The technology sector experienced a robust performance in 2024, significantly driven by the chip industry, which fueled the surge in artificial intelligence (AI) infrastructure. Although a slowdown occurred in the latter half of the year, the tech sector maintained its position as one of the best-performing areas through mid-December. Goldman Sachs Research indicated that U.S. technology stocks had not yet entered a financial bubble as of September 2024, despite their rapid ascent fueled by AI, which was backed by solid financial fundamentals. Specifically, the global tech sector’s earnings per share had increased by approximately 400% since the Great Financial Crisis, far exceeding the broader market’s growth.
Market Challenges in 2025
However, 2025 introduced new challenges for tech stocks. By March 5, the Information Technology and Communication Services sectors witnessed a 4.42% decline, which negatively impacted the wider market. The “Magnificent Seven,” consisting of leading tech giants, collectively suffered a loss of approximately $2.7 trillion in market value over a 50-day period. On March 18th, Reuters reported additional declines in major U.S. indices, influenced by economic uncertainties and Federal Reserve policy expectations, which amplified concerns regarding stability within the tech sector. The longer-term outlook for technology remains positive despite short-term headwinds. Deloitte’s 2025 Technology Industry Outlook projects a 9.3% increase in global IT spending, with the data center and software segments projected to achieve double-digit growth. AI spending is forecasted to expand at a compound annual growth rate of 29% through 2028, signifying robust long-term demand. An analysis from Morgan Stanley in 2024 additionally highlighted that hedge funds had augmented their long positions in technology, media, and telecom (TMT) stocks, particularly in the semiconductor and software sectors, reflecting continuous institutional confidence.
Shifting Investments and AI’s Future
Initially, investments driven by AI centered on data center infrastructure, though Goldman Sachs analysts foresee a shift towards software companies as AI monetization evolves. The focus is expected to transition from AI model training to inferencing, where applications generate revenue, which will lead to further expansion within the software sector. Tech firms are also increasing their capital expenditures related to AI, driven by the pursuit of artificial general intelligence (AGI).
Nevertheless, investors should prepare for potential market volatility. Reuters reported that hedge funds withdrew from U.S. tech and media stocks at the swiftest pace in six months by February 21, which reflects shifting institutional strategies. Berkshire Hathaway’s portfolio adjustments, spearheaded by Warren Buffett, indicate a slight underweighting of technology stocks.
Amazon.com, Inc. (AMZN)
As the technology sector navigates both structural growth opportunities and near-term market turbulence, investors must weigh AI-driven innovation against macroeconomic risks. Goldman Sachs has identified key tech stocks poised for future growth, offering strategic opportunities in an evolving landscape. Amazon.com, Inc. (NASDAQ:AMZN) is a multinational technology company that specializes in e-commerce, cloud computing, digital streaming, and artificial intelligence. Amazon has evolved from an online bookstore into a global conglomerate, offering a vast array of products and services, including consumer electronics, apparel, and cloud services through Amazon Web Services (AWS).
Amazon reported solid financial results for 2024, with net sales rising 11% year-over-year to $638.0 billion. Q4 net sales grew 10% to $187.8 billion, while net income nearly doubled to $59.2 billion ($5.53 per share) from $30.4 billion ($2.90 per share) in 2023.
Despite this, recent stock performance has shown mixed results, closing at $195.54 on March 19, 2025, which is below its 50-day and 200-day moving averages, indicating short-term bearish momentum.
Amazon continues to advance its AI initiatives, including the unveiling of a new “AI Alexa” at an event in New York. Analysts remain optimistic; JMP Securities maintains a “Market Outperform” rating and a price target of $285. The consensus 12-month target of $267.98 suggests a potential 34.8% upside. Looking ahead, the company is planning over $100 billion in capital expenditures for 2025, with a focus on AWS and AI, trying to balance long-term growth potential alongside short-term profitability pressures.
Overall, AMZN ranks high. While acknowledging the investment potential of AMZN, the belief is that some AI stocks present greater promise for higher returns within a shorter timeframe.
