Wall Street eyes 2025 with confidence as JPMorgan declares the U.S. will remain the global growth leader.
While Europe wrestles with structural woes, the emerging markets face headwinds from high interest rates and a strong dollar. Meanwhile, the U.S. is powering ahead, fueled by an AI-driven spending spree and robust capital market activity.
AI Spending: A $1 Trillion Juggernaut
Artificial intelligence is sparking a capital expenditure boom that dwarfs anything seen in decades. The Magnificent 7 — Amazon.com Inc (NASDAQ:AMZN), Microsoft Corp (NASDAQ:MSFT), Meta Platforms Inc (NASDAQ:META), NVIDIA Corp (NASDAQ:NVDA), Alphabet Inc (NASDAQ:GOOGL) (NASDAQ:GOOG), Tesla Inc (NASDAQ:TSLA) and Apple Inc (NASDAQ:AAPL) — plan to invest over $500 billion into capex and R&D next year, roughly 25% of their combined sales.
JPMorgan estimates the broader AI ecosystem could surpass $1 trillion in spending by the end of the year. This includes costs for infrastructure, engineering talent and data center upkeep.
While this AI frenzy promises to drive earnings growth, JPMorgan analysts warn of potential pitfalls. Capital misallocation and lofty growth expectations could draw investor skepticism by late 2025.
Still, the long-term AI opportunity is undeniable, and JPMorgan sees key players poised to capitalize.
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A Broad Earnings Recovery
JPMorgan projects a bounce-back year for earnings growth in 2025. S&P 500 companies are projected to achieve an 11.4% earnings increase with all 11 sectors turning positive after 2024's uneven performance.
Meanwhile, small-cap Russell 2000 firms should see rebounding with double-digit earnings growth after enduring two years of declines.
Even the Magnificent 7 are expected to sustain a 15% growth rate.
JPMorgan analysts note a surprising upside could emerge if borrowing costs or the U.S. dollar ease. This should boost S&P 500 earnings by 1% for every 2% drop in the dollar.
Stock Picks: Who's In JPMorgan's Cart?
Here are a few of the top picks per theme, from JPMorgan's 2025 outlook, which the firm has an Overweight (OW) rating on:
- AI Winners: Amazon, Microsoft, Nvidia, Alphabet, Meta, Qualcomm Inc (NASDAQ:QCOM), Salesforce Inc (NYSE:CRM).
- Deregulation Darlings: Apple, ExxonMobil Corp (NYSE:XOM), Baker Hughes Co (NASDAQ:BKR), Bank of America Corp (NYSE:BAC).
- America First Beneficiaries: Boeing Co (NYSE:BA), Lockheed Martin Corp (NYSE:LMT), General Motors Co (NYSE:GM), Ford Motor Co (NYSE:F), Caterpillar Inc (NYSE:CAT), and more.
With an AI boom, a broad earnings recovery, and pro-American policies potentially reshaping the landscape, JPMorgan's 2025 vision sets a bold tone for the year ahead.
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