As of late morning on Wednesday, December 24, 2025, U.S. markets are trading through a holiday-thinned, shortened Christmas Eve session with one message dominating the tape: investors are back in “AI mode.” The S&P 500 pushed to a new intraday record, buoyed by renewed appetite for heavyweight AI and tech names and growing confidence that the Federal Reserve could deliver additional rate cuts in 2026—two catalysts that have repeatedly powered the AI-stock trade over the past three years. [1]
But beneath the headline index level, today’s AI-stock story is more nuanced than a simple “chips up, everything else follows” narrative. From fresh questions about Intel’s foundry ambitions to a new wave of enterprise-AI dealmaking and mounting scrutiny on how AI infrastructure is being financed, investors are ending 2025 by debating what matters most for AI stocks in 2026: demand, margins, funding, or geopolitics.
The market backdrop: record highs return as AI leadership reasserts itself
The S&P 500’s record move comes after a choppy stretch in November, when worries about tech valuations and “AI bubble” dynamics resurfaced and pulled the index down meaningfully from October peaks. Reuters notes the AI trade regained momentum after upbeat Nvidia earnings and, importantly, Micron’s outsized profit forecast helped re-energize confidence in the AI hardware cycle—especially the memory side of the buildout. [2]
That rebound has restored the familiar year-end pattern: mega-cap AI beneficiaries drawing incremental flows, while investors also rotate into cyclicals (financials, materials) to broaden the rally and reduce concentration risk. [3]
What’s driving AI stocks right now: rates, earnings, and AI spending expectations
A Reuters year-end market analysis published today frames the 2026 setup around three pillars:
- Strong earnings growth
- A dovish Fed (or at least a Fed that can keep cutting without triggering recession fears)
- Sustained AI spending—especially infrastructure spending that continues to translate into real revenues and profits [4]
The same Reuters piece highlights how exceptional the current run has been: the S&P 500 is up over 17% in 2025 (with a few sessions left), after back-to-back gains in 2024 and 2023—an unusually durable, AI-led bull market that began in October 2022. [5]
2026 forecasts: Wall Street sees gains, but not “easy-mode” gains
Strategists are increasingly publishing year-end targets that assume continued upside, but with less room for valuation expansion. Reuters cites CFRA’s Sam Stovall projecting a 2026 year-end level around 7,400 (roughly mid-single-digit to high-single-digit upside depending on the starting point), while more aggressive calls include Deutsche Bank’s 8,000 target. [6]
The common thread: earnings have to do more of the work, because multiples are already elevated. Reuters also reports forecasts calling for S&P 500 earnings to rise more than 15% in 2026 after solid growth in 2025. [7]
The “Magnificent Seven” factor—and why AI investors care
The Magnificent Seven (the mega-cap tech/AI bellwethers) remain central to both index performance and AI sentiment. Reuters notes that while the Mag 7 dominated profit growth in 2024, the gap is expected to narrow in 2026 as earnings growth broadens—an important condition for a healthier market that doesn’t rely on a handful of AI proxies. [8]
The big risk hanging over AI stocks: can the capex math keep working?
The debate investors are most focused on heading into 2026 is simple to ask and hard to answer:
Will the massive AI infrastructure buildout generate returns fast enough to justify the spending?
Reuters flags that questions about returns from AI capital spending have already dented some AI-linked shares—and will likely remain a defining theme next year. [9]
Investopedia’s 2026 outlook echoes that concern and puts a number on it: hyperscalers (including Microsoft, Alphabet, Amazon, Meta, and Oracle) are expected to log combined capital expenditures of more than $500 billion next year, with AI infrastructure accounting for the majority. [10]
That spending is bullish for AI chip and infrastructure suppliers—until it isn’t. If boards or investors decide the buildout is outpacing monetization, the fastest way the AI trade can “cool” is via capex guidance resets.
A new wrinkle: AI data-center financing is becoming a story of its own
One of the most underappreciated themes in late 2025 is how AI infrastructure is being funded—especially beyond the self-financed hyperscalers.
The Financial Times reports that tech groups including Meta, xAI, Oracle, and CoreWeave have shifted more than $120 billion of AI data-center debt off balance sheets using special-purpose vehicles (SPVs), backed by large Wall Street credit firms. The benefit is cleaner-looking corporate balance sheets; the risk is less transparency and potential systemic vulnerability if AI demand cools or if refinancing conditions tighten. [11]
For AI-stock investors, this matters because “AI demand” is no longer only a product story—it’s increasingly a capital markets story.
AI chip stocks: Intel and Nvidia put foundry ambitions back under the microscope
Intel slides after report Nvidia halted 18A testing
One of today’s most closely watched AI hardware headlines is Intel, after reporting tied to Nvidia’s manufacturing evaluations. Reuters reporting highlighted in today’s market coverage says Nvidia halted tests to manufacture on Intel’s 18A chipmaking node after initial tests—pressure that hit Intel shares in premarket trading. [12]
The subtext is larger than a single customer test: Intel’s multi-year repositioning depends on proving its most advanced processes can attract (and retain) external customers—especially AI leaders that currently rely on TSMC-like foundry execution.
Intel’s “too strategic to fail” narrative grows—with political stakes attached
At the same time, Reuters published a deep dive today on Intel CEO Lip-Bu Tan and Intel’s evolving relationship with the U.S. government. Reuters reports the U.S. government committed $5.7 billion for nearly a 10% stake in Intel, and describes how that deal elevated Intel’s strategic importance even as operational execution remains under scrutiny. [13]
For AI-stock readers, the takeaway is that Intel’s AI/foundry trajectory is now influenced by both engineering milestones and policy dynamics—a combination that can amplify upside if partnerships materialize, or increase volatility if expectations get ahead of fundamentals.
Geopolitics is back in the AI-stock conversation: chip tariffs and U.S.–China tensions
AI stocks don’t trade in a vacuum—especially AI semiconductors.
On December 24, China said it opposed the U.S. “indiscriminate use of tariffs” and “unreasonable suppression” of Chinese industries in response to Washington’s plan to impose tariffs on Chinese semiconductor imports, according to Reuters. [14]
That response follows a Reuters report that the U.S. plans to impose new tariffs on Chinese semiconductor imports but delay implementation until June 2027, while keeping broader trade and technology leverage in play. [15]
For AI-chip investors, these headlines tend to feed directly into:
- export-license uncertainty
- China demand assumptions
- supply-chain localization narratives
- and risk premiums applied to chipmakers most exposed to cross-border policy shifts
Enterprise AI software stocks: dealmaking and index moves lead today’s narrative
While semis grab the spotlight, several enterprise AI “platform” names are generating their own catalysts today—often through acquisitions, product positioning, or index inclusion.
Snowflake: talks to buy Observe for about $1 billion
Snowflake is reportedly in talks to acquire Observe for roughly $1 billion, a move positioned as a major step in its AI and observability push. Investors.com describes it as Snowflake’s largest acquisition to date and places it in the context of intensifying competition in observability and AI tooling (against firms like Datadog, Dynatrace, and Splunk). [16]
Why it matters for AI stocks: “AI apps” don’t scale without reliable monitoring, cost controls, and performance visibility. Observability is becoming core infrastructure for agentic workflows—not just a developer nice-to-have.
ServiceNow: Armis deal underscores “cybersecurity for AI” as a growth lane
ServiceNow announced a $7.75 billion all-cash agreement to buy cybersecurity firm Armis, its largest acquisition to date, as it tries to deepen security capabilities in increasingly AI-driven enterprise environments, according to MarketWatch. [17]
Investors.com also notes the market’s mixed reaction, with the stock dropping on deal concerns even as analysts weigh the strategic value of integrating operational-technology security data into enterprise AI workflows. [18]
The broader signal: AI is expanding the attack surface, and platform vendors are racing to own security controls that can keep up with autonomous and connected systems.
UiPath: index inclusion adds a mechanical tailwind
UiPath gained attention today after S&P Dow Jones Indices said the company is set to join the S&P MidCap 400, replacing Synovus Financial. Investopedia notes that inclusion doesn’t guarantee performance, but it can drive incremental demand from index-tracking funds and broaden exposure to institutional buyers. [19]
For AI-stock watchers, UiPath is a reminder that “AI software” isn’t only GenAI chat—automation platforms are increasingly bundling AI assistants and agentic tools into workflow execution.
Analyst and strategy watch: semis still favored, but volatility warnings are rising
A notable late-2025 positioning theme is that many strategists still like the AI semiconductor complex—yet are becoming more explicit about second-half 2026 volatility risk if AI infrastructure costs and funding concerns intensify.
Investors.com highlights a Citi call naming Microchip Technology as a top 2026 semiconductor pick while still expressing optimism about AI-linked chip leaders like Nvidia, Broadcom, and Micron—alongside a warning that AI chip stocks could become more volatile in the back half of 2026 as the market debates the sustainability of AI infrastructure economics. [20]
This aligns with the broader macro logic: when an industry is in a capex supercycle, the timing of ROI matters almost as much as the size of demand.
The “AI stocks” checklist heading into 2026
Going into the final trading days of 2025 and into January’s earnings season, AI-stock investors are increasingly watching for a few specific signals:
- Capex guidance and payback periods: any hint of delayed monetization can compress multiples quickly. [21]
- Earnings breadth beyond mega-cap AI: broader profit growth helps reduce “AI concentration” risk in the indices. [22]
- Policy and trade surprises: tariffs, export rules, and U.S.–China dynamics can reprice chip exposure overnight. [23]
- AI infrastructure funding conditions: private credit and SPV structures may affect the pace of data-center expansion outside hyperscalers. [24]
- M&A as a competitive weapon: platform vendors are buying capabilities (observability, cybersecurity, data tooling) to defend AI distribution and enterprise budgets. [25]
Bottom line: AI stocks end 2025 back in the driver’s seat—but 2026 is shaping up as a “prove it” year
Today’s record-high tape shows the AI trade still has gravitational pull—especially when rates are expected to fall and earnings remain resilient. [26]
But the conversation is shifting from whether AI will transform business to when the financial statements will justify the infrastructure bill. With hyperscaler capex projected to remain enormous and new financing structures pushing debt out of sight, the market’s tolerance for disappointment may be lower than it was earlier in the cycle. [27]
That sets up 2026 as a year where AI stocks could still lead—yet the winners may increasingly be the companies that can translate AI ambition into measurable cash flow, predictable margins, and credible returns on capital.
References
1. www.reuters.com, 2. www.reuters.com, 3. www.reuters.com, 4. www.reuters.com, 5. www.reuters.com, 6. www.reuters.com, 7. www.reuters.com, 8. www.reuters.com, 9. www.reuters.com, 10. www.investopedia.com, 11. www.ft.com, 12. www.reuters.com, 13. www.reuters.com, 14. www.reuters.com, 15. www.reuters.com, 16. www.investors.com, 17. www.marketwatch.com, 18. www.investors.com, 19. www.investopedia.com, 20. www.investors.com, 21. www.reuters.com, 22. www.reuters.com, 23. www.reuters.com, 24. www.ft.com, 25. www.investors.com, 26. www.reuters.com, 27. www.investopedia.com
