Why 2026 Could Be Another Strong Year for the S&P 500 and the Case for Holding Top-Performing Stocks Like SanDisk

The S&P 500 has a long history of delivering robust returns when earnings growth, macroeconomic tailwinds, and sector-specific innovation align. As we approach 2026, all the stars are lining up for another banner year. Wall Street's consensus is clear: the index is on track for double-digit earnings growth, with a projected 14% increase in earnings per share (EPS) driven by AI-driven productivity, a weaker U.S. dollar, and the continued dominance of the "Magnificent 7" tech giants. But beyond the broad market optimism, one stock-SanDisk-stands out as a prime beneficiary of these forces, offering investors a high-conviction play on the AI storage revolution.

The Historical Case for 2026

Let's start with the fundamentals. Historically, the S&P 500 has thrived when earnings growth outpaces market expectations. Post-2010, the index has averaged roughly 8% annual EPS growth, but 2026's projected 14% surge would represent a meaningful acceleration according to historical data. This isn't just a one-off; it's a structural shift. AI is now the engine of corporate profitability, with companies across industries investing heavily in automation, data analytics, and machine learning. Goldman Sachs and other analysts argue that AI's impact on productivity will mirror the internet boom of the late 1990s, but with broader economic implications.

Moreover, the macro backdrop is favorable. A weaker dollar is boosting export-driven sectors and multinational tech firms, while fiscal and monetary policies remain accommodative.

The Magnificent 7-Apple, Microsoft, Alphabet, Amazon, Meta, Nvidia, and Tesla-are expected to account for nearly half of the S&P 500's earnings growth in 2026, a testament to their outsized influence on the market according to market analysis. If these titans continue to deliver, the entire index will follow.

SanDisk: The Hidden Gem in the AI Storage Boom

Nowhere is this transformation more evident than in the storage sector. SanDisk, which spun off from Western Digital in early 2025, has become a poster child for AI-driven growth. Since its relisting, the stock has surged 571% year-to-date, outpacing even its former parent company, which gained 260% in the same period according to market data. This isn't just a short-term rally-it's a structural shift in demand for NAND flash memory and high-capacity storage solutions.

The numbers tell the story. In its fiscal fourth-quarter 2025, SanDisk reported $1.90 billion in revenue, a 12% sequential increase, with non-GAAP EPS of $0.29 and a gross margin of 26.2%. These results reflect a tightening supply environment, rising NAND pricing, and a surge in exabyte shipments driven by AI data lakes. The company's data center revenue alone grew 26% sequentially in Q1 2026, as it secures qualifications with major hyperscalers like Amazon and Microsoft according to market reports.

SanDisk's technological edge is equally compelling. Its BiCS8 QLC technology enables high-density enterprise SSDs and embedded storage, making it a critical supplier for AI workloads that require lightning-fast data access. Analysts project that SanDisk's fiscal 2026 EPS could grow by over 300%, fueled by margin expansion and sustained demand.

Why This Matters for the S&P 500 in 2026

The storage sector's explosive growth isn't an outlier-it's a microcosm of the broader market. The AI-powered storage market is projected to balloon from $30.27 billion in 2025 to $187.61 billion by 2035, a 20% compound annual growth rate. This surge will directly benefit the S&P 500, as storage providers like SanDisk and Western Digital (which itself is up 260% year-to-date) become linchpins in the AI infrastructure chain according to industry analysis. What's more, the S&P 500's historical performance shows that sectors with above-average growth-like tech and industrials-tend to outperform during bull markets. The Zacks Computer – Storage Devices industry, for instance, has advanced 70% year-to-date in 2025, far outpacing the S&P 500's 16.5% gain according to financial data. If this trend continues, the index's 14% EPS growth target looks not just achievable, but conservative.

The Bottom Line: Hold the Rockets, Not the Rockets' Fuel

For investors, the message is clear: hold the rockets, not the rockets' fuel. The Magnificent 7 are the engines of this bull market, but companies like SanDisk are the unsung heroes powering the infrastructure. With AI demand showing no signs of slowing, SanDisk's combination of strong margins, technological leadership, and explosive revenue growth makes it a must-own for 2026.

The S&P 500's path to another strong year hinges on earnings growth, and SanDisk is a prime example of how innovation and macro tailwinds can create unstoppable momentum. As the AI storage market takes off, this stock could very well be one of the biggest winners-and a key driver of the S&P 500's next leg higher.