Earnings Growth Driven by AI Monetization

Investing.com — Earnings growth driven by AI monetization will be a “key barometer for tech stocks in 2025,” Barclays (LON:BARC) strategists led by Venu Krishna said in a Wednesday note.

The AI narrative has been a major factor behind strong equity returns in 2023 and 2024, with promises of substantial productivity gains.

According to Barclays’s analysis, global AI stocks have delivered a 16.5% year-to-date return, significantly outpacing the MSCI ACWI Index’s 6% return on an equal-weighted basis.

Thus far, the benefits from the AI revolution have largely been concentrated in hyperscalers and foundational hardware players, such as Big Tech and semiconductor companies. However, following recent elections, the Software (ETR:SOWGn) sector has surged ahead, outperforming these groups.

This shift has been driven by multiple expansions, Barclays notes, fueled by advancements in AI technology from generative AI co-pilots to newer Agent AIs.

“Barclays software analysts expect these AI agents to power the next wave of leaps in functionality and adoption, which could herald further upside for these stocks catalyzed by higher EPS growth,” the note states.

US stocks ended lower on Tuesday, with crude oil prices also declining as investors assessed fresh economic data and prepared for several key central bank decisions, including a widely anticipated rate cut by the Federal Reserve.

The Dow Jones extended its losing streak to nine consecutive sessions, the longest since 1978, while the Nasdaq 100, dominated by technology shares, dropped 0.4%.

The Federal Open Market Committee (FOMC) began its two-day meeting on Tuesday, with expectations pointing to a 25-basis-point reduction in the Fed funds rate on Wednesday.

Attention is focused on the accompanying Summary of Economic Projections (SEP), which is likely to shape policy expectations for the year ahead amid persistent inflation and strong economic indicators.