The artificial intelligence industry will become even tougher in 2025. While strong capital spending cycles and revenue growth from the world’s biggest tech companies helped propel the market to record highs, the easy rally is over, with the S&P 500 soaring more than 17% and the Nasdaq Composite index up 22% since the beginning of the year. A turning point emerged in the second half of the year, amid a volatile trading period driven by soaring valuations, macroeconomic headwinds and concerns about the rise of an AI bubble. With this, several new investment areas have emerged, with new winners and surprising laggards. Among the Magnificent Seven, Alphabet and Nvidia came out on top, while Amazon and Apple underperformed. Investors are paying more attention to companies that help build AI infrastructure, and expect to see more tangible results from the technology in the year ahead. “While 2025 saw valuations rise again for key enablers, from component suppliers to EMS companies to accelerator competitors, NVIDIA has given up premiums to historical valuations,” Stifel analyst Torre Svanberg wrote this week. “In 2026, hyperscaler clusters scale toward deployments of 100,000+ accelerators, and bottlenecks shift more decisively to power density and connectivity.” A look at the five biggest AI trends that have swept the market this year can help investors think about what 2026 will bring. Google shakes up the AI race Earlier this year, investors thought Google’s parent company, Alphabet, was the underdog in the AI space. That theory has been turned on its head, with OpenAI CEO Sam Altman declaring a “code red” earlier this month to improve ChatGPT in the face of increased competition. The successful launch of Google’s Gemini 3 model and Nano Banana Pro led to a sharp increase in monthly user numbers and increased investor sentiment. AI Overviews, a feature that uses Gemini to bring AI-powered information to the top of Google search results, has also grown, reaching 2 billion monthly users as of November 18th. The Street was also enthused by Google Cloud’s record third-quarter operating margins and favorable ruling in a search antitrust case in early September. Talk of expanding its tensor processing unit (TPU) business was also positive, and Alphabet’s stock price reflected the bullish sentiment. The stock is up 66% since the beginning of the year, making it the top of the Magnificent Seven stocks. The reversal gave a halo to longtime chip partner Broadcom, which rose more than 50%, while private OpenAI distributors Nvidia and Microsoft underperformed. Indeed, ChatGPT remains the dominant chatbot in terms of number of users as of fall, according to metrics provided by OpenAI and Google. TD Cowen estimates that ChatGPT will have 450 million average daily users by the end of 2025. The AI infrastructure maker beat Western Digital in a big way, and while Seagate Technology didn’t dominate the headlines like Alphabet, the stock ranks among the top five S&P 500 performers this year. The broad market index’s information technology group was the top performer in 2025, with big wins for AI infrastructure stocks and chip equipment makers. Hard disk drive maker Western Digital topped the list, up more than 290% year-to-date. The rally, driven by a boom in AI data center construction and the spinoff of SanDisk’s flash memory business, was a big turnaround for the stock. Western Digital was trading at a two-year low after Trump administration tariffs caused a market decline in April. Micron Technology’s stock price has increased more than 228% since the beginning of the year. Investors are flocking to memory chip makers as demand soars. Micron said the total market size for high-bandwidth memory is expected to reach $100 billion by 2028, reflecting a compound annual growth rate of 40%. Because Seagate makes high-capacity data storage products for enterprise and cloud customers, it also serves as another AI data center for the company. The stock is up about 227% this year through Tuesday’s close. AI-powered Shopping Investors looking for evidence of real-world applications of AI may look to checkout lines. “We believe the arrival of agent commerce is on the horizon and will be the next real unlock for GenAI-enabled customers,” Morgan Stanley said, naming Amazon, eBay, Wayfair, and Walmart as companies that will be the biggest beneficiaries of AI shopping agents over the next year. The company says Agent AI can accelerate customer acquisition and e-commerce growth for large retailers such as Wayfair and Walmart with strong physical supply chains, competitive scale, and access to large amounts of consumer data. AI is also benefiting grocery delivery platforms DoorDash and Instacart. Reflecting this enthusiasm, DoorDash stock is up 40% this year. The delivery service integrates grocery shopping directly into ChatGPT through a partnership with OpenAI, and some analysts are bullish going into 2026. Citi recently named DoorDash a top stock for 2026, but Morgan Stanley on Thursday reiterated its overweight rating on the stock, noting that DoorDash was integrated into ChatGPT before giant retailers Walmart and Amazon did. Instacart similarly launched its app on ChatGPT, allowing users to search for groceries, create carts, and checkout seamlessly through the chatbot’s instant checkout feature. Analysts at Morgan Stanley say, “We see the consumer ‘e-commerce funnel’ evolving to become more conversational, personalized, and interactive…with always-on personal shopping agents. Searching for hard-to-find products, suggesting combinations of item groups, real-time and continuous price comparisons, and automated subscriptions (like groceries) will be the job of personal digital shopping agents…which will further increase consumer value and the utility of e-commerce.” “Physical AI” is a reality Investment in early-stage technologies (think humanoid robots, self-driving cars, and space-based data centers) has surged this year. This reflects a widespread belief that the next wave of AI innovation will be physical, not just digital. Alphabet Inc.’s Waymo is expanding its commercial robo-taxi business this year and plans to expand its ride-hailing business to more than 20 additional cities in 2026, making it the clear leader in the space. Amazon’s Zoox robotaxi division also has plans to expand. Enthusiasm about Tesla’s aspirations in robotics and self-driving is driving up the stock even as the company struggles to maintain its dominance in the global electric vehicle market. The stock is up 20% this year. Piper Sandler analyst Alexandra Potter rates Tesla Overweight and predicts that Tesla is “very likely to remove safety drivers from its Austin robotaxi fleet.” Uber and Lyft are partnering with Chinese tech company Baidu to test driverless taxis in the UK in 2026. As of Tuesday’s close, the ride-hailing companies’ shares were up 34% and 52%, respectively. Recently, AI companies have turned to space, paving the way for new investment opportunities. When OpenAI’s Altman expressed interest in acquiring or partnering with a rocket company that competes with SpaceX in early December, talk fueled double-digit gains. Space could be the answer to AI cooling and power problems, with Nvidia-backed startup Starcloud proving it is possible to train language models at scale outside of Earth’s atmosphere. Shares of aerospace companies Echostar and AST SpaceMobile are up more than 360% and 300%, respectively, since the beginning of the year, while Planet Labs is up a whopping 413%. Rocket Lab has tripled. Robotic innovation has also accelerated this year, driven by advances in AI algorithms, increased hardware efficiency in sensor technology, and computing power. Although humanoid robots have not yet become mainstream, companies such as Agility Robotics, Unitree Robotics, UBTech, and Figure AI are deploying robots in factories to assist with supply chain processes. Amazon is also reportedly rapidly deploying robots across its warehouses in an effort to reduce labor costs, speed delivery times, and lower costs for customers. Tech giants fuel private market boom, fueling deal market in 2026 Will we see a massive IPO market in 2026? Access to alternative investment sources and reduced regulatory pressure are causing startups to stay private longer. However, SpaceX recently confirmed plans to go public in 2026, which is expected to be the largest IPO in history. OpenAI, Anthropic, and Anduril are also strong candidates for the public market. OpenAI is considering filing for a listing as early as the second half of 2026, Reuters reported in late October, citing people familiar with the matter. “The tail of private companies is wagging the dog of publicly traded companies. Rumors that OpenAI is raising money are increasing confidence in the broader AI industry,” Gene Munster wrote in a post on X on Monday.
