5 Tech Stocks to Buy as AI Hype Fizzles

Fed chair Powell dropped a big lump of coal in the market’s stocking last week as he reigned in the Fed’s rate cut projections for 2025. While the Fed cut its key benchmark rate by the expected 25 basis points, Powell tempered expectations on future rate cuts based on sticky inflation data and the continued robust spending from American consumers.

The Fed’s so-called ‘dot plot,’ which anticipates the frequency and strength of future rate activity, now indicates only two rate cuts in 2025, with a Fed funds rate at 3.75% – 4.00% by the end of next December.

Markets did not take kindly to the news, and major indices closed starkly lower after being flat for most of the day. Nasdaq led the losers, with the tech-heavy index dropping more than 3.5%.

After hours, AI-darling Micron Technology added to the pain with a significant earnings miss, and the stock had its worst performance since March 2020 the following day. Add in a close-call government shutdown and low holiday trading volume, and it was the perfect storm for some year-end volatility. And it won’t stop there.

A cautious Fed means cautious investors and a change in strategy is necessary for 2025.

How We Chose These Stocks

Is this the end of the AI-infused tech rally? The prospects of rate reductions slashing capital costs and juicing stock prices have diminished, and AI stocks are beginning to see some cracks form. Even the stalwart NVIDIA is in correction territory after touching the $152 mark earlier this month. While AI isn’t exiting the investment landscape anytime soon, the big winners over the last two years look to be finally taking a breather. In their place, we’ve identified five tech stocks not dependent on AI that could lead the way in 2025.

Alphabet Inc. GOOG

Google-parent Alphabet Inc. seems to battle antitrust action every few years, causing a drawdown that eventually rebounds once investors realize the company still makes boatloads of cash every quarter. GOOG revenue and earnings have increased every quarter since March 2023, and profit margins are finally back above 27% for the first time since March 2022. The stock slumped in the summer following a poor earnings report and again in November on (you guessed it) antitrust concerns, but it’s currently back near all-time highs.

Google’s recent quantum computing breakthrough unveiled a chip capable of speeds beyond any in the known universe, which could become an investment theme in 2025 (more on that later). Additionally, Waymo is one of the most significant success stories related to autonomous driving to date. The company recently announced a new service in Tokyo, its first international city, and recent testing data continues to show impressive safety statistics. Alphabet is also the parent of YouTube, which is the dominant way people consume podcasts and short-length videos and its YouTubeTV streaming service has an impressive sports package (and little pushback to price increases).

Uber Technologies Inc. UBER

It’s been a tumultuous year for Uber. The company finally posted a positive annual net income figure in 2023, and the stock rallied from $25 to $80 between December 2022 and February 2024. But the rally stalled there, and the stock bounced between $60 and $80 for most of the last nine months.

We think this recent drawdown is overdone, and the stock could be poised for a rally in 2025. Despite the proliferation of Waymo, Uber is still the dominant force in rideshare, and its ride-hailing market share is actually expanding compared to its biggest rival, Lyft. From a technical standpoint, the stock is oversold according to the Relative Strength Index (RSI) and the 50-day moving average is still hovering above the 200-day MA. As long as the 50-day stays above the 200-day, UBER shares might be an interesting buy at this level.

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Rigetti Computing Inc. RGTI

As mentioned above, if AI takes a breather over the next few months, one investment theme that could emerge is quantum computing. Quantum computing stocks have rallied hard in the last month, led by the aptly named Quantum Computing Inc. QUBT. However, Quantum Computing Inc. used to be known as Innovative Beverage Group, which raises some questions about its dedication to the industry. There may be better choices to take advantage of this trend, like Rigetti Computing Inc.

RGTI shares also experienced a meteoric rise over the last month, but not at the level of QUBT despite a much longer history in the quantum computing space. That could be a good development for investors, as Rigetti is better positioned to thrive if quantum computing takes off thanks to its innovative product line and decade-plus history in the industry.

CACI International Inc. CACI

CACI provides technology solutions as a defense contractor, and it could see tailwinds in the coming months due to an increased focus on defense spending in the incoming Trump administration and its sterling business reputation. CACI International provides cybersecurity, cyberspace and digital solutions for domestic and international clients.

CACI shares may have been unfairly unloaded as the price plunged down to $400 after approaching $580 in early November. The RSI reading of 27 indicates an oversold stock, and the company has good fundamentals with a 19.9 P/E ratio and a consensus Buy rating from analysts.

Apple Inc. AAPL

Sometimes, you don’t need to overthink it. Apple has been one of the biggest winners in the tech sector since Trump’s election, and the company’s cash pile is the envy of the business world. Despite already being one of the largest companies in the world by market cap, investors may have an opportunity here as the AI rally spins down.

AAPL is a staple in any long-term investment portfolio, but the time is ripe to add more shares. The stock has been roaring upward since May 2024 and made another new all-time high as the third week of December came to a close. AAPL is now approaching a $4 trillion market cap, and its rally could continue in 2025 if the company is granted tariff exemptions similar to the ones it received during the first Trump administration.

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