Fidelity fund manager resets tech stocks forecast for 2026

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The S&P 500 is on track to finish the year up 16%, delivering a third consecutive year of double-digit returns that outpace historical averages.

The gain, which comes on top of a whopping 23% and 26% return in 2024 and 2023, respectively, is mainly due to surging interest in artificial intelligence and a friendlier Federal Reserve.

The rise of AI, sparked by the massively successful launch of OpenAI's ChatGPT three years ago, has drawn comparisons to the dawn of the Internet. Big tech has already spent hundreds of billions of dollars packing data centers with AI-optimized servers, and the spending frenzy is expected to continue in 2026.

Unsurprisingly, investors have flocked to tech stocks to ride the spending boom to substantial gains. Fidelity's Select Technology Portfolio (FSPTX) has provided an eye-popping average annual return of 34% over the past three years, nearly 15% higher than the S&P 500.

The portfolio manager of that fund, Adam Benjamin, recently shared his take on what's likely to happen to technology stocks in 2026. Given his success, it may be worthwhile to pay attention to his outlook.

Fidelity technology fund rides AI boom

Benjamin took over as lead portfolio manager of Fidelity's Select Technology Fund in January 2022, which means he was thrown into the proverbial fire. The market was on the cusp of a reckoning following significant Covid-era stimulus payments that caused runaway inflation, leading to the most hawkish Fed monetary policy since former Fed Chairman Paul Volcker broke inflation's back in the 1980s.

The Fed's primary goal is to maintain low unemployment and inflation rates. Easier said than done. Those goals often run contrary to each other, given that higher rates cause unemployment and lower inflation, while lower rates have the opposite effect.

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To wrestle inflation lower, the Fed raised interest rates by 5% in 2022 and 2023, slowing the economy, denting profits, and sending stocks into a bear market. The S&P 500 and tech-heavy Nasdaq fell approximately 27% and 36%, respectively, from the end of 2021 to their lows in October.

Since then, it has been mostly a sea of green, led primarily by the world's biggest technology stocks, including those comprising the so-called magnificent seven: Apple, Microsoft, Alphabet, Amazon, Tesla, Meta Platforms, and, of course, AI golden boy Nvidia.

Fidelity Select Technology annual returns past five years:

• 2025: 21.99% year-to-date

• 2024: 35.28%

• 2023: 59.83%

• 2022: -36.87%

• 2021: 21.97%

• 2020: 63.71% Source: Morningstar

Nvidia, which manufactures super-fast and efficient graphics processing units, or GPUs, better suited to efficiently handling AI workloads, has seen its annual revenue surge, rising to $187 billion over the past 12 months from $27 billion in fiscal 2023. Its stock price is up 512% since 2021, helping to lift technology's weighting in the S&P 500 to 35.6%. If you include the communications services sector, represented by companies such as Alphabet and Meta, technology accounts for approximately 46% of the S&P 500's total value. That's far above the 35% weight at the peak of the dot-com bubble.

Given that backdrop, it's easier to understand how $10,000 invested in the Fidelity Select Technology fund three years ago has grown to be worth about $24,000 today.

Fidelity fund manager Adam Benjamin offers tech stock outlook for 2026

The billion-dollar question on investors' minds is whether technology stocks can continue their winning ways for yet another year in 2026. The market moves upward and to the right over time, but zoom in on any particular period, and you'll see plenty of drops, zigs, and zags.

Many argue that the tech stock rally over the past three years is setting up another reckoning. If so, it could be bad news for investors, given that tech stocks often retreat more significantly than the broader market during stock market declines.

Benjamin's role as portfolio manager is to anticipate trends and position the $28 billion fund appropriately.

Fidelity Select Technology Fund top five holdings/weightings (Oct. 31, 2025):

• Nvidia: 25.97%

• Apple: 11.7%

• Microsoft: 9.87%

• Marvell Technology: 5.04%

• Cisco Systems: 4.02% Source: Fidelity Investments

As of October 31, the fund had 57% of its assets in its top five holdings (Nvidia, Apple, Microsoft, Marvell Technology, and Cisco Systems), and all five are experiencing growth because of AI spending.

Benjamin doesn't appear to be fazed by the bubble chatter. In a note to Fidelity customers, Benjamin outlined his thoughts heading into 2026, writing:

The largest data center operators, including Amazon, Alphabet, Meta, and Microsoft, are on track to spend approximately $405 billion in 2025, with a significant portion targeting AI infrastructure for data centers. In 2026, analysts expect capex to climb further.

Goldman Sachs, in a research report shared with TheStreet, targets $533 billion in spending next year by those companies and a fifth data-center player, Oracle.

"Analysts have been too conservative with their estimates during each of the past two years. The magnitude of spending in historical technology investment cycles suggests as much as $200 billion upside to current hyperscaler 2026 capex estimates," wrote Goldman Sachs analysts.

With so much money still flowing, Benjamin's optimism appears warranted.

"I expect the 'picks and shovels' that have brought the AI train this far — graphics processing units, high-speed memory, and data centers — to continue to be integral to successive improvements in 2026 and beyond," wrote Benjamin.

Benjamin thinks that demand for GPUs, memory, and other infrastructure for data centers will be supported by "constantly" evolving AI models requiring "updated equipment to support new capabilities."

Not all technology stocks may be winners, though. The flood of money into AI is changing IT budget priorities, and that could be bad news for some, particularly software companies, which "could be at risk of major disruption, assuming AI models increasingly incorporate application capabilities," according to Benjamin.

Related: Analyst says buy the dip in this big cap tech stock (it's not Nvidia)

This story was originally published by TheStreet on Dec 1, 2025, where it first appeared in the Investing section. Add TheStreet as a Preferred Source by clicking here.