Outperforming the S&P 500: Why Broadcom and Amazon Are 2026's High-Probability Winners

The S&P 500 has long been the benchmark for U.S. equity performance, but in 2026, two tech giants-Broadcom and Amazon-are poised to defy market trends and deliver outsized returns. Both companies are leveraging artificial intelligence (AI) to drive growth, with Broadcom capitalizing on its hardware expertise and Amazon repositioning its cloud and AI infrastructure for long-term dominance. This analysis examines their strategic moves, financial performance, and cyclical rebounds to argue why they are high-probability winners in the coming year.

Broadcom: The AI Infrastructure Powerhouse

Broadcom's (AVGO) dominance in AI infrastructure has propelled it to record financial results. In Q3 of fiscal 2025, the company reported $16 billion in revenue, a 22% year-over-year increase, with AI revenue surging 63% to $5.2 billion. This growth is fueled by its custom chip solutions and high-speed networking technologies, which are critical for hyperscale cloud providers and AI labs. Goldman Sachs has raised its price target for Broadcom to $435, projecting AI revenue could reach $45.4 billion in fiscal 2026.

Broadcom's stock performance has been equally impressive. Over the past five years, AVGO has surged 680%, vastly outpacing the S&P 500's 100% gain. Even in the past 12 months, the stock rose 129% versus the S&P 500's 11%. This outperformance is driven by its strategic positioning in AI data centers and 5G networks, with analysts forecasting continued momentum as demand for custom AI accelerators grows.

Amazon: Rebounding from Underperformance

Amazon (AMZN) has lagged behind the S&P 500 in recent years, delivering a 50% return over five years compared to the index's doubling. However, its strategic investments in AI and cloud computing position it for a 2026 rebound. The company has committed up to $50 billion to expand AI and supercomputing capabilities for the U.S. government, a move that aligns with global AI spending reaching $375 billion by 2025.

Amazon's AWS division, its crown jewel, is accelerating growth. In Q3 2025, AWS revenue rose 13% year-over-year, driven by AI-driven tools and enterprise demand. JPMorgan reiterated an "outperform" rating on Amazon, citing AWS's potential to benefit from the AI boom and a growing backlog of contracts. Despite short-term underperformance, Amazon's forward P/E ratio of 33.9 suggests undervaluation, comparable to Microsoft, and its AI investments could unlock significant upside.

Cyclical Rebounds and Market Positioning

Broadcom's stock has historically demonstrated resilience, rebounding sharply after downturns. For instance, it surged nearly 40% off its 2024 lows, reflecting investor confidence in its AI-driven growth. In contrast, Amazon's stock has stagnated despite strong earnings, partly due to its capital-intensive strategy and lack of buybacks. However, analysts argue that Amazon's focus on long-term AI infrastructure and cloud expansion could justify its valuation and drive a 2026 rebound.

Conclusion: A 2026 Outlook

Both Broadcom and Amazon are uniquely positioned to outperform the S&P 500 in 2026. Broadcom's AI infrastructure dominance and consistent stock outperformance make it a high-conviction play, while Amazon's strategic AI investments and AWS growth offer a compelling case for a cyclical rebound. For investors seeking exposure to the AI revolution, these two stocks represent a balanced approach: one a proven leader in hardware, the other a cloud and AI innovator with untapped potential.