(Bloomberg) — Investors will remember 2025 as the year the artificial intelligence rally broadened out and the fears became more pronounced — not only of a bubble in the stocks, but also of the disruption the technology represents.
While tech giants like Alphabet Inc. and Nvidia Corp. delivered strong gains, unsung corners of the industry, like memory chips and hard disk drives, proved to be far better places for investors. Meanwhile, the threat of competition from deep-pocketed heavyweights and upstarts like OpenAI and Anthropic weighed on software makers that are considered most at risk from challengers.
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With the bull market in US stocks stretching into a fourth year, there are more concerns than ever about the sustainability of heavy spending on AI computing and whether the returns will justify the investments.
“There’s a lot of optimism around AI, but also a lot of hype,” said Anthony Saglimbene, chief market strategist at Ameriprise. “2026 will be more about the proof of AI. What’s the ROI on the hyperscalers that have been spending? Will they see profit growth continue to accelerate?”
Here’s a look at some of the biggest stock market stories for the tech industry in 2025 and the outlook for each in the new year.
Neocloud Nerves
Neoclouds, which are companies that provide cloud-computing services tailored to AI customers, were the rage for most of 2025. But heading into 2026 they look more like proxies for AI bubble risk.
Growing scrutiny over OpenAI’s lack of profitability has raised questions about its ability to pay for its massive spending commitments, including a cloud-computing deal with Oracle Corp. said to be worth $300 billion over five years. Oracle was expected to be a major beneficiary of AI growth, but its stock is down 45% since hitting a peak in September as its exposure to OpenAI becomes a major concern.
“There is a lot of fear with OpenAI and the commitments it has made,” said Adam Rich, who helps oversee more than $17 billion in assets as deputy chief investment officer and portfolio manager at Vaughan Nelson. “People can only forecast what we know, and right now there’s a lot we don’t know. So long as that’s the case, it will be hard for companies like Oracle to regain their luster.”
Oracle has other issues, including the amount of money it’s spending on data center leases, reported delays in some data center projects, and financing questions. Its growing debt load is particularly concerning to investors, as a measure of the company’s credit risk has skyrocketed to its highest level since the financial crisis.
Beyond Oracle, neocloud provider CoreWeave Inc. has lost about two-thirds of its market value since hitting a high in June. And Nebius Group NV shares are down more than 42% from an October peak.
Boring Tech
Investors discovered new AI trades in 2025 by following where the billions of dollars in pledged capital expenditures are going. You can see it just by looking at the top performers in the S&P 500 Index. Memory and storage company Sandisk Corp. leads the list, followed by Western Digital Corp, which makes hard disk drives, and its rival Seagate Technology Holdings Plc. Micron Technology Inc., the biggest US-based maker of memory chips, is fifth.
The trend is expected to continue in 2026 as capital expenditures keep growing. Investors are increasingly thinking about where the next wave is headed, with some eyeing beaten-down software stocks.
“Things at the edge are interesting,” said Melissa Otto, who heads technology, media and telecommunications research at Visible Alpha. “There is this AI ecosystem that orbits around the AI infrastructure itself.”
Software Slump
Software stocks traded at attractive market valuations in 2025, but that did little to entice investors. Shares of software-as-a-service, or SaaS, companies were hit particularly hard. Much of the weakness reflects growing fears that the group will be disrupted by AI, as offerings from services like ChatGPT and Alphabet’s Gemini cut into demand or pricing power.
AI represents “existential competition” for some software companies as “AI chatbot and agent dominance becomes the core battlefield,” analysts at RBC Capital Markets wrote in a research note this week.
Companies like ServiceNow Inc., Adobe Inc., and Salesforce Inc. were among the weakest performers in the tech sector this year. A Morgan Stanley index of SaaS companies is down 10%, compared with a gain of 5% for a broader software index that includes perceived AI winners like Microsoft Corp.
Whether software’s underperformance continues will be a key stock market theme in 2026. Some Wall Street pros already think it’s overdone. The SaaS group “is trading anywhere between a 30-40% discount relative to what its fundamentals would suggest,” KeyBanc Capital Markets analysts wrote in a note to clients late last month.
Pricey Got Pricier
Concerns that nose-bleed valuations would hamper the ascent of some of 2024’s hottest stocks in 2025 proved misplaced. Palantir Technologies Inc. turned out to be one of the year’s best performers despite trading at more than 200 times estimated profits for much of the year. The stock’s 146% advance ranks eighth in the S&P 500.
Wall Street has long been skeptical of Palantir, mainly because of the stock’s lofty valuation. Of the 29 the analysts covering the maker of data analysis software, just nine rate the stock a buy. Still, the company is expected to expand at an enviable clip, with revenue projected to jump 43% in 2026 and 39% in 2027, according to the average of analyst estimates compiled by Bloomberg.
Electric-vehicle maker Tesla Inc. also overcame concerns about its valuation, which is by far the most expensive among the so-called Magnificent Seven. The stock hit a record this week despite trading at more than 200 times anticipated profits and facing a number of headwinds from slowing EV sales to concerns about safety.
Investors are optimistic about Chief Executive Officer Elon Musk’s vision of a self-driving car future and nascent push into robotics. After two years of stagnant revenue growth, Tesla’s sales are expected to expand 13% in 2026 and 19% in 2027.
All of which leaves the tech landscape heading into 2026 roughly where it was a year ago. Yes, the stocks are pricey. But the opportunities for growth are there. It’s up to the companies to deliver.
“Expectations are high and valuations are expensive,” Ameriprise’s Saglimbene said. “That means they have more to prove, and they will really have to exceed expectations to move higher.”
