The relentless march of technology continues, prompting analysts to examine the potential landscape of the sizzling tech sector in 2025. From the rise of ubiquitous AI to a potential surge in IT spending, understanding these trends could prove lucrative for investors.
Table Content:
Artificial intelligence (AI) dominated discussions in 2024, and experts at Deloitte predict a shift from AI augmenting knowledge to AI augmenting execution. This transition towards “agentic AI,” where autonomous systems perform tasks without human intervention, could revolutionize how we live and work. Deloitte suggests the familiar phrase “there’s an app for that” might soon evolve into “there’s an agent for that.”
Deloitte: The Rise of Agentic AI
“Organizations may witness a fundamental shift in AI from augmenting knowledge to augmenting execution,” Deloitte stated. This investment in agentic AI “could upend the way we work and live by arming consumers and businesses with armies of silicon-based assistants.”
Adam Benjamin, an information technology fund manager at Fidelity Investments, suggests the tech sector’s future remains bright, fueled by continuous innovation and the growing importance of digitization and automation. He believes we are currently in the “picks and shovels” phase of generative AI, benefiting semiconductor and hardware companies supporting AI infrastructure. Benjamin anticipates the next phase will present opportunities for software firms as generative AI agents are deployed across various markets, realizing AI’s full potential.
Addressing concerns about semiconductor oversupply, Benjamin believes this is temporary and likely to resolve soon, potentially driven by an AI-fueled product upgrade cycle as AI adoption expands across devices and markets.
William Blair: Anticipating Increased IT Spending in 2025
Analysts at William Blair project a rise in IT/software spending in 2025, citing decreasing interest rates and the conclusion of the U.S. presidential election. This optimism stems from the anticipated resurgence of app modernization and digital transformation initiatives, coupled with the resolution of budget disruptions caused by price hikes at VMware following its acquisition by Broadcom (AVGO). The end-of-life for Microsoft’s (MSFT) Windows 10 is also expected to trigger a PC upgrade cycle, further contributing to increased spending.
Furthermore, Blair anticipates a rise in infrastructure refreshes, coinciding with the five-year anniversary of the substantial Covid-related spending cycle. The firm expects the adoption of generative AI to accelerate throughout the year as businesses become more comfortable with its capabilities.
“Vendors are at different stages in the monetization journey, but we generally expect early signs of GenAI monetization to gain traction in 2025, with more material revenue streams being generated in future years,” Blair stated.
William Blair’s Top Tech Picks for 2025
According to William Blair, the current challenging macro-economic conditions and tech spending environment have suppressed software growth rates for the past three years. However, they express optimism for 2025, anticipating increased budgets driven by modernization efforts, innovation, and preparation for the generative AI era.
Broadcom leads Blair’s list of promising companies for 2025, with its acquisition of VMware exceeding expectations due to increased prices, bundling strategies, and a shift to subscription-based licensing. Workday (WDAY), soon to be included in the S&P 500, is expected to experience growth acceleration driven by revenue recognition from large deals, increasing demand for AI solutions, and favorable year-over-year comparisons. Cloudflare (NET) is highlighted for its strategic positioning in AI cybersecurity and edge computing.
Other companies on Blair’s list include Pure Storage (PSTG), a pioneer in flash storage technology, and monday.com (MNDY), a work-management platform poised for expansion within its customer base. These companies represent promising investment opportunities in a tech landscape poised for significant transformation in 2025.
