2025 AI Investor Handbook

After a nasty Spring swoon, stocks are on a roll.  

AI momentum has tech leading the charge, up 21.4% QTD – more than double the S&P 500’s 8.6% gain.

Our May 5 call to Buy Mega Cap Tech Stocks is humming.

But there’s a lot more to like about the “AI trade” than just the Mag 7.

MoneyFlows’ 2025 AI Investor Handbook will guide you through the big equity opportunities.

As AI drives broader productivity gains across the economy, its disruptive impact will be felt across every sector, creating huge opportunities for savvy investors.

You need to think about AI as a bullish macro overlay on the case for stocks. It’s a secular game changer.

Below, we’re unpacking the AI boom. What’s driving it?

How quickly will it change the game?

What are the long-term macro implications for the economy and stocks?

To wrap up, we’ll arm you with a sector diversified list of 50 big near and long-term AI winners.

The AI Arms Race Kicks into High Gear

There was a moment in February when the “AI trade” felt saturated and stale.

But then, Microsoft (MSFT), Alphabet (GOOGL), Nvidia (NVDA), Amazon (AMZN) and Meta (META) – the largest companies in the world – reminded us on their Q1 earnings calls that AI isn’t a trade – it’s a structural shift reshaping technology, capital allocation and ultimately the nature of competition.

As AI has become increasingly advanced and accessible, interest and investment have followed.

Microsoft, Alphabet, Amazon, Meta and others confirmed their 2025 AI capex will rise to a record $392 billion as they chase AI infrastructure dominance (chart).

Despite mounting geopolitical and trade related supply chain pressures, Big Tech is translating AI investments into revenue growth and margin expansion as they shift from experimentation to monetization across their cloud and advertising platforms.

Better profitability is why the Mag 7 keep outperforming. They continue to have the fastest earnings growth in the S&P 500.

AI is only accelerating this trend.

But it isn’t just the mega-caps that are benefiting.

To quote Warren Buffett, a rising tide lifts all boats.

AI Spillover Beyond Big Tech

While big tech companies have been early adopters and beneficiaries of AI, productivity improvements are expected to spread far and wide.

Already, 40% of S&P 500 corporations cited “AI” on Q1 2025 earnings calls, according to FactSet.

Gartner forecasts 2025 global investment in AI will total $644 billion— up 76% from $365 billion in 2024.

As AI investments continue to ramp, efficiency benefits will contribute to stronger economic growth, helping boost productivity across a wide array of sectors from finance to logistics to health care and consumer.

Here’s how AI helps companies in every sector: 

• Automation: AI can automate repetitive and time-consuming tasks like data entry, scheduling, logistics and basic customer inquiries, freeing employees to focus on more complex work.
• Physical AI: Robotics can automate physical tasks across industries.
• Improved Decision-Making: AI can analyze large datasets to identify patterns, predict trends, and provide insights that help leaders make more informed decisions. 
• Enhanced Collaboration: AI-powered tools can improve team communication, facilitate brainstorming, and streamline project management. 
• Increased Efficiency: AI can optimize resource allocation, improve scheduling, and enhance overall workflow efficiency, resulting in significant time savings and increased output. 
• Improved Accuracy: AI can minimize errors in data entry and analysis, reducing rework. 
• Personalized Experiences: AI can personalize customer interactions and product recommendations, leading to increased customer satisfaction and engagement. 
• Faster Scientific Advancement: AI can accelerate scientific research by automating tasks, analyzing complex data, and making new discoveries. 
• Enhanced Writing and Editing: AI can assist with drafting, editing, and proofreading documents, saving time and improving the quality of written content. 

These all are net positives for productivity…

…for everyone embracing technological change.

Productivity on Steroids

Productivity is already on the rise. It grew a healthy 2.7% in 2024 (chart).

Goldman Sachs estimates generative AI could raise annual US labor productivity growth by just under 1.5% over a 10-year period following widespread adoption.

The combination of significant labor cost savings, new job creation, and a productivity boost for non-displaced workers raises the possibility of a labor productivity boom like those that followed the emergence of earlier innovations like the electric motor and the personal computer.

These past experiences offer two key lessons.

First, the timing of a labor productivity boom is hard to predict, but in both cases, it started about 15 years after the initial technological breakthrough, at a point when roughly half of US businesses had adopted the technology (chart).

Second, in both of these instances, labor productivity growth rose by around 1.5% per year in the 10 years after the productivity boom started, suggesting that the labor productivity gains can be substantial. 

We are in the early stages of the AI breakthrough. This will keep stock markets soaring.

A Secular Tailwind for Stocks

AI innovation is a long-term, secular trend that will continue to unlock higher equity valuations.

Higher productivity is the throughline through which this happens.

Rising productivity is boosting S&P 500 profit margins, with the latest reported net income margin at a near-record 13.5%. Earnings have followed suit, recently hitting all-time highs (chart).

Thanks increasingly to AI, the technology sector – the S&P 500’s largest with a 32% weight – has driven most of the increase to date, with margins recently reaching 26%.

Widening AI adoption will only broaden this trend as higher productivity increases output and lowers labor costs, boosting profit margins across the economy.

Companies in every sector will see their margins expand, their profits rise, and their valuations increase.

We know stocks follow earnings.

As higher productivity boosts margins and profits, equities respond.

Check out this next chart.

Since 1950, the S&P 500 gains an average of 12% in years following top quartile productivity acceleration. That’s the best expect return series:

The key take away is to think of AI as a secular game changer that is only just beginning to kick in. Tech is the obvious early winner, but as AI continues to jack productivity, its benefits will spread to every sector.

2025 AI Investor Handbook

We’ve made the macro case for AI as a structural game changer that unlocks higher equity valuations. Now let’s tackle portfolio construction.

We know Big Tech is the face of AI. But that’s just the tip of the spear.

We’re digging deeper to bring you a sector diversified list of 50 AI winners.

Most of these companies are already seeing big AI driven fundamental benefits.

Others are blue chips just beginning to use AI to solidify their “best of breed” status.

Both groups stand to win big.

The MoneyFlows MAP Scores can help you time your entry points. But remember, this isn’t tactical – AI is a secular game changer – all these names will win big over time.

There are three categories of AI stocks we’re highlighting:

#1: Tech is the heart and lungs of the AI trade. We’ll show you lots to like beyond the Mag 7.

#2: AI innovation requires a ton of power – that supply chain runs through the energy, materials, industrials, real estate and utilities sectors, where the leading players are already seeing huge benefits that will only grow over time.

#3: Looking further out, the spread of AI driven productivity enhancements will revolutionize the healthcare, consumer and financial sectors, benefiting both upstarts, as well as incumbents.

We built a diversified list of 50 AI companies that will massively benefit from technological innovation. Become a PRO member today to access this amazing list.

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Invest Well,

Alec Young