The S&P 500 and Nasdaq Composite are hovering around all-time highs. A big part of the rally is investor excitement for sustained artificial intelligence (AI)-driven growth and adjustments to Federal Reserve policy that open the door to interest rate cuts.

While investor sentiment and macroeconomic factors undoubtedly influence short-term price action, the stock market’s long-term performance ultimately boils down to earnings.

Nvidia (NVDA 1.10%) will report its second-quarter fiscal 2026 earnings on Aug. 27 after market close. Here’s why expectations are high, and why the “Ten Titans” stock could single-handedly move the S&P 500.

Nvidia’s profound impact on the S&P 500

The Ten Titans are the largest growth stocks by market cap — making up a staggering 38% of the S&P 500.

Nvidia is the largest — with a 7.5% weighting in the index.

The other Titans are Microsoft, Apple, Amazon, Alphabet, Meta Platforms, Broadcom, Tesla, Oracle, and Netflix.

Aside from its value, Nvidia is also a major contributor to S&P 500 earnings growth.

NVDA Market Cap data by YCharts

Megacap tech companies influence the value of the S&P 500 and its earnings. And since many of the top earners are growing quickly, the market arguably deserves to have a premium valuation.

Since the start of 2023, Nvidia added roughly $4 trillion in market cap to the S&P 500. But it also added over $70 billion in net income — as its trailing-12-month earnings went from just $5.96 billion at the end of 2022 to $76.8 billion today. That’s like creating the combined earnings contribution of Bank of America, Walmart, Coca-Cola, and Costco Wholesale in the span of less than three years.

Nvidia’s value creation for its shareholders, and the scale of just how big the business is from an earnings standpoint, is unlike anything the market has ever seen. But investors care more about where a company is going than where it has been.

Nvidia’s unprecedented profit growth

Expectations are high for Nvidia to continue blowing expectations out of the water. Over the last three years, Nvidia’s stock price rose after its quarterly earnings report 75% of the time. Analysts have spent the last few years flat-footed and scrambling to raise their price targets as Nvidia keeps raising the bar. It looks like they aren’t making that mistake any longer — as near-term forecasts are incredibly ambitious.

As mentioned, Nvidia’s trailing-12-month net income is $76.8 billion, which translates to $3.10 in diluted earnings per share (EPS). Consensus analyst estimates have Nvidia bringing in $1 per share in earnings for the quarter it reports on Wednesday and $4.35 for fiscal 2026. Going out further, analyst consensus estimates call for 37.8% in earnings growth in fiscal 2027, which would bring Nvidia’s diluted EPS to $6 per share.

NVDA Net Income (TTM) data by YCharts

Based on Nvidia’s current outstanding share count, that would translate to net income of $107.7 billion in fiscal 2026 and $148.5 billion in fiscal 2027. Unless other leaders like Alphabet, Microsoft, or Apple accelerate their earnings growth rates, Nvidia could become the most profitable U.S. company by the time it closes out fiscal 2027 in January of calendar year 2027. These projections strike at the core of why some investors are willing to pay so much for shares in the business today.

The key to Nvidia’s lasting success

Nvidia can single-handedly move the stock market due to its high weighting in the S&P 500. However, its influence goes beyond its own stock, as strong earnings from Nvidia could also be a boon for other semiconductor stocks, like Broadcom. But the ripple effect is even more impactful.

In Nvidia’s first quarter of fiscal 2026, four customers made up 54% of total revenue. Although not directly named by Nvidia, those four customers are almost certainly Amazon, Microsoft, Alphabet, and Meta Platforms. So strong earnings from Nvidia would basically mean that these hyperscalers continue to spend big on AI — a positive sign for the overall AI investment thesis.

However, Nvidia’s long-term growth and the stickiness of its earnings ultimately depend on its customers translating AI capital expenditures (capex) into earnings — which hasn’t really happened yet.

ORCL CAPEX To Revenue (TTM) data by YCharts

Cloud computing hyperscalers are spending a lot on capital expenditures (capex) as a percentage of revenue — showcasing accelerated investment in AI. But eventually, the ratio should decrease if investments translate to higher revenue.

Investors may want to keep an eye on the capex-to-revenue metric because it provides a reading on where we are in the AI spending cycle. Today, it’s all about expansion. But soon, the page will turn, and investors will pressure companies to prove that the outsize spending was worth it.

The right way to approach Nvidia

Almost all of Nvidia’s revenue comes from selling graphics processing units, software, and associated infrastructure to data centers. And most of that revenue comes from just a handful of customers. It doesn’t take a lot to connect the dots and figure out just how dependent Nvidia is on sustained AI investment.

If the investments pay off, the Ten Titans could continue making up a larger share of the S&P 500, both in terms of market cap and earnings. But if there’s a cooldown in spending, a downturn in the business cycle, or increased competition, Nvidia could also sell off considerably. So it’s best only to approach Nvidia with a long-term investment time horizon, so you aren’t banking on everything going right over the next year and a half.

All told, investors should be aware of potentially market-moving events but not overhaul their portfolio or make emotional decisions based on quarterly earnings.

Bank of America is an advertising partner of Motley Fool Money. Daniel Foelber has positions in Nvidia. The Motley Fool has positions in and recommends Alphabet, Amazon, Apple, Costco Wholesale, Meta Platforms, Microsoft, Netflix, Nvidia, Oracle, Tesla, and Walmart. The Motley Fool recommends Broadcom and recommends the following options: long January 2026 $395 calls on Microsoft and short January 2026 $405 calls on Microsoft. The Motley Fool has a disclosure policy.

Heavy is the head that wears the crown. Alphabet (GOOGL 1.70%) (GOOG 1.52%), the parent of Google, and Meta Platforms (META 2.65%), formerly known as Facebook, are facing antitrust litigation regarding the ways they have maintained their dominance in internet search and social media.

Investors generally dislike uncertainty, and amid a macroeconomic environment that has become far less predictable over the past few months, the entire market has become increasingly volatile. Between that and the company-specific risks they face, Alphabet had fallen by 27% from its high and Meta Platforms had lost 32%, as of April 22.

The potential outcomes of the cases against those companies could include regulators forcing them to sell or spin off key business assets. That said, shying away from these top artificial intelligence (AI) companies now could prove to be a mistake for investors.

Here’s why investors may want to buy this dip on Alphabet and Meta Platforms.

Technology empires may shrink

Alphabet and Meta Platforms are among the world’s most powerful technology leaders. Each generates billions of dollars in annual ad revenue from its core businesses. Alphabet dominates the internet with its Google search engine and software ecosystem, while Meta’s social media apps, including Facebook, Instagram, WhatsApp, and Threads, collectively reach 3.35 billion daily active users.

However, antitrust regulators have stepped in due to those companies’ strangleholds on their respective niches within the tech sector.

Alphabet has already lost two antitrust cases, one involving Google Search and another relating to its anticompetitive practices in online advertising. Now, Alphabet and regulators will argue in court, and judges will determine what actions Alphabet may need to take to remedy its violations. Alphabet may be ordered to sell its Chrome web browser, or to cease paying Apple the billions of dollars a year it spends in the deal that has made Google the default search engine on iPhones’ Safari web browser.

Meanwhile, the Federal Trade Commission’s antitrust case against Meta Platforms over its aggressive tactics to either acquire rivals like Instagram and WhatsApp or eliminate them is just starting. If the company loses, some speculate that it may be ordered to spin off or sell those apps.

Antitrust remedies might not be that bitter

The idea of a breakup is scary, but investors could be overreacting to the headlines. Both companies have layered multiple products and services to build technology ecosystems with powerful network effects.

Suppose the courts blocked Alphabet from paying Apple for search engine placement on its Safari web browser.

Now, Alphabet decided it was worth paying tens of billions a year to make Google the default search engine in Apple’s Safari browser. Still, it is unlikely that Google Search would collapse if that arrangement were to end. Safari is just one of Google’s many distribution channels, and has only a 17.5% share of the world’s web browser market.

Google’s Chrome is the global leader, with a 66% share. Even if Alphabet were to sell or spin off Chrome, it is tightly integrated with Google’s productivity apps, such as Gmail and others. In other words, it would be difficult to eliminate the network effects Alphabet benefits from unless regulators dismantle the company. That seems unlikely given how complicated it would be. Meanwhile, the Chrome unit on its own could struggle to generate revenue without its Google connection, as it’s a free product.

The situation around Meta is a little trickier because there aren’t as many layers to its ecosystem. If it had to sell Instagram, WhatsApp, or both, that would be a sizable blow to its empire. The good news is that while Meta has leveraged its family of apps to boost each other, such as by letting users cross-post from Instagram and Facebook to Threads, the big three apps — Facebook, Instagram, and WhatsApp — still function independently of each other.

Therefore, Meta losing one wouldn’t necessarily diminish the others. A spinoff would leave Meta smaller, but could also unlock shareholder value if an independent, publicly traded Instagram or WhatsApp thrives.

The antitrust risks are real, but investors shouldn’t panic. There is no rush to act, especially when each company’s AI efforts might create new core businesses down the road.

Both of these AI stocks are better bargains now

The AI trend could someday be the more important catalyst for both companies, and that seems unlikely to change regardless of how things turn out with these antitrust cases. Experts such as those at PwC believe AI technology could create a multitrillion-dollar economic opportunity over the next decade and beyond.

Alphabet’s AI opportunities include:

• AI-fueled growth in the cloud;
• An expanding autonomous ride-hailing business in Waymo;
• Quantum computing development;
• Competitive AI models (Gemini) for consumers and enterprises.

Meta doesn’t own a public cloud platform, but it does have:

• A broadening hardware business with Meta Quest headsets and AI smart glasses;
• An open-source AI model (Llama) with over 1 billion downloads;
• AI integrations throughout its social media apps and existing ad business.

The dips in these stocks have left them trading at reasonably compelling valuations. Alphabet trades at a price/earnings-to-growth (PEG) ratio of just 1.2, and Meta’s is 1.4. True, the generally agreed upon view is that a stock is fairly valued with a PEG ratio of 1, and lower is better. And sure, there are some potential risks to be wary about with both of these tech giants. But would an investor be better off buying shares of Walmart, a mature business trading at almost 40 times earnings and at a PEG ratio of 5.1? I don’t expect Walmart’s stock to outperform either Alphabet or Meta Platforms over the next five years unless there is a dramatic decline in the tech companies’ growth and competitive advantages.

GOOGL PE Ratio data by YCharts.

It can be easy to get overanxious about investment risks when the markets are already shaky. However, in the cases of Meta Platforms and Alphabet, it’s way too early to panic about what these antitrust cases could mean, and even aggressive court-mandated remedies could benefit shareholders. With that in mind, I’d recommend tuning out the noise and taking a long-term view on two of the world’s most powerful technology companies.

Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. Randi Zuckerberg, a former director of market development and spokeswoman for Facebook and sister to Meta Platforms CEO Mark Zuckerberg, is a member of The Motley Fool’s board of directors. Justin Pope has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Alphabet, Apple, Meta Platforms, and Walmart. The Motley Fool has a disclosure policy.

Harsh Chauhan has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Advanced Micro Devices, Nvidia, and Taiwan Semiconductor Manufacturing. The Motley Fool recommends Broadcom and Marvell Technology. The Motley Fool has a disclosure policy.

The S&P 500 index recently slipped over 10% from its peak and officially entered the correction territory. Although it has rebounded since, the heightened volatility amid economic and geopolitical concerns and stubborn inflation have put dividend stocks in the spotlight.

Stocks that pay a regular dividend generate steady income for shareholders. Then there are some that also grow their dividend payouts regularly, which means investors can expect fatter dividend checks every year regardless of what the stock markets do. Now that’s a compelling reason to buy dividend stocks, and there are opportunities you wouldn’t want to miss now.

Here are three great S&P 500 dividend stocks that are down between 20% and 33% from their 52-week highs that you’d want to buy now and hold practically forever.

A no-brainer dividend stock to buy

Shares of NextEra Energy (NEE 0.53%) have fallen nearly 17% in the past six months and are down nearly 20% from their 52-week high, as of this writing. The company, however, is a leader in its industry and is increasing its dividend by double-digit percentages every year.

NextEra Energy’s electric utility, Florida Power & Light (FPL), was created 100 years ago and is the largest electric utility in North America today. That’s not all. NextEra Energy also built what was the largest wind farm in the world in 2001. And it’s the largest producer of renewable energy from wind and solar today, as well as a leader in battery storage.

To be the frontrunner in utility and renewable energy is truly formidable, and it’s the kind of classic business combination that perfectly combines stability with growth. So while its utility generates steady cash flows, renewable energy has been the key to the double-digit compound annual growth in NextEra’s adjusted earnings per share (EPS) and dividends over the past decade.

NEE data by YCharts.

NextEra Energy commissioned 8.7 gigawatts (GW) of new renewables storage capacity across FPL and renewables in 2024 alone, has a backlog of over 25 GW, is targeting 6% to 8% growth in adjusted EPS through 2027, and expects operating cash flow to grow at or above its EPS growth rate. With the stock also aiming to increase dividends yielding 3.2% by at least 10% through 2026, NextEra Energy is a magnificent S&P 500 dividend stock to buy now and hold forever.

Down but not out

Devon Energy (DVN -1.40%) stock saw massive buying between 2021 and 2023 after it introduced the oil and gas industry’s first variable-dividend policy. Simply put, although Devon already paid a fixed dividend, it started topping it up with an extra dividend of up to 50% of the excess free cash flow (FCF) every quarter.

However, Devon’s variable dividends have fallen dramatically over time, with management even foregoing them in the past two quarters after the acquisition of Grayson Mill Energy’s Williston basin business last year for $5 billion. I see nothing wrong here, as Devon is using cash to repay debt instead and is targeting a $2.5 billion reduction in debt in two years. That’s a good thing as it will strengthen its balance sheet. Meanwhile, Devon has expanded its share-repurchase program by 67% to $5 billion.

Above all, Devon increased its fixed dividend by 9% in February and expects to return 70% of its cash flows to shareholders in 2025 in dividends and share repurchases. Devon’s fixed dividend per share, in fact, has more than doubled since 2021. Investors may have dumped Devon stock after its dividend “cuts,” but it’s not really a cut, as a variable dividend is just that: variable. With Devon shares down nearly 33% from their 52-week high and yielding 2.6%, it’s one beaten-down S&P 500 dividend stock to buy now and hold for the long term.

This S&P 500 heavyweight pays highly reliable dividends

Caterpillar (CAT -0.47%), which manufactures construction and mining equipment, and off-highway diesel and natural gas engines and gas turbines, recently reported weak numbers for financial year 2024 primarily because of macroheadwinds.

If you look at the bigger picture though, Caterpillar has survived bigger storms over its 100 years of existence and grown aggressively in recent years. Its FCF, for instance, has doubled in the past five years. That provides a solid base for the industrial giant to lift its dividends higher. In 2024, Caterpillar generated $9.4 billion in FCF from its core machinery, energy, and transportation businesses despite lower revenue, and that was near the top end of its target range of $5 billion to $10 billion.

CAT data by YCharts.

Caterpillar has increased its dividend per share for 31 consecutive years now. That speaks volumes about the company’s resiliency and capital efficiency, considering that Caterpillar is a cyclical stock, and its fortunes ebb and flow with the economy. More importantly, its dividends, when reinvested, have contributed significantly to the stock’s returns, which is why even a low yield of 1.6% makes Caterpillar such a great dividend stock. With its shares falling almost 13% in six months and 20% from their 52-week high, as of this writing, Caterpillar is the kind of S&P dividend stock you can buy on every dip and hold for years to to come.

Every so often, Wall Street reminds investors that stocks don’t move up in a straight line. In span of roughly three weeks, the ageless Dow Jones Industrial Average, broad-based S&P 500 (^GSPC -1.39%), and Nasdaq Composite have respectively sold off by 7.2%, 9.3%, and 13.1%.

This sell-off isn’t the least bit surprising given how far beyond historic norms stock market valuations have risen. Based on the S&P 500’s Shiller price-to-earnings (P/E) Ratio, Wall Street’s most-followed stock index recently traded at its third-highest premium during a continuous bull market when back-tested to January 1871.

Though I remain a long-term optimist and recognize that high-quality businesses increase in value over long periods, I’m not oblivious to the historic correlation that Wall Street’s major stock indexes tend to fall 20%, or greater, when the Shiller P/E Ratio becomes notably extended to the upside. This is to say that I’m eagerly on the hunt for a bargain, but also not itching to the pull the trigger on most stocks just yet.

While a number of magnificent stocks have caught my eye during the current sell-off, the companies I’m most-eager to add to are stocks I already own. Among the 35 stocks currently in my investment portfolio, here are five I’m waiting patiently buy more of.

Sirius XM Holdings

Amid a historically pricey stock market, satellite-radio operator Sirius XM Holdings (SIRI -3.06%) stands out for its unbelievably inexpensive valuation. Even though Sirius XM’s sales growth and subscriber figures have hit a bit of a rough patch, I’m fully expecting its sustainable competitive advantages to boost its share price in the years to come.

One factor that allows Sirius XM to stand on a pedestal above other radio companies is its satellite-radio licensing. Being a legal monopoly should afford Sirius XM a level of subscription pricing power that other radio-based businesses lack.

What’s even more important is Sirius XM’s revenue diversity. Instead of being solely reliant on advertising like terrestrial and online radio operators, Sirius XM brought in 76% of its net sales last year from subscription services. Subscription revenue is more predictable and sustainable than ad sales, which leads to stabler cash flow in virtually any economic climate.

A forward P/E ratio of 7, coupled with a dividend yield nearing 5%, makes Sirius XM stock an intriguing deal. If shares were to dip to $20 or below — my last purchase was at $20.55 — I’d be a buyer.

Alphabet

“Magnificent Seven” member Alphabet (GOOGL -2.60%) (GOOG -2.53%) has been a holding of mine for coming up on three years. Although Mag-7 stocks have been hit the hardest during the stock market sell-off, Alphabet looks to be the cheapest of the bunch.

Alphabet’s foundational operating segment continues to be its search engine, Google. Data from GlobalStats shows that Google has sustained an 89% to 93% monthly share of global internet search looking back 10 years. Possessing a near-monopoly on internet search ensures that Google will maintain strong ad-pricing power and yield abundant operating cash flow.

Over the next five years, Alphabet’s cloud infrastructure service platform, Google Cloud, should be able to spread its wings and rapidly increase cash-flow generation. Businesses are still reasonably early in their cloud spending ramp, and the incorporation of artificial intelligence solutions by Alphabet has the potential to accelerate sales growth for this segment.

While Alphabet is already cheap at 16 times forward earnings, historic correlations suggest the Magnificent Seven stocks will drive the major indexes lower. Though patient investors can’t go wrong, in my view, buying Alphabet stock right now, I’m anticipating emotion-driven trading, along with historic precedent, vis-à-vis the Shiller P/E Ratio, will push its valuation even lower.

Pinterest

Although it’s already a top-five holding in my portfolio, social media stock Pinterest (PINS -6.46%) is another company I’m eager to add to. I first purchased shares of Pinterest in February 2020 during the COVID-19 crash and last added to the position in April 2022.

Taking a wide-lens approach shows that Pinterest’s monthly active user (MAU) count has been trending higher for quite some time. Excluding some temporary hiccups following the worst of the pandemic, Pinterest’s investments in innovation (e.g., video) have boosted its monthly MAU count to 553 million. Having 553 million people visiting its site monthly should steadily lift its ad-pricing power.

Another lure for Pinterest as an investment is its operating model. Whereas most social media companies rely heavily on data-tracking tools and likes to help advertisers target users with their message(s), Pinterest’s entire platform is based on its MAUs willingly and freely posting about the things, places, and services they like. App developers changing their tracking tools should have little or no effect on Pinterest’s growth runway.

Pinterest stock is already inexpensive at 14 times forward-year earnings. But with ad-driven stocks taking it on the chin during the current sell-off, I wouldn’t be surprised to see Pinterest retreat from $31.39 per share, as of this writing, to the $25 to $28 range. That’s where I’d love to start nibbling, once again.

Fiverr International

A fourth existing holding that I’m looking to buy more of during the stock market sell-off is online-services marketplace Fiverr International (FVRR -4.32%). I’ve held shares of Fiverr for less than two years, with the most recent purchase coming in April 2024 at $18.90 per share.

I view Fiverr as ideally positioned to take advantage of a materially changed labor market. While some businesses have required workers to come back to the office, a substantially higher percentage of people are working remotely than prior to the pandemic. This is the perfect environment for Fiverr’s online freelancer marketplace to thrive.

While I’m not oblivious to the fact that annual active buyers fell from 4 million to 3.6 million in 2024 from the previous year, this isn’t a big concern when taking into account that annual spend per buyer rose by 9% to $302 during the fourth quarter, and marketplace take rate jumped to 27.6%, up 20 basis points from the prior-year period. In other words, Fiverr’s focus on bigger clients is allowing it to hang onto a higher percentage of the deals negotiated on its platform.

On an adjusted basis, Fiverr International stock can be purchased right now for about 10 times forward earnings. But if tech valuations continue to deflate, I believe I’ll be able to pick up additional shares of Fiverr in the neighborhood of $20.

PennantPark Floating Rate Capital

The fifth magnificent stock that I already own (since October 2023) and am looking to add to during the current stock market sell-off is little-known business development company (BDC) PennantPark Floating Rate Capital (PFLT -1.27%). PennantPark pays a monthly dividend and its yield has now surpassed 11%.

Though PennantPark has put some of its capital to work buying common and preferred stock in middle-market companies (i.e., generally unproven businesses), the vast majority of its $2.194 billion investment portfolio is tied up in debt securities. Since middle-market businesses often lack access to loans and lines of credit, the loans they do receive from BDCs come with above-market interest rates. In short, it pumps up the weighted-average yield PennantPark generates on its loan portfolio.

The other great aspect about PennantPark Floating Rate Capital (which its name gives away) is that the entirety of its $1.964 billion debt-securities portfolio sports variable interest rates. When the Federal Reserve aggressively raised rates from March 2022 to July 2023, it sent PennantPark’s weighted-average yield on debt investments significantly higher. Even with the nation’s central bank now in a rate-easing cycle, PennantPark should have plenty of opportunity to take advantage of higher loan rates.

Historically, rapid moves lower in the stock market tend to create short-lived price dislocations in PennantPark’s stock. Normally, BDCs trade very close to their respective book value, which for PennantPark was $11.35 per share, as of Dec. 31, 2024. It its shares move notably below its book value, I’ll be eager to add to my position.