The technology and AI stocks to look out for in 2025

Is the tech and AI boom over, or do the trends that have almost single-handedly driven stock markets for two years have more room to run?

Investing in tech and AI is always something of a leap of faith into the future. Investors making that leap have been rewarded over recent years as the top stocks and funds in the stock market have had an overwhelmingly technological flavour.

Such is the extent to which tech and AI stocks have come to dominate, that the Magnificent Seven group now accounts for 33% of the S&P 500’s total capitalisation. As such, any broad stock market index fund will now be heavily exposed to this group of big tech and AI stocks.

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“The Magnificent Seven present a particular challenge for investors,” says Ben Seager-Scott, chief investment officer at Forvis Mazars. “They have been on a great run with momentum propelling their share prices ever higher, and one of the problems with momentum is it can keep pushing prices up… until it doesn’t and then those stocks can come crashing back down to earth.”

When this happens, valuations become a huge quandary for investors. “These stocks now look ‘expensive’ on most measures, but their profits are continuing to grow rapidly,” Seager-Scott adds. “Nvidia is one of the largest companies in the world with earnings growth like a micro-cap. How do you value something like that?

“The short answer is you can’t with any real conviction, and that is somewhat in the nature of disruptive innovations. So there’s a lot of guesswork involved despite the confidence professed both by champions and detractors in the commentariat.”

Data from Hargreaves Lansdown shows that tech and AI stocks are still highly in favour among ISA investors. The most popular funds during Q4 on the company’s platform showed a concentration into tech funds as well as global and US markets.

Source: Hargreaves Lansdown

“While we think the US has more room for growth following Trump’s re-election and the potential for business-friendly policies, valuations are lofty, particularly among larger growth-focused companies,” says Kate Marshall, lead investment analyst, Hargreaves Lansdown. “Similarly, the tech sector is full of exciting opportunities, but it’s a specialist area and, like any specialist sector, performance will come in waves. In case of any setback, investors should maintain diversified portfolios that have the potential to perform when different regions come in and out of favour.”

However, while there is uncertainty over how long the tech and AI rally can continue, I’ve picked out three stocks here that could be well-positioned to ride the particular conditions that 2025 has in store, and could be worth keeping an eye on this year.

Note – these are in addition to Broadcom, Nvidia and MicroStrategy, all of which were referenced in my five stocks for 2025 article.

Kyndryl to catch infrastructure tailwinds

The UK government is setting out its stall to be a leader in the AI market. Prime minister Keir Starmer announced an initiative to”turbocharge” the sector’s growth over the next decade on Sunday 12 January, including allocating £14 billion in funding and securing a commitment among leading private tech companies to create 13,250 jobs.

“Our plan will make Britain the world leader. It will give the industry the foundation it needs and will turbocharge the Plan for Change. That means more jobs and investment in the UK, more money in people’s pockets, and transformed public services,” said Starmer.

Vantage Data Centres, Nscale and Kyndryl Holdings (NYSE:KD) will between them build out new AI infrastructure and jobs for the UK, with Kyndryl set to create 1,000 jobs in Liverpool.

Kyndryl spun out from IBM’s infrastructure services business in 2021, and is the world’s largest infrastructure services provider.

As global public and private investment in AI increases, Kyndryl could be well-set to continue garnering lucrative contracts like this one. Analysts expect the company to swing to a profit in 2025, and a forward P/E ratio of 19.98 is very reasonable for any business with AI spend exposure.

Alfa looks good value

I’ve known Alfa Financial Software (LON:ALFA) for a long time. As software companies go, it’s not the most glamorous: its software is highly specialised for the asset finance industry, and as such is fairly esoteric.

However, unlike some of the more eye-catching software houses, Alfa makes good, steady profits – something I’d be looking for in an investment with the amount of macro uncertainty around at the moment. Asset finance as an industry also tends to be fairly resilient during periods of broader market turbulence.

Alfa also offers a degree of geographical diversification, particularly between the UK and the US (which could potentially see very different economic trajectories this year once Trump re-enters the White House). It has customers in 37 countries, with the UK accounting for approximately a third of revenue, the US roughly two-fifths, and EMEA excluding the UK roughly one-fifth.

Alfa’s stock jumped in November when management improved its guidance for the year, but has since fallen back to below the levels it was trading at before its Q3 update. At the time of writing, it has a P/E ratio of 27.59, a forward P/E of 25.44, and a dividend yield of 2.68%. Median estimates among London Stock Exchange Group (LSEG) analysts yield a 255p price target – implying 24.1% gains over the next year.

None of that will shoot the lights out, but all in all this looks like a steady performer that could sit well alongside other more speculative AI and tech investments. (Note: this is a tech stock, but has limited AI exposure – CEO Andrew Denton in fact downplayed the potential of AI to benefit asset finance specifically in Alfa’s 2023 annual report.)

Salesforce to get things done

A recent research note from Morgan Stanley predicts that AI is going to cycle into the “agentic” phase this year. In other words, now should be the time we start seeing AI shift from impressive gimmicks, like chatbots, into actually doing useful stuff – what Morgan Stanley calls the “task-fulfillment phase”. That could see a shift in focus away from semiconductor stocks, and into AI software firms.

If this shift plays out, Salesforce (NYSE:CRM) could be one of the big beneficiaries. It’s rarely in the conversation as far as the big AI companies are concerned, and to my mind this is a little unfair. Rather than jumping on the bandwagon post-ChatGPT, Salesforce has been “AI-first” since 2014 when founder Marc Benioff highlighted the opportunity at an internal all-hands.

Its Einstein AI platform has a lot of functionality which will help salespeople in all kinds of companies improve their performance. If market conditions sour, businesses might well become more delivery-focused; AI tools that improve their top line could be relatively sought-after even if spending is cut in other areas.

With a trailing P/E ratio of 52.34 Salesforce looks a little pricey based on its trailing earnings, but a forward P/E of 29.45 is reasonable for a large-cap AI company.