Speaking on a Schwab Network show last week, presenter Alex Coffee mentioned an interesting fact. He pointed out that this year’s second quarter was one of the best ever and historically, 94% of the time the S&P 500 has delivered higher returns for the full year in comparison to the second quarter. With Q2 S&P 500 return of roughly 15%, he sees this as a signal of strength and an opportunity to keep buying, and he’s not the only one.
Tom Lee, managing partner at Fundstrat, is bullish for the month of July and sees significant upside in stocks going forward.
In July, we’re gonna get Q2 earnings and in the first quarter, earnings came in way better than expected, so the market’s PE is actually lower than it was in January. I think second quarter earnings are going to surprise to the upside again, so the market is going to be cheaper again. That means there’s room for PE to expand, so i think July is going be a stronger month for stocks.
Asked if the S&P could reach 8000 this year, he said yes, as that would represent a 20-times multiple of 2027 earnings. He believes 8000 is a low estimate and the S&P could well hit 8400 or 8800 by year-end.
He is clearly bullish on the market, but the hard part is determining which stocks are best placed to drive those returns. One way to figure that out is to look at Wall Street consensus and see which stocks the Street thinks will dominate going forward. After compiling the required data, we came up with the 10 Best AI Stocks to Watch in July.
Our Methodology
To compile our list of the 10 best AI stocks to watch in July, we first reviewed various AI-themed ETFs and financial media to identify companies developing AI technologies as well as those benefiting from the rapid expansion of AI infrastructure and adoption. We then shortlisted stocks with a market cap of at least $2 billion. These stocks have a consensus upside potential of at least 25%, making them a suitable bet for outperformance over the next 12 months. They have also reported recent investor-worthy news and are ranked in ascending order of their potential upside.
Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Insider Monkey’s quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 599.2% since May 2014, beating its benchmark by 372 percentage points (see more details here).
Note: All share price data is as of July 7, 2026.
10. AppLovin Corporation (NASDAQ:APP)
Potential Upside: 26%
Based on a report released on July 1, Clark Lampen, an analyst at BTIG, reaffirmed a Buy rating on AppLovin Corporation (NASDAQ:APP) along with a price target of $640. The firm’s assigned price target reflects a further 17% upside from current levels. This upside is close to the median Wall Street analysts’ upside estimate of 22%, based on 37 analysts covering the stock.
The next important catalyst for AppLovin Corporation (NASDAQ:APP) is its second-quarter fiscal year 2026 earnings, scheduled to be reported on August 5 after the U.S. market closes. As per the company’s previously provided outlook, revenue for the quarter is expected to range from $1.815 billion to $1.945 billion. Adjusted EBITDA is forecasted to be between $1.615 billion and $1.645 billion. This represents an adjusted EBITDA margin of 84%-85%. In addition, the company expects a temporary increase in sales and marketing expenses as it supports the launch of the self-serve platform. Given that the stock responded well to the previous earnings and the expanded adoption of AXON 2.0, investors will expect similar performance this time as well, making the stock worth buying as an AI pick for the month of July.
AppLovin Corporation (NASDAQ:APP) is a technology company that provides AI-powered software solutions designed to help businesses, primarily mobile app developers, grow by acquiring users and monetizing their apps.
9. Nebius Group NV (NASDAQ:NBIS)
Potential Upside: 35.7%
On July 2, Nebius Group NV (NASDAQ:NBIS) received some analyst attention on Wall Street as a result of Meta’s entry into the cloud computing business. Stefan Slowinski of BNP Paribas has a Neutral rating on the stock, partly because Nebius’ stock has already risen over 345% this year so far. While he thinks the stock has run its course, the company’s business is expected to stay strong. He believes the company’s pricing power will remain intact and cited SpaceX’s recent deals with Google and Anthropic as evidence that the demand for compute continues to stay strong. In his note to investors, Slowinski said:
Near term, we continue to find the pricing environment supportive, evidenced in part by SpaceX’s recent AI infrastructure deals with Anthropic and Google.
On the subject of strong demand, the analyst also pointed out that Amazon’s recent 20% price increase for GPU reservation service would benefit NeoClouds like Nebius. Enterprises continue to look for cheaper alternatives, and Nebius provides exactly that through its open-source models. This factor, he believes, could be the catalyst for NBIS’ next rally, if that materializes:
In this regard, Nebius screens relatively well as its AI cloud stack appears better positioned to support fine-tuned open-source models for enterprise customers seeking cheaper alternatives to frontier models.
Nebius Group NV (NASDAQ:NBIS) is a technology company that provides infrastructure and services to AI builders worldwide. It offers Nebius AI, an AI-centric cloud platform that provides full-stack infrastructure, including large-scale GPU clusters, cloud services, and developer tools.
