Top Trade Ideas for 2025
As we approach the midpoint of the decade, the financial markets stand at a critical inflection point—five years post-pandemic, the first year of a new administration, and a world recalibrating to new economic realities. With big changes come big opportunities. Below are key themes and potential trade ideas for 2025 and beyond.
AI Infrastructure and the Energy Demands Behind It
The growing scale of AI deployment is drawing increased attention to energy infrastructure, leading to a structural increase in energy consumption. Training GPT-3 required roughly 1,287 megawatt-hours, enough to power 120 average U.S. homes for a year. An AI search, specifically a prompt for a generative AI model, uses more energy than a Google search, which typically uses about 0.3 watt-hours (Wh). In contrast, a generative AI prompt consumes roughly 3 megawatt-hours, about 10 times more energy. By 2030, AI-related data centers could consume as much energy as entire mid-sized countries (International Energy Agency).
This surge in demand is reshaping the energy and physical infrastructure landscape. Nuclear energy is reentering the discussion as a reliable baseload power solution, supported by advances in small modular reactor (SMR) technologies. These reactors offer scalable, 24/7 power, suitable for direct pairing with data centers. Sam Altman, CEO of OpenAI, is supporting Oklo, a next-gen nuclear startup positioned to support AI growth with reliable nuclear energy.
Beyond power generation, data centers themselves require advanced thermal management, cooling, and electrical systems. Vertiv (VRT) and Digital Realty Trust (DLR) are two names seeing direct benefit. Vertiv raised its 2025 forecast on strong demand from AI-powered data centers. Digital Realty, a REIT, continues to expand its hyperscale infrastructure portfolio.
The magnitude of capital expenditure from Big Tech underlines the investment case. In 2025, Microsoft is expected to spend $80 billion in CapEx, Amazon $105 billion, Google $75 billion, and Meta $65 billion (company filings, Bloomberg). Collectively, these firms will deploy over $325 billion, reflecting record investment levels in compute and infrastructure.
Trade Setup: Long Constellation Energy (CEG), Vertiv (VRT), Digital Realty Trust (DLR), Oklo (OKLO), nuclear infrastructure ETFs, and suppliers tied to SMR deployment and data center expansion.
Housing and Construction: Year of Recovery
Despite elevated rates, buyers are returning to the market. Manhattan home sales rose 29% YoY (Miller Samuel). Builders like Lennar and D.R. Horton are shifting to meet demand with targeted incentives, appliance upgrades, and mortgage buydowns.
Over the past few years, the U.S. has faced a significant housing shortage, with estimates ranging from 3.7 to 4 million units in 2024 (Freddie Mac, Realtor.com). Although new home construction has increased in some areas, it still lags behind the rate of new household formation. Rising home prices and higher mortgage rates have further strained affordability, making it harder for individuals to buy or rent. The imbalance between housing supply and demand persists, and zoning restrictions along with elevated land, construction, and financing costs remain primary barriers. This supply-demand gap continues to exert upward pressure on prices and limits access for many prospective buyers.
We also expect rates to come down significantly this year as the economy moves closer to the Federal Reserve’s 2% inflation target. Spring 2025 is shaping up to be an active season as construction activity picks up and local governments, encouraged by federal incentives, begin easing zoning restrictions. Labor remains a key constraint, especially in the context of a tighter immigration policy.
Trade Setup: Long appliance and building supply firms, and real estate-focused ETFs.
M&A and IPO Revival
Over the past few years, IPO and M&A activity has been notably subdued due to elevated interest rates (higher cost of capital). As inflation approaches the Federal Reserve’s 2% target and rates begin to come down, borrowing conditions are expected to ease. Combined with economic growth, strong corporate earnings, and loosening regulatory conditions, investors should see a favorable environment for deal-making.
Private equity is sitting on $2.5 trillion of dry powder globally, with deployment pressure mounting as funds raised in 2020–2021 near the end of their investment periods (PwC, Preqin). The median holding period for portfolio companies has stretched, with 46% of P.E. assets now held since 2020. This, along with pent-up demand and more attractive entry multiples, should significantly increase deal-making activity in 2025.
2025 might be the year for names like Klarna, Plaid, and Chime to pursue IPOs.
Trade Setup: Long exchanges and Tech-focused small caps
Vertical AI and Sector-Focused Disruption
While foundational models are becoming commoditized, the next leg of AI adoption is forming around embedded, industry-specific applications. These vertical tools are reshaping workflows in finance, healthcare, legal, and logistics.
Agentic AI and embedded systems will be the source of sustained ROI, particularly in regulated industries that require deep context and domain expertise. The focus is shifting from model-building to real-world implementation, and the winners will be those solving discrete, high-value problems with defensible integration.
Trade Setup: Long vertical SaaS, AI-native enterprise software, compliance tech, and productivity platforms tied to specific industries.
Financials
The banking sector offers a mix of defensive characteristics and latent optionality. On one hand, they are less directly exposed to tariff-related volatility. On the other hand, there are structural shifts underway around deregulation, increased efficiency through AI, and a potential pickup in dealmaking.
Deregulation has historically allowed banks to expand geographically, offer new products, and improve efficiency. The Trump Administration has renewed conversation around deregulation, with policy proposals aimed at lowering regulatory burdens and stimulating a more competitive lending market. Loosening restrictions could also open the door for banks to engage in higher-margin businesses and optimize compliance processes.
Financial institutions should benefit from modernizing underwriting, fraud detection, and client servicing through AI. Not to create a circular reference, but as highlighted in Trade Idea 3, private equity firms with aging dry powder and long-held portfolio companies may begin seeking liquidity through M&A and IPOs, boosting investment banking revenues and expanding the pipeline for capital markets activity.
Trade Setup: Long banks and digital-first lenders.
2025 should be a constructive and pivotal year for markets. AI remains the key driver, but the real opportunities lie in how it's reshaping infrastructure, regulation, and the broader economy.
Hopefully, I don’t look back at the end of the year and see I went 0 for 5.
