Barclays says a small number of stocks will benefit from the surge in artificial intelligence spending expected next year. Analysts at Barclays believe the U.S. is in the midst of the biggest capital investment cycle in decades, which they say has boosted stock market performance over the past three years. According to Barclays, AI stocks drive 75% to 80% of the S&P 500’s profits and overall performance. The company expects easing financial conditions and a more favorable regulatory environment to also support stock valuations in 2026. Analysts say that while Fed rate cuts often coincide with recessions, rate cuts in non-recession environments typically favor cyclical sectors and growth stocks. Given these favorable conditions, Barclays Research analysts have highlighted 10 stocks with overweight ratings that they believe will be able to take full advantage of higher-than-expected AI spending next year. The average market capitalization of these stocks is approximately $785 billion. “AI stands out above all others when considering the key drivers for risk assets and the broader economy heading into 2026. With AI capital spending projected to reach trillions, it is difficult to understate the impact AI has had and will have on businesses and investors around the world to date,” analyst Andrew Feremi wrote in a note to clients on Thursday. Indeed, Felemi acknowledged that “the great wealth that has been generated from AI makes the United States especially vulnerable if the AI story loses momentum.” Take a look at some of Barclays’ stock picks below. Two “Magnificent Seven” stocks that Barclays analysts believe will be boosted by AI investments are Microsoft and Nvidia. The company’s price targets for Microsoft and NVIDIA, as of Dec. 16, suggest upside potential for the stocks of 31% and 55%, respectively. Price targets from analysts surveyed by LSEG are more bullish than consensus, suggesting Microsoft stock could rise about 28% from recent levels and Nvidia could rise 38%. Barclays analysts are particularly bullish on NVIDIA stock, writing in a note to clients on Nov. 19 that “the company has a significant lead in GPUs for (data center) AI, and is positioned for long-term sustainable growth with additional edge (automotive, robotics, etc.) opportunities and a competitive moat surrounding a large portion of the market.” Nvidia stock is up more than 36% this year, outperforming the broader market. Still, stock prices have cooled since early November, and there has been a short-term pullback due to concerns about an AI bubble, increased chip competition and subsequent slowing of growth. Meanwhile, Microsoft stock is up about 15% since the beginning of the year, slightly lagging the S&P 500 index. Stocks have been weighed down in recent weeks by broader market-robbing AI spending concerns. Microsoft said in its last earnings report that spending would accelerate this fiscal year. However, Barclays analyst Raimo Renshaw expects the company’s AI-enabled business to show growth and become more profitable. “AI momentum seemed to continue to accelerate, with a variety of use cases presented and good value creation in place. For us, this showed that the evolution of AI is real and likely to continue at high speed, as the benefits of successful projects were very visible,” Lenschow said in a Nov. 20 note. Other stocks that rose include financial giant JPMorgan Chase and used car retailer Carvana. The firm believes JPMorgan’s competitive position is attractive and believes the largest source of potential earnings upside lies in loan growth and capital markets.
