It was a very good year to invest in stocks last year. The S&P 500 Index returned more than 20% for a second consecutive year, and the major stock market indexes consistently set new all-time highs in the process.
It was an even better year for those lucky or savvy enough to have invested in technology stocks. Growth stocks outperformed value stocks, and tech stocks were among the best performers, largely because excitement about artificial intelligence (AI) dominated headlines.
Related: Cathie Wood makes bold $173 million bet on surging AI stock
For example, among the 23 companies in the Russell 1000 Index that generated returns of 100% or more last year, 8 are related to AI, including Palantir Technologies (PLTR) , Vistra Corp (VRT) , Nvidia Corp. (NVDA) , Vertiv Holdings (VRT) , and Axon Enterprises (AXON) .
Technology's winning ways may not be over yet, as many expect artificial intelligence to remain a big focus in 2025. The individual stocks that generate the biggest returns, however, could be slightly different.
While spending on AI infrastructure will remain high, we'll also start to hear much more about agentic AI, which many believe will be the next big AI trend.
Why is there so much excitement about AI
According to a recent research report from Goldman Sachs, AI could boost global growth by 7% over the next decade, boost S&P 500 corporate profit margins by 4%, and raise U.S. labor productivity growth by just under 1½ percent per year over a 10-year period.
Little wonder that AI has captured the zeitgeist.
On January 21, OpenAI CEO Sam Altman added to the excitement when he went to the White House alongside SoftBank CEO Masayoshi Son and Oracle’s Chairman and Chief Technology Officer Larry Ellison to announce a huge new AI deal.
Related: Sam Altman's net worth: The OpenAI founder is now a billionaire
Together, the three billionaires committed to spending as much as $500 billion building artificial intelligence infrastructure in the U.S., one of several high-profile announcements made during the new Trump administration. So far, the U.S. technology partners named in the deal include Nvidia (NVDA) , Oracle (ORCL) , Microsoft (MSFT) , and Arm Holdings (ARM) .
Based on information from various sources, the joint venture would be called Stargate and will start with a data center in Texas.
President Trump said it would create over 100,000 American jobs almost immediately. So far, 10 data centers in the U.S. are under construction, and 20 more are planned.
The real estate company CBRE recently stated, "The rapid growth in digital services, cloud computing, artificial intelligence (AI) and 5G is driving a persistent surge in demand for data center capacity."
They added, "Despite record construction activity, the data center market will struggle to keep pace with demand, leading to higher utilization rates in existing facilities and tighter vacancy rates. The average vacancy rate for primary markets fell to a record-low 2.8%, and the average preleasing rate of new construction hit a record high in 2024."
According to a recent report by Blackstone, "Artificial intelligence is powered by data, and in recent years, total data generation has been doubling every three years. Between 2010 and 2025, the amount of data created, consumed, and stored will increase over 100x. All of this data needs a place to live, which in turn has unleashed an enormous need for data centers.
And it isn’t just AI — social media, cloud migration, content creation and media streaming are all contributing to more data. Meeting this demand and fully capturing the AI opportunity will require an estimated $2 trillion in global digital infrastructure investment by 2030."
So, briefly, what is AI?
According to Chat GPT 4.0:
“AI focuses on reasoning, problem-solving, perception, language understanding and decision-making. AI can be categorized into two main types:
1. Narrow AI (Weak AI): This is designed to perform a specific task, such as voice assistants, recommendation systems, or image recognition. It is highly specialized and does not possess general intelligence.
2. General AI (Strong AI): This is a more advanced form of AI that would be capable of understanding, learning, and performing any intellectual task that a human can do. General AI is still a theoretical concept and has not yet been realized.”
Moving ahead… what is agentic AI
A new, more advanced area of AI is starting to emerge, and it is called Agentic AI.
Chat GPT describes Agentic AI as “artificial intelligence systems that can autonomously make decisions and take actions based on their programming or learned experiences, with the ability to achieve specific goals or perform tasks in dynamic environments."
Related: One AI stock has become analysts’ top pick for 2025
Some literature refers to these decision-makers as “Agents.” Unlike traditional AI, which might require continuous human input or supervision, Agentic AI operates independently to pursue its objectives.
In other words, compared with earlier technology, Agentic AI models represent a more sophisticated evolution that incorporates advanced reasoning capabilities, autonomous decision-making, and complex problem-solving.
These agents can be used as tools, such as helping software engineers code faster. Or they may replace certain job functions, such as online customer service.
Who could be the big agentic AI winners in 2025
Merrill Lynch recently released a research report on Agentic AI called “The New Wave: Agentic AI.”
Here are a few of the highlights within the report:
- New and disruptive AI capabilities are emerging rapidly.
- Agentic AI and autonomous action-taking agents mark the beginning of AI’s third wave (the first wave was pre-GenAI from 1940 – November 2022, and the second was GenAI from November 2022 to October 2024).
- AI capabilities appear to be emerging on a weekly, if not daily, basis.
- AI capabilities are advancing so rapidly that AI agents (think Agentic AI) may complete end-to-end software engineering tasks, answer customer service calls, or book your next vacation.
- We are approaching an accelerating super cycle of innovation, in which increasingly powerful models produce increasingly powerful apps that, in turn, drive additional model advances and app capabilities.
According to a recent interview from the Wall Street Journal, companies such as Johnson & Johnson (JNJ) , Moody’s (MCO) , and eBay (EBAY) are all in various stages of testing and deploying Agentic AI.
Looking ahead, many technology-related names are involved in developing, enabling, and helping to build out Agentic AI. There are many others, but this is a small list of names investors might want to watch in 2025 include:
No. 1: The semiconductor companies Nvidia, Marvell Technology (MRVL) , Credo Technology Group (CRDO,) and Monolithic Power Systems Inc. (MPWR) .
Related: Analyst who bet correctly in 2024 unveils top AI stock picks for 2025
These companies provide computer processing power, high-speed connectivity solutions, and power solutions for data infrastructure.
No. 2: The diversified technology company Google (GOOGL) .
Google provides a wide range of services, including cloud computing, online advertising, online search, email, and hardware. The company has incorporated AI into several of its services, including search, maps, ads and more.
No. 3: The software companies Microsoft, Oracle, IBM (IBM) , ServiceNow (NOW) and Salesforce Inc. (CRM) .
Related: Analyst revisits IBM stock price target before earnings, investor day
These large global technology software companies are all involved in either developing AI technology or providing end user applications that utilize AI.
No. 4: The internet retailer Amazon (AMZN) .
Amazon is a global technology and retail company that sells products online, offers cloud computing services and provides digital streaming and AI services.
No. 5: The global IT services firm Accenture (ACN) . Accenture is a global technology services company that provides consulting and outsourcing services and helps companies in advanced areas that include AI, analytics and automation.
No. 6: The computer networking company Arista Networks (ANET) .
Arista is an industry leader focused on networking, data centers and routing.
This AI industry is rapidly evolving and moving forward as billions of dollars pour into the sector. 2025 is likely to follow in the footsteps of 2024 and bring lots of exciting news, new breakthroughs, and advances for a number of technology-related companies.
Related: Veteran fund manager issues dire S&P 500 warning for 2025
