The big rally in the broader stock market might have ceased, but there are a lot of things to focus on under the surface, says Morningstar. Notably, technology stocks, which were the leading contributors to the big bull market in 2023 and 2024, have seen strong declines in 2025. Elsewhere, other sectors including financial services, basic materials, and healthcare continue to see new investor interest.
Morningstar, while highlighting the comment from Michael Arone (chief investment strategist at State Street Global Advisors), mentioned that non-US markets including China, the UK, and Germany have seen strong rallies. Notably, the market strategists continue to see a subtle transition in leadership. The broader markets have been struggling to find focus due to the uncertainties related to the future. The US Fed rate cuts are not guaranteed this year, while inflation remains sticky. Also, the potential impact of Trump’s economic policy proposals is unknown yet.
Is a Market Rotation on the Horizon?
To provide a brief perspective, when a rotation occurs, the market investors tend to shift their focus from stocks that were critical to a strong trend to other parts of the broader equity market that have not seen much movement. Morningstar believes that there is plenty of evidence that a rotation is underway. Technology stocks, which have seen an increase of over 36% in 2024, are down in 2025. The NASDAQ-100 Technology Sector has seen a decline of ~0.74% on a YTD basis.
The basic materials sector was the worst performing sector in 2024. However, so far in 2025, related stocks have managed to deliver decent gains. Dow Jones U.S. Basic Materials Index increased by over ~6% on the YTD basis. Also, healthcare stocks have grabbed investors’ attention after they returned ~2.7% in 2024, says Morningstar. Dow Jones U.S. Health Care Index returned over 7% on a YTD basis. As per Dan Kemp, Morningstar chief research and investment officer, there seems to be a rotation in terms of valuations.
UBS Remains Optimistic About S&P 500 in 2025 Despite Challenges
UBS has reiterated the importance of portfolio diversification and hedging in a bid to navigate the market volatility moving forward. Investors are required to consider capital preservation strategies so that they can limit the portfolio losses. Investors looking to build up long-term AI exposure can use structured strategies or “buy the dip” strategy in certain quality AI stocks.
UBS expects 2025 capex from the Big 4 US tech firms to increase by 35% to reach US$302 billion, with the firm seeing strong demand for frontier models. Due to the AI adoption trends fueling monetization, it projects mid-teens returns for global AI stocks this year.
Our Methodology
To list the 10 Hot Growth Stocks to Invest in According to Analysts, we used a screener to shortlist stocks that have gained at least 30% over the past 6 months and that analysts see at least 20% upside to over the next 12 months. Next, we ranked the stocks in ascending order of their average upside potential, as of March 5. We also mentioned the hedge fund sentiments around each stock, as of Q4 2024.
Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 373.4% since May 2014, beating its benchmark by 218 percentage points (see more details here).
20 Windiest Cities in the United States
Wind turbines against a backdrop of the sky, signifying the power of renewable energy.
GE Vernova Inc. (NYSE:GEV) is an energy company, which is engaged in the provision of various products and services that generate, transfer, orchestrate, convert, and store electricity. The company remains well-positioned to capitalize on the higher global demand for electricity, mainly because of the data centers and electrification trends. GE Vernova Inc. (NYSE:GEV)’s robust presence in gas power, grid solutions, and renewable energy enables it to cater to multiple aspects of this growing demand. With electricity consumption continuing to rise, the company is expected to see strong growth opportunities throughout its business segments, exceeding current market projections.
GE Vernova Inc. (NYSE:GEV) remains well-placed to reap the benefits from several major industry trends, such as the global energy transition, increased electrification, and the elevated demand for clean energy solutions. Its diverse portfolio enables the company to address several aspects of these trends, ranging from conventional power generation to renewable energy and grid modernization. Overall, GE Vernova Inc. (NYSE:GEV)’s robust market position is aided by its technological expertise, global reach, and extensive installed base.
Fidelity Investments, an investment management company, recently released its Q3 2024 investor letter. Here is what the fund said:
“Among individual holdings, the top relative contributor was an overweight stake in GE Vernova Inc. (NYSE:GEV). The company’s shares gained about 49% the past three months, as the power-generation business that split from General Electric on April 2 continued to fare well as a stand-alone entity. On July 24, the company reported quarterly earnings that were better than expected, boosted by its natural gas power-turbine business, and released an optimistic financial forecast for the rest of 2024.”
Overall GEV ranks 7th on our list of the hot growth stocks to invest in according to analysts. While we acknowledge the potential of GEV as an investment, our conviction lies in the belief that some deeply undervalued AI stocks hold greater promise for delivering higher returns, and doing so within a shorter time frame. If you are looking for a deeply undervalued AI stock that is more promising than GEV but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
