Technology stocks are heading into the final stretch of 2025 with a familiar mix of momentum and anxiety: the AI trade is still the market’s engine, but the questions around valuations, geopolitics, and the sheer cost of building AI infrastructure are getting louder.
As of Saturday, Dec. 20, 2025, investors are digesting a week that ended with a strong risk-on move led by tech and semiconductors. On Friday, the S&P 500 rose 0.9% to 6,834.50, the Nasdaq climbed 1.3% to 23,307.62, and the Dow added 0.4% to 48,134.89—a bounce that helped erase the S&P 500’s weekly losses. [1]
But beneath the headline rally, the tech story is splitting into three distinct threads that will likely define the first quarter of 2026:
- AI infrastructure spending is accelerating—from memory chips to data centers to power-hungry compute. [2]
- Policy and geopolitics are back at the center of the Nvidia narrative, with U.S. authorities reviewing a path for advanced AI chip shipments to China. [3]
- Strategists are drawing a sharper line between “AI enablers” and “AI adopters,” arguing the next leg of tech performance may look different than 2023–2025. [4]
Below is a detailed roundup of the most consequential news, forecasts, and analyses driving technology stocks right now—and what investors will be watching next.
Market snapshot: Tech retakes the driver’s seat into year-end
Friday’s rally reinforced a key reality for U.S. equities: even when leadership broadens, Big Tech and semiconductors still tend to decide the tape.
In Friday’s session, investors rotated back into AI-linked names, and reports noted that AI-related stocks like Nvidia turned higher again. [5]
The year-to-date scoreboard remains striking:
- S&P 500: +16.2% in 2025
- Nasdaq: +20.7% in 2025
- Dow: +13.1% in 2025 [6]
That performance gap matters for technology stocks because it keeps expectations high: investors are not simply paying for growth; they’re paying for growth that must arrive on schedule.
Micron’s forecast puts AI memory back in focus
One of the most market-moving tech catalysts this week was not a flashy new model release—it was memory.
Micron forecast quarterly profit far above Wall Street expectations, pointing to strong AI-driven demand and tight supply conditions. The company also said it would raise its 2026 capital expenditure plans to $20 billion (from $18 billion) and noted it is negotiating multiyear contracts with key customers. [7]
Why Micron’s outlook matters beyond one ticker:
- AI data centers are memory-hungry. Training and inference workloads don’t just require GPUs/accelerators; they require high-performance memory and storage to keep expensive compute fully utilized.
- Capex plans are becoming the “tell.” As hardware makers and hyperscalers commit larger budgets, markets treat these numbers as a proxy for how durable the AI buildout is likely to be.
Micron’s strength also fed into a broader semiconductor rebound: Reuters noted that other memory names (including SanDisk and Western Digital) moved higher as the AI demand narrative tightened again. [8]
Data centers hit a dealmaking record—AI’s physical buildout is reshaping “tech stocks”
AI is not only a software story. Increasingly, it’s a construction story, a financing story, and a real assets story—and that matters to technology stocks because it affects who captures profits, who bears risk, and where bottlenecks show up.
A report cited by Reuters said global data-center dealmaking surged to a record high through November, with more than 100 transactions totaling just under $61 billion, already surpassing 2024’s prior record. [9]
The key takeaway for tech investors is double-edged:
- Bull case: record deal volume confirms that the AI buildout remains an “insatiable demand” cycle for compute infrastructure. [10]
- Bear case: the same buildout invites concerns about lofty valuations and debt-fueled spending—and whether profits will arrive quickly enough to justify the capital intensity. [11]
This is the tension sitting under the best-performing technology stocks: AI can be transformative and still create stock-market disappointment if too much success is priced in too early.
Google Cloud and Palo Alto Networks: a near-$10B security partnership signals “AI + security” demand
Another major tech headline is not about a single product—it’s about cloud strategy and the security arms race created by AI.
Reuters reported that Google Cloud and Palo Alto Networks expanded their partnership, and a source told Reuters the contract includes a commitment by Palo Alto to pay a sum “approaching $10 billion” to Google Cloud over several years. Executives declined to confirm the figure, but the report describes it as by far Google Cloud’s largest security services deal. [12]
From a technology stocks perspective, this kind of partnership matters for three reasons:
- Cloud growth is increasingly tied to AI workloads. Cloud providers want not just storage and compute, but “sticky” platform services that remain essential as architectures evolve.
- Security is becoming an AI spending multiplier. Palo Alto’s president told Reuters that AI is driving “tremendous” security demand, while Google Cloud pointed to competitive positioning against hyperscaler rivals. [13]
- It reinforces a broad theme for 2026: AI isn’t only about chips—it’s about the enterprise stack that surrounds AI adoption (security, governance, workflow, compliance).
Nvidia and China: a U.S. review could reopen a controversial revenue lane—at a price
No technology stock carries the “AI barometer” label more clearly than Nvidia, and this week brought a high-stakes policy development.
Reuters reported the U.S. administration has launched a review that could result in the first shipments to China of Nvidia’s H200 chips, following a pledge to allow such sales with the U.S. government collecting a 25% fee. The report says the Commerce Department has sent license applications to other agencies for review and that those agencies have 30 days to weigh in under export regulations, with the final decision resting with the president. [14]
Why this matters for technology stocks broadly:
- Semiconductor supply and demand are now policy-sensitive. A change in export posture can shift near-term revenue expectations, competitive dynamics, and even production planning.
- It reopens the “national security vs. commercial advantage” debate that has become a recurring feature of the AI era. [15]
Investors will also be watching for knock-on effects: any perceived easing could lift parts of the semiconductor complex, while any backlash or reversal could reignite volatility.
TikTok and Oracle: years of uncertainty move toward a concrete structure
For tech investors, “platform risk” and regulatory risk are no longer abstract—they move real stocks.
Reuters reported that ByteDance signed binding agreements to hand control of TikTok’s U.S. operations to a group of investors including Oracle, in a step aimed at avoiding a U.S. ban. Under the deal structure described by Reuters, investors will hold 80.1% of the new TikTok USDS Joint Venture entity while ByteDance retains 19.9%. The transaction is set to close on Jan. 22. [16]
Oracle’s role as a “trusted security partner” responsible for auditing and safeguarding U.S. user data—stored in a U.S.-based Oracle cloud environment—puts a spotlight on the often-overlooked side of tech investing: who gets paid to “run” trust and compliance at scale. [17]
In the market, Oracle shares rose sharply on Friday amid the news. [18]
IPO watch: Cerebras prepares to file—AI chip competition remains a capital markets theme
Even with public market scrutiny on AI valuations, the pipeline for AI-related listings remains active.
Reuters reported that Cerebras Systems is preparing to file for a U.S. IPO as soon as next week, targeting a second-quarter 2026 listing, after previously withdrawing an IPO filing. Reuters also notes the company has raised over $1 billion and was valued at $8 billion, and that earlier delays were tied to national security review concerns involving UAE-based G42 (which Reuters says is no longer listed among Cerebras’ investors in the new filing). [19]
For technology stocks, the significance is twofold:
- Investor appetite for “AI picks-and-shovels” is still there, particularly for differentiated compute approaches.
- A successful IPO window in 2026 could bring more competition—and more scrutiny—across the AI hardware ecosystem.
The macro backdrop: Rate cuts helped—now the question is “how many more?”
Technology stocks remain highly sensitive to interest rate expectations because much of their valuation rests on future earnings growth.
The Federal Reserve’s December decision is now a core pillar of the tech narrative:
- The Fed cut the federal funds target range by 25 basis points to 3.50%–3.75% in its December statement. [20]
- The statement emphasized the committee will assess incoming data and the evolving outlook when considering further adjustments. [21]
- Reuters described the decision as a divided one, with multiple dissents, and reported that policymakers’ median projection pointed to only one quarter-point cut in 2026. [22]
The Fed’s own projection tables (released with the December meeting) show a median 2026 projection of 2.3% real GDP growth, 4.4% unemployment, and 2.4% PCE inflation. [23]
For tech investors, that combination—solid growth with inflation still above target—can be supportive (earnings) and restrictive (rates) at the same time. The market’s job in early 2026 will be to re-price that balance, sometimes abruptly.
2026 forecasts: Optimism is real, but so is the warning label
What’s changed heading into 2026 is not whether AI matters. It’s how investors are being told to position around it.
Citi: 2026 could be a “winner vs. loser” AI market
Citigroup set a 2026 year-end S&P 500 target of 7,700, driven by expectations of robust earnings and continued AI tailwinds. Citi’s note also argues that while AI infrastructure buildout remains important, investor focus could shift from AI “enablers” to AI “adopters,” creating a clearer winner/loser dynamic. [24]
That framing is especially relevant to technology stocks because it implies the next phase may reward:
- companies monetizing AI inside real workflows (enterprise software, automation),
- platforms with pricing power,
- and firms with defensible distribution.
Vanguard: “AI exuberance” may be rational—and still risky for tech-heavy growth
Vanguard’s 2026 outlook strikes a tone tech investors can’t ignore: it says U.S. technology stocks could maintain momentum in 2026 due to investment and expected earnings growth, but risks are growing amid what it calls “exuberance.” [25]
Vanguard also argues that muted long-run U.S. equity return expectations are “nearly singlehandedly driven” by its risk/return assessment of large-cap technology companies, and warns that heady expectations may not be met due to already-high earnings expectations and competitive “creative destruction.” [26]
BlackRock: AI capex is measured in trillions—and power is the constraint to watch
BlackRock’s 2026 outlook says its investment institute expects another $5–8 trillion in AI-related capex through 2030, and emphasizes that the critical watchpoint is whether infrastructure—especially the power grid—can support escalating compute demand. [27]
BlackRock also argues that much of 2025’s tech performance came from earnings growth rather than valuation multiple expansion, suggesting tech is not purely a “multiple story” at current levels. [28]
Rotation alert: Software looks cheaper, but the “value trap” debate is intensifying
One of the most interesting undercurrents in technology stocks right now is not happening inside semiconductors—it’s happening inside software.
MarketWatch reports that several prominent software and IT names—including Adobe, Salesforce, and ServiceNow—are trading near their lowest forward P/E multiples in five years, raising the question: bargain bin opportunity, or structural repricing due to AI disruption? [29]
The analysis highlights the core fear in software:
- AI-native tools may compress the “moat” of legacy subscription products, forcing incumbents to defend pricing and re-architect offerings quickly. [30]
This is where the Citi “enabler vs. adopter” framework becomes practical: if investors start rewarding AI adoption and monetization over infrastructure pure-plays, software could regain leadership—but only if the market believes growth durability is real.
What to watch next for technology stocks
Heading into late December and early 2026, technology stocks are likely to trade on five headline engines:
- Export controls and U.S.–China AI policy
Nvidia’s H200 review process is a direct catalyst, and any shifts in licensing posture could ripple through semis and cloud supply chains. [31] - AI infrastructure spending—especially data center supply, financing, and power
Data-center dealmaking at record levels is a sign of demand, but it also heightens the “return on invested capital” debate across the AI ecosystem. [32] - Enterprise AI commercialization
The Google Cloud–Palo Alto tie-up underscores how security, compliance, and AI services are converging—and where cloud revenue may come from next. [33] - Mega-platform regulatory outcomes
The TikTok/Oracle structure is a reminder that political risk can remain unresolved for years and then move fast once a framework appears. [34] - The rate path and the “how many cuts?” argument
With the Fed signaling data-dependence and projecting limited easing, the discount-rate question stays central for growth-heavy tech valuations. [35]
Bottom line: AI is still the tech market’s story—now it’s also the tech market’s stress test
As of Dec. 20, 2025, technology stocks are not short on fuel: AI investment remains massive, chip and memory demand signals are strong, and major cloud/security partnerships show the enterprise stack is adapting. [36]
But the market is also entering a more mature phase of the AI cycle—one where the questions shift from “Who benefits from AI?” to:
- How quickly can AI investment translate into durable profits? [37]
- Who has pricing power as competition accelerates? [38]
- How fragile are valuations if rate cuts slow—or if policy headlines hit? [39]
That’s why the most useful way to read the current moment may be this: technology stocks are still leading, but leadership is starting to rotate from pure infrastructure narratives toward “real-world adoption.” If that rotation accelerates in 2026, the winners may not be identical to the winners of 2023–2025. [40]
References
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