S&P 500 Expected to Rise as AI Enthusiasm Continues

The S&P 500 is predicted to see over a 17% increase in 2025, fueled by sustained interest in artificial intelligence, marking the third consecutive year of a bull market.

This year, semiconductor stocks have once again led the index, with notable growth in companies that are involved in constructing data centers necessary for AI technology. Interestingly, three of the top ten performing companies in 2025 within this index are data storage firms, reaping substantial benefits from massive investments made by major AI cloud service providers, often referred to as hyperscalers.

On the flip side, economic uncertainties stemming from President Donald Trump’s extensive tariffs have put pressure on consumer company stocks. Moreover, healthcare stocks have faced challenges due to unclear administration policies and ongoing concerns regarding drug pricing.

Technology shares have continued to shine, especially those linked to AI. However, the focus has noticeably shifted toward companies that deal with data, encompassing everything from storage to data center construction. Major players like Microsoft, Amazon, Alphabet, and Meta Platforms have collectively pledged over $440 billion in the forthcoming year to enhance their AI capabilities, standing in contrast to strong performers like SanDisk, Western Digital, and Seagate Technologies.

In 2025, new entries to the S&P 500 included Robinhood Markets, SanDisk, Appravin, and Carvana, all of which saw impressive gains that landed them among the top 20 performers in the index.

But not every stock has enjoyed an upward trajectory. The Trade Desk faced a significant downturn, dropping nearly 70%, making it the worst performer in the S&P 500. Other notable declines included Block, which fell over 20%, and Coinbase, down more than 6%.

Palantir Technologies is also gearing up for its third consecutive year of double-digit gains, propelled by strong backing from retail investors attracted by the allure of AI and the dynamic leadership of its CEO, Alex Karp. Nonetheless, it’s worth noting that Palantir’s stock is considered quite pricey, boasting a forward P/E ratio exceeding 180 times, making it the third most expensive on the index, following Tesla and Warner Bros. Discovery.

Speaking of Warner Bros. Discovery, shares skyrocketed nearly 175% in 2025 amid strong takeover speculation. The company had put itself up for sale in October, sparking a competition between Paramount Skydance and Netflix, both of which are vying to solidify their offers.

Reportedly, Warner Bros’ board plans to reject Paramount’s bid in favor of Netflix’s, although Oracle Chairman Larry Ellison—who is related to Paramount’s CEO—has backed Paramount’s proposal.

Economic uncertainties, tariffs, and inflation concerns have negatively impacted consumer stocks, notably among respected brands like Clorox, Lamb Weston, Campbell’s, and Constellation Brands, all of which featured among the index’s poorest performers. Chipotle Mexican Grill’s shares reflected a nearly 40% drop after two years of strong growth.

Retail stocks have also been affected, with DECK Outdoor—owner of well-known brands such as Hoka and Ugg—seeing a nearly 50% decline, snapping a nine-year winning streak due to underwhelming earnings projections and analyst downgrades.

Meanwhile, Lululemon Athletica is expected to dip almost 45% this year, marking its second successive year of significant declines as it navigates business challenges following slow growth and CEO resignation. Activist investor Elliott Investment Management has a notable stake in the company—valued over $1 billion.

Healthcare stocks, while anticipated to benefit from policy shifts under the Trump administration, underperformed in 2025. Molina Healthcare saw a drop exceeding 40%, following the trend of consecutive declines. UnitedHealth Group and Centene were also down over 30%, landing them among the 25 poorest performers in the S&P 500.

Even with these challenges, some investors see potential in the struggling healthcare sector, suggesting there may be advantageous valuations to exploit. Money manager Michael Varley believes Molina could become an acquisition target if its stock holds steady in the coming year.