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Palantir, Broadcom And Oracle Will Be S&P 500 Winners in 2025

Joey Frenette

Published: January 29, 2025 9:11 am

There’s no shortage of uncertainties surrounding productivity gains to be had from the AI boom. Will embracing next-generation large language models (LLMs) actually lead to an earnings boost? And when will such a boost be on the horizon? Which firms will be impacted, and by what degree? These are the right questions value investors should be asking as they contemplate paying a premium for the S&P 500 and some of the individual names inside and outside of the basket.

Undoubtedly, with the advent of China’s DeepSeek R1 model, which is reportedly magnitudes cheaper to train (just $5.6 million to train versus the hundreds of millions or even more than a billion spent by some American rivals), the costs of using AI are bound to come down rapidly, perhaps far faster than expected.

And with that, firms (including those outside of the tech sector) will have fewer reasons not to embrace the power as they look to bolster their fundamentals. It’s hard to imagine, but AI models will only get smarter, cheaper, and lighter from here.

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Some of the biggest S&P 500 winners had grand AI ambitions.

Who knows? Perhaps we’ll have a powerful, personalized, and secure AI model running offline in a year from now. Either way, perhaps the historic premium attached to the S&P 500 is more than justified, or even too low, given the pace of AI innovation and its ability to translate to real sales and earnings growth. In an environment where firms don’t need to stockpile fancy AI chips to get in on the action, there are some real efficiency gains for a broad range of firms, ranging from finance to healthcare to retail.

Indeed, Oracle (NASDAQ:ORCL) top boss Larry Ellison remarked on the transformative potential of AI during last week’s Project Stargate announcement.

In this piece, we’ll check in on some of the S&P 500 winners that could lead the pack again as AI aims to show the world that it is a revolutionary technology that’s not in any sort of bubble.

Palantir

As AI is going to be a profitability growth engine, it’ll need to narrow its focus to specific use cases. On that front, Palantir (NASDAQ:PLTR) is one of the leaders in transforming innovative technology into real, tangible value. Indeed, perhaps there’s a reason the U.S. government keeps inking new contracts with the fast-rising big data firm.

With its AI Platform (AIP), Palantir is shaping up to be one of the bigger software winners if the cost of AI compute is poised to come down rapidly.

As the Trump administration gets serious about beating China in the AI race, the AI-leveraging government contractor seems to be a prime candidate to keep gaining investors. In short, the nosebleed valuation may actually be a fair price of admission for one of America’s most significant AI assets.

Broadcom

Broadcom (NASDAQ:AVGO) was a huge 2024 winner, gaining over 110% last year, that’s taken a few backward steps this year. Indeed, the stock got dragged down as the DeepSeek sell-off wiped out wealth in the semiconductor scene. With an even bigger chunk of the post-earnings gains given back, I think now is as good a time as any to start doing some buying. Indeed, the trend of custom AI chips is not going away.

If anything, custom silicon is even more necessary for greater AI model efficiency gains and a transition toward edge computing. With partnerships with many of the AI leaders, I’d argue Broadcom has enough tailwinds to keep winning in this next chapter of AI, which could prioritize efficiency and customization more than brute force and one-size-fits-all solutions.

With a $300 price target slapped on by Jefferies, shares could face close to 45% upside from Tuesday’s closing price of $207 and change per share. Also, there’s a generous 1.2% dividend yield on the name, making it one of the best high-growth picks for investors who also want a fast-growing dividend with a yield north of 1%.