2 Leading Tech Stocks to Buy in 2026

Key Points

• Investors have expressed concerns with large-cap valuations and AI spending in 2026.

• These two tech giants trade at valuations that are at or below the S&P 500 average.

• One stands out as the better option, but both have big upside.

• 10 stocks we like better than Microsoft ›

In 2026, investors appear to be getting more cautious about companies that they think spend too much on artificial intelligence (AI) without results, and on stocks that trade at high valuations. Both of these concerns have had an outsize impact on technology stocks, particularly large caps. The large-cap tech sector is down about 3% in 2026 as of Feb. 4, which is the worst among the sectors.

The bigger concern, from my perspective, particularly as it relates to many of the large-cap tech companies, is the valuations. The inflation-adjusted 10-year Shiller P/E ratio is at its highest level since the dot-com boom, sitting at just over 40.

Where to invest $1,000 right now? Our analyst team just revealed what they believe are the 10 best stocks to buy right now, when you join Stock Advisor. See the stocks »

Image source: Getty Images.

In the past, an abnormally high Shiller P/E ratio has been a strong indicator that a market correction is coming. We aren’t there yet, but it bears watching closely.

So, in 2026, investors should focus on tech stocks that are both positioned to capitalize on AI spending and are reasonably valued. Two stocks that stand out are Microsoft (NASDAQ: MSFT) and Oracle (NYSE: ORCL).

Why Microsoft stands out

Let’s start with Microsoft, the top choice among the two stocks. Microsoft had some pullback after its fiscal second-quarter earnings in late January due to record spending on capital expenditures, mostly AI, last quarter, which was 66% higher than it was the same quarter a year ago.

At the same time, growth for its AI cloud engine, Azure, slowed slightly and was guided to slow a bit more in 2026. But it is more a case of supply constraints than demand as the remaining performance obligation rose 110% to $625 billion.

The pullback is great for long-term investors because it makes Microsoft even more attractive. It is trading at 26 times earnings, which is the lowest it has been since 2022 and below the S&P 500 and Nasdaq-100 averages.

Some 95% of analysts rate Microsoft a buy, the most of any S&P 500 stock, and it has a median price target of $600 per share, suggesting 45% upside.

Oracle has huge upside, but…

Oracle stock has even higher potential upside than Microsoft, according to Wall Street analysts, with a median price target of around $272 per share, which would mean 88% upside over the next 12 months.

Like Microsoft, it is also undervalued relative to its peers, trading at around 29 times earnings, which is near a 52-week low.

To a greater degree than Microsoft, investors are concerned about Oracle’s AI spending. It announced in early February that it was raising $50 billion to build new data centers to meet its massive cloud computing demand. As of January, it had a $523 billion backlog of contracts in the pipeline, up a whopping 438% year over year. Its clients include a who’s who of hyperscalers like Nvidia, Meta Platforms, and OpenAI, which inked a five-year $300 billion deal with Oracle.

But again, there have been investor concerns about OpenAIʻs ability to fund that contract, which has hurt Oracle stock a bit.

Oracle is more of a gamble than Microsoft because of the debt it is taking on and the OpenAI concentration in the pipeline, but it has a ton of upside and looks good from a valuation standpoint.

Should you buy stock in Microsoft right now?

Before you buy stock in Microsoft, consider this:

The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and Microsoft wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years.

Consider when Netflix made this list on December 17, 2004… if you invested $1,000 at the time of our recommendation, you’d have $443,299!* Or when Nvidia made this list on April 15, 2005… if you invested $1,000 at the time of our recommendation, you’d have $1,136,601!*

Now, it’s worth noting Stock Advisor’s total average return is 914% — a market-crushing outperformance compared to 195% for the S&P 500. Don’t miss the latest top 10 list, available with Stock Advisor, and join an investing community built by individual investors for individual investors.

See the 10 stocks »

*Stock Advisor returns as of February 8, 2026.

Dave Kovaleski has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Meta Platforms, Microsoft, Nvidia, and Oracle. The Motley Fool has a disclosure policy.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.