When the closing bell rang on Dec. 31, professional and everyday investors had reason to cheer. The Dow Jones Industrial Average, S&P 500, and Nasdaq Composite respectively ended the year higher by 13%, 23%, and 29%, with all three indexes reaching multiple record-closing highs throughout 2024.
Catalysts have been abundant, with hefty stock buybacks, better-than-expected corporate earnings, stock-split euphoria, and President-elect Donald Trump’s victory in November all working to drive stocks higher. But the biggest catalyst of all has undeniably been the rise of artificial intelligence (AI).
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The lure of AI is the virtually limitless ceiling the technology offers. With AI, software and systems are given the capacity to grow more proficient at their tasks over time, as well as evolve to learn new skills, all without the need for human intervention.
According to the analysts at PwC, artificial intelligence can increase global gross domestic product (GDP) by 26%, or $15.7 trillion, by 2030. In Sizing the Prize, PwC breaks down its expectation of a $6.6 trillion boost to global GDP coming from productivity improvements, with the remaining $9.1 trillion associated with consumption-side effects.
While the AI revolution has predominantly revolved around semiconductor colossus Nvidia (NVDA 4.45%) and its superior hardware up to this point, 2025 should mark the evolution of this technology to an even hotter trend.
Nvidia has prospered immensely from its time in the sun
When 2023 began, Nvidia was a $360 billion business that played a distant second fiddle to Wall Street’s biggest tech stocks. But as of the end of 2024, it’s a nearly $3.3 trillion company with the AI hardware that every business wants.
The reason Nvidia’s sales are expected to have catapulted from $27 billion to an estimated $195 billion in three years is its AI-inspired graphics processing units (GPUs). Orders for the company’s ultra-popular H100 GPU (commonly known as the “Hopper”) and successor Blackwell chip are backlogged.
When demand for a good or service vastly exceeds supply, it’s normal for the price of said good or service to rise until demand tapers. In Nvidia’s case, it’s been able to charge up to a 300% premium for its Hopper chip, relative to the cost of Advanced Micro Devices Insight MI300X GPUs. This combination of AI-GPU scarcity and phenomenal pricing power has helped lift Nvidia’s gross margin into the mid-70% range.
It's also worth noting that no other GPU developer is particularly close to surpassing Nvidia in terms of computing capabilities. For instance, Blackwell is designed to accelerate computing in a half-dozen arenas, including quantum computing and generative AI, and can do so while being more energy efficient than its predecessor chip.
However, GPU hardware has been a 2023/2024 story for the artificial intelligence revolution. While Wall Street estimates suggest demand for GPUs will continue to grow, investors’ attention will be on the newest AI trend in 2025.
The next stage of the AI revolution has arrived -- and it offers trillion-dollar potential
The evolution of artificial intelligence in the new year is less about the hardware powering it and more about its real-world autonomous capabilities. Say hello to the rise of AI agents, which are also known as AI assistants.
AI agents are software programs capable of performing tasks without the need for human intervention. Some examples of agentic AI in action include businesses deploying virtual agents for customer support, financial firms employing machine learning-driven algorithmic stock and cryptocurrency trading, and automakers relying on AI in next-generation vehicles to safely navigate roadways filled with cars, pedestrians, and other obstacles.
This next step for the AI revolution will see AI agents working side-by-side with humans, as well as with other AI agents, to improve the operating efficiency and profit potential of corporate America.
The company that’s arguably leading the charge for this multitrillion agentic AI opportunity is cloud-based customer relationship management (CRM) kingpin Salesforce (CRM 0.68%).
According to Salesforce co-founder and CEO Marc Benioff, the addressable market for digital labor is in the trillions. Just three months after launching Agentforce in September, which is the company’s suite of autonomous AI agents that assist with service, sales, marketing, and commerce, Benioff’s company unveiled Agentforce 2.0.
Benioff noted during the December unveil that Salesforce has been a key benefactor of agentic AI. Among the 32,000 conversations the company averages per week at help.salesforce.com, only around 5,000 are being escalated to a human agent. This means AI agents are resolving 83% of the company’s client concerns.
And it’s not just industry juggernauts that can benefit from this growth wave in AI agents. SoundHound AI (SOUN 2.28%), which sports a modest $7.3 billion market cap, saw its stock surge 836% in 2024. SoundHound’s area of expertise is using voice AI and conversational technology in various settings, such as restaurant drive-thrus.
However, SoundHound AI has ambitions of expanding its intuitive voice recognition AI solutions beyond traditional settings. In an interview with The Media Leader in July, SoundHound AI’s Senior Director of Product, Automotive, and Internet-of-Things, Pedram Faghfouri, pointed to a unifying experience for voice ecosystems in the future. For instance, Faghfouri envisions AI voice integration in next-gen automobiles that can control features in a car based on intuitive commands.
The agentic AI evolution has one noteworthy concern: history
As with most next-big-thing innovations and technologies, investor excitement is thick enough to cut with a knife. Having witnessed Nvidia effectively 10X in value in just two years is enough to tickle the fancy of professional and everyday investors alike.
But if history has taught us anything, it’s that when things seem too good to be true on Wall Street, more often than not they are.
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On paper, the long-term runway for AI is promising. There’s little question that this technology can improve the operating efficiency and profitability for businesses across a wide swath of industries around the globe. But when it comes to the early-stage expansion of new technologies/innovations, things get a bit dicey and unpredictable.
For example, the early stages of the internet’s mainstream adoption in the mid-1990s spurred the dot-com revolution. While investors were excited about the possibility of how the internet would alter the growth arc of corporate America, it ultimately took years before businesses fully understood how to market and monetize their online presence.
The internet represents just one example of a next-big-thing innovation where investors overestimated its adoption rate and/or early-stage utility. Others include genome decoding, business-to-business commerce, nanotechnology, 3D printing, blockchain technology, and the metaverse.
To reiterate, investors overestimating the early-stage utility and adoption of game-changing technologies doesn’t mean these innovations weren’t eventually successful. The internet went on to revolutionize the way companies do business in the U.S. and abroad.
But what it does show is that it takes time for new technologies to mature. At the moment, most businesses lack concrete plans to generate a positive return on their AI investments, or have yet to realize how best to use AI to improve their company.
While AI agents have a clear path to become this year’s hottest trend, don’t be surprised if artificial intelligence momentum fades by the end of the year.
