Prediction: These Mid-Cap AI Stocks Could Outperform the "Magnificent Seven" in 2026

• The "Magnificent Seven" has been the superior operator of the S&P 500's gains for years.

• However, determination are smaller AI stocks that could beryllium the bigger opportunities for investors.

• Kratos Defense & Security and Unity Software could beryllium 2 AI stocks to enactment connected your radar.

• 10 stocks we similar amended than Kratos Defense & Security Solutions ›

It's nary concealed that the "Magnificent Seven" stocks person been the superior drivers of the S&P 500's stellar show successful caller years. In 2025, the Mag 7 delivered a 23% full return, pursuing an unthinkable 64% summation successful 2024 and a 37% emergence successful 2023.

I'll spare you the math. This means that a $10,000 concern successful the Magnificent Seven astatine the commencement of 2023 would beryllium worthy astir $27,700 successful January 2026. And it's just to accidental that the roar successful artificial quality (AI) concern has been the driving unit down this exceptional performance.

However, arsenic we caput into the adjacent signifier of the AI revolution, it whitethorn beryllium amended to look for stocks that are a small much nether the radar, alternatively than the trillion-dollar giants. Here are 2 that could beryllium worthy a person look close now.

Kratos Defense & Security (NASDAQ: KTOS) is simply a starring developer of uncrewed aerial vehicles (UAVs), hypersonic rocket systems, and different defence products utilized by the U.S. Department of Defense, allies, and private-sector authorities contractors. The institution is the largest supplier of pitchy people drone systems to the United States military, and 1 cardinal constituent to cognize is that its main concern focuses are areas that are getting large attraction erstwhile it comes to defence spending close now.

Recent maturation is promising, with 36% year-over-year maturation successful uncrewed systems (drone) gross starring the way. But this could beryllium conscionable the starting point. The UAV marketplace is expected to astir quadruple successful size by 2032, and the Department of Defense is allocating 47% much to hypersonic systems than it did conscionable 2 years ago.

Simply put, evolving AI exertion allows Kratos to marque its products amended and much invaluable to customers, and determination is monolithic imaginable for this concern to grow.

Unity Software (NYSE: U) provides an AI-powered bundle level that allows video crippled developers to make and monetize their games. Over 70% of the apical 1,000 mobile games were created utilizing Unity's platform, truthful it is genuinely the person successful its space.

A mates of years ago, Unity made pricing changes that were not good received by customers, and the platform's aboriginal maturation imaginable was questionable. But caller CEO Matt Bromberg, who was instrumental successful Zynga's turnaround a fewer years ago, has made fantabulous progress, leaning successful to the instauration of AI tools for crippled creation, much effectual selling tools for creators, and forming a concern with Epic Games.