even as revenue has grown. The combination of margin expansion and revenue growth has provided a fundamental foundation for the year's equity gains.

The second half of 2026 presents several potential catalysts and risks. The $700 billion in projected AI infrastructure spending could accelerate further if hyperscalers report strong returns on their investments. However, elevated valuations in some AI-related names have prompted caution. Palantir trades at nearly 100 times forward earnings, a level that some analysts have described as requiring sustained 45% growth for three years to justify, according to a recent analysis cited by Benzinga. Earnings reports in July will provide the next major test of whether the tech rally has room to run.

This article is for informational purposes only and does not constitute investment advice.