As 2025 draws to a close, the AI frenzy has swept markets, but concerns are mounting—not just about potential stock bubbles but also the disruptive force of the technology itself. While giants like Alphabet Inc. (GOOGL.US) and NVIDIA Corporation (NVDA.US) delivered strong earnings, overlooked sectors like memory chips and hard drives emerged as better investment havens. Meanwhile, competition from deep-pocketed players like OpenAI and Anthropic pressured software makers deemed most vulnerable to challengers.
With the U.S. bull market entering its fourth year, unprecedented doubts have surfaced about the sustainability of massive AI computing expenditures and whether returns justify the investments. "There’s optimism around AI, but also a lot of hype," said Anthony Saglimbene, chief market strategist at Ameriprise. "2026 will be more about 'proof.' What’s the ROI for hyperscalers pouring money in? Will their profit growth keep accelerating?"
Here’s a recap of key 2025 tech stock developments and what lies ahead.
**Neocloud Jitters** Neocloud firms (providers of tailored cloud services for AI clients) dominated 2025 but now appear emblematic of AI bubble risks. Scrutiny over OpenAI’s lack of profitability has raised doubts about its ability to fulfill spending commitments, including a reported $300 billion five-year cloud deal with Oracle (ORCL.US). Once seen as a prime AI beneficiary, Oracle’s shares have plunged 45% since September peaks as its OpenAI ties became a liability.
"OpenAI’s promises are under a cloud of doubt," said Adam Rich, deputy CIO at Vaughan Nelson, which oversees $17+ billion. "Predictions rely on known data, and unknowns abound. Until that changes, companies like Oracle will struggle to shine." Oracle also grapples with soaring data center lease costs, project delays, and financing woes, with its debt burden spooking investors—credit risk metrics hit crisis-era highs.
Beyond Oracle, CoreWeave Inc. (CRWV.US) has lost two-thirds of its value since June, while Nebius Group (NBIS.US) is down over 42% from October highs.
**Unsexy Tech Winners** In 2025, investors tracked billion-dollar capex flows to uncover new AI plays. The S&P 500’s top performers tell the tale: memory/storage firm SanDisk (SNDK.US) led, followed by hard drive makers Western Digital (WDC.US) and Seagate Technology (STX.US). Micron Technology (MU.US), the largest U.S. memory chipmaker, ranked fifth. With capex still rising, this trend may extend into 2026.
Attention is shifting to the next wave, with some eyeing battered software stocks. "The periphery is intriguing," said Melissa Otto, TMT research head at Visible Alpha. "There’s an entire AI ecosystem around the infrastructure itself."
**Software Slump** Despite attractive valuations, software stocks failed to lure investors in 2025. SaaS firms were hit hardest, reflecting fears that AI—like ChatGPT and Alphabet’s Gemini—could disrupt demand or pricing power. RBC analysts called AI an "existential threat" for some, as "AI chatbots and agents dominate core battlegrounds."
ServiceNow (NOW.US), Adobe (ADBE.US), and Salesforce (CRM.US) were among tech’s weakest performers. Morgan Stanley’s SaaS index fell 10%, while a broader software index (including AI winners like Microsoft) rose 5%. Whether this underperformance persists is a key 2026 theme. Some argue the selloff is overdone; KeyBanc analysts noted SaaS trades at a 30-40% discount to fundamentals.
**Pricier Premiums** Fears that sky-high valuations would curb 2024’s hottest stocks proved unfounded. Palantir (PLTR.US)—often trading at 200x forward P/E—soared 146%, ranking eighth in the S&P 500. Skepticism lingers (just 9 of 29 analysts rate it a "buy"), but revenue is projected to grow 43% in 2026 and 39% in 2027.
Tesla (TSLA.US), the "Magnificent Seven’s" most expensive stock (200x P/E), also defied concerns, hitting record highs despite EV slowdowns and safety issues. Optimism centers on Elon Musk’s autonomous vehicle vision and robotics push. After two stagnant years, sales may rebound—up 13% in 2026 and 19% in 2027.
As 2026 begins, tech stocks mirror 2025’s dilemma: expensive but brimming with growth potential. The onus is on execution. "Expectations and valuations are lofty," said Ameriprise’s Saglimbene. "They’ll need to overdeliver to keep rising."
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