MW AI revolution will create 10 winners in 2025 - and software is finally joining the party

By Ciara Linnane

Nvidia, Microsoft and Palantir lead Wedbush's list of AI winners for next year

Technology stocks are expected to gain 25% in 2025 once the new administration ushers in a less stringent regulatory regime, according to Wedbush, where analysts are expecting the AI revolution to spawn 10 winners, led by market leader Nvidia Corp.

Software companies are finally joining the list, analysts led by Dan Ives wrote in a note to clients on Tuesday.

"The time has come for the broader software space to get in on the AI Party as we believe the use cases are exploding, the enterprise consumption phase is ahead of us beginning in 2025, the launch of LLM models across the board, and the true adoption of generative AI will be a major catalyst for the software sector and key players to benefit from this once in a generation fourth Industrial Revolution set to benefit the tech space," Ives wrote in the note.

The two best software plays are still Palantir $(PLTR)$ and Salesforce $(CRM)$, but many other vendors are also well placed to join the group, Ives wrote. The list includes six software names, including MongoDB $(MDB)$, Pegasystems $(PEGA)$ and Snowflake (SNOW).

"The AI Software era is now here in our view," wrote Ives.

Nvidia $(NVDA)$ and other cloud leaders will remain the driving force for AI.

"The start of this $2 trillion+ of AI spending all began with the Godfather of AI Jensen and Nvidia as they remain the only game in town with their chips the new gold and oil," the analyst wrote.

Other cloud/hyper scale players will also play a key role in the next phase of the AI revolution being led by Microsoft $(MSFT)$, with Alphabet's $(GOOGL)$ Google Cloud Platform and Amazon Web Services $(AMZN)$ also finding cloud and AI momentum into the coming years.

The Trump White House is expected to adopt a softer approach to regulation than the Federal Trade Commission has under leader Lina Khan, who has blocked several mergers and acquisitions on competition grounds and worked to rein in Big Tech's outsize influence.

Still, Ives acknowledges there'll be "white knuckle" moments for tech companies, including Trump's planned tariffs on imported goods, worries about the Federal Reserve's monetary policy approach with interest rates still high, and already-stretched valuations.

However, "this will create the opportunities to own the tech theme and key names which has been our core investing tech playbook the last 2 years," said Ives.

Nvidia's stock has soared 177% in 2024, while the S&P 500 SPX has gained 24%.

-Ciara Linnane

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January 02, 2025 05:28 ET (10:28 GMT)

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