Key Points
The Nasdaq Composite has had ups and downs this year, but in recent times, the downs have won out. The tech-heavy benchmark fell into correction territory. Why has the index slipped? A variety of elements have represented headwinds this year. Investors have worried about rising inflation and the potential interest rate increases put into place to contain it.
And the biggest concern of all might be regarding the future of artificial intelligence (AI). Investors question whether big tech’s spending on new data centers and equipment will be worth the effort — or if the revenue opportunity will fall short. All of this has put pressure on tech stocks and, therefore, the Nasdaq, in 2026.
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On top of this, Democrats, who have been cautious regarding AI, scored majorities in both the House of Representatives and the Senate in the U.S. midterm elections last week. This reinforced investors’ concerns about regulation and limitations on data center growth.
Against this backdrop, you might be wondering what the Nasdaq will do in the last two months of 2026. Here’s my prediction.
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The Nasdaq’s biggest stocks
First, let’s take a look at the Nasdaq and tech story so far. As mentioned, technology companies are heavily weighted in the benchmark, so if they are having a good or bad day, the Nasdaq will reflect that. Apple, Nvidia, and Microsoft lead the Nasdaq-100, the index of the largest non-financial companies traded on Nasdaq, with weightings of more than 10% each.
Over the past three years, as the AI boom progressed, the Nasdaq Composite advanced, gaining more than 100% until the recent dip. This is as AI companies reported strong revenue growth and investors got excited about the current and future earnings opportunities. AI was seen as the next big thing in technology, and investors wanted to bet on it early to maximize their gains.
Stocks climbed so much, however, that valuations started to look lofty. And investors began to worry about the return on investment for tech giants paying for the AI infrastructure build-out. Amazon, Alphabet, Microsoft, and Meta Platforms pledged to spend more than $700 billion this year alone. This, along with higher inflation and a tightening of the credit market, has periodically weighed on the performance of tech stocks. And just recently, the Democrats’ victory stirred up concern about a potential slowdown in AI growth.
Now, here’s my prediction for the last two months of the year. While this month may be a difficult one for the Nasdaq, I predict that the index will advance in December and post a double-digit gain for the year. We aren’t far from such a gain now, with the increase being more than 8% from the start of the year through Nov. 9.
A look back in time
History shows that the index has climbed four times in the November-December period over the past six years, and the end of the year is generally known as being a strong period for stocks. The S&P 500 often benefits from a “Santa Claus” rally, with the index finishing positive almost 80% of the time during that period, according to Britannica Money. (That period is the last five trading days of December and the first two days of January.)
So, history supports my prediction, but I’m not basing my ideas on that alone. I also think the Nasdaq may climb because the long-term AI growth story hasn’t changed. Even if it faces certain headwinds or a slowdown, quality, well-established tech companies are likely to generate significant growth from their AI investments and products over the long run.
Meanwhile, some of these companies are trading at interesting valuations right now due to the recent decline. Investors are likely to recognize this and may decide to add some of these players to their portfolios at the end of the year — to prepare for a potential rebound next year.
And that could help the Nasdaq, after falling into correction territory, advance in the last weeks of the year.
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Adria Cimino has positions in Amazon. The Motley Fool has positions in and recommends Alphabet, Amazon, Apple, Meta Platforms, Microsoft, and Nvidia. The Motley Fool has a disclosure policy.
