We recently compiled a list of the 9 Stocks Poised for Gains as AI Reaches New Heights in 2025.In this article, we are going to take a look at where SAP SE (NYSE:SAP) stands against the other stocks.

The equity market has climbed consistently over the past few years on the global economy recovering from the COVID-19-fueled slowdown. On the other hand, artificial intelligence has emerged as a key catalyst pushing the market to new heights. Tech-laden Nasdaq, home to some of the biggest AI investment plays, was up by 29% in 2024, adding to the 43% gain generated in 2023.

The big question at the start of the new year is whether the AI-driven rally is sustainable. Has the market run ahead of itself, as some stocks have increased by more than 200%, resulting in overstretched valuations? If history is anything to go by, investors have nothing to worry about, but be optimistic, as the equity market has always rallied each year after a 28% or more gain the previous year.

According to Wall Street analysts, the artificial intelligence industry is expected to reach its peak in 2025, with a $2 trillion increase in capital expenditures over the following three years. Governments around the globe pushing for friendly regulatory conversations on AI ethics and safety should spur innovation in the sector.

“We believe tech stocks will be robust in 2025 on the shoulders of the AI Revolution and $2 trillion+ of incremental AI Capex (spending) over the next 3 years,” said Wedbush Securities analyst Daniel Ives.

The fact that big tech companies are ramping up their AI investments to gain a competitive edge affirms AI rally sustainability. Wall Street experts expect several businesses to continue growing due to the untapped potential of revolutionary technology. As large-cap tech revises their AI capital expenditures upward, investors should position themselves for opportunities. Analysts at UBS expect AI capital expenditure to reach record highs of $280 billion in 2025, up from about $224 billion in 2024. The increase in AI capital expenditure is expected to result in game-changing innovations and development, which should support and fuel the AI rally. Nevertheless, the analysts have warned that AI revenues are likely to lag capital expenditures.

“Big tech firms will likely make more headway in monetizing their AI spending this year. While AI revenues are likely to again lag behind Capex in 2025, we see evidence that AI monetization is primed to improve sharply in 2025,” UBS said in a research note.

Amid the expected increase in AI capital expenditure, analysts at BNY Mellon Wealth Management believe that “AI’s role in the world will surpass that of other technologies that propelled earlier periods of tidal change.” Its increased roll should also strengthen bullishness in the equity market, broadening the gains, as in 2024.

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For this article, we selected AI stocks by going through news articles, stock analysis, and press releases. These stocks are also popular among hedge funds.

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 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).Goldman Sachs Initiates Coverage on Penguin Solutions, Inc. (NASDAQ:PENG) with ‘Buy’ Rating, Citing AI Growth Potential

A data centre room with cloud technology, illustrating the enterprise application software services.

SAP SE (NYSE:SAP)

Number of Hedge Fund Holders: 36

SAP SE (NYSE:SAP) provides applications, technology, and services worldwide. It offers SAP S/4HANA, which includes software capabilities for finance, risk and project management, procurement, manufacturing, supply chain, and asset management. While CFRA analyst Angelo Zino downgraded the stock from a “Buy” to “Hold” on December 18, it is still a solid long-term AI play. SAP SE (NYSE:SAP) is increasingly leveraging AI to enhance its enterprise resource planning solutions. Integration of AI features and solutions in cloud offerings is the catalyst behind the company’s cloud revenue increasing by 26% in Q3 2024, following a 24% increase in Q2. This growth is largely driven by SAP’s cloud ERP suite, which has become integral to customers' digital transformation strategies, particularly in industries like chemicals and automotive.

Overall SAP ranks 8th on our list of the stocks that are poised for gains as AI reaches new heights in 2025. While we acknowledge the potential of SAP as an investment, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than SAP but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.

READ NEXT: 8 Best Wide Moat Stocks to Buy Now and 30 Most Important AI Stocks According to BlackRock.

Disclosure: None. This article was originally published at Insider Monkey.

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