My Predictions for 2025
It’s that time of year again — prediction time.
Predictions make you look dumb, especially with the internet keeping track of every miss. But it’s a fun intellectual challenge, so here I am again, taking another shot at it.
Let’s start by reviewing how my 2024 predictions turned out.
I had some big hits: 1) the 60-40 portfolio making a comeback, 2) the market rotation in H2, 3) crypto hitting new all-time highs, 4) the rise of open-source AI models, 5) the growing impact of GLP-1s, and 6) the continued expansion of private credit.
But I also had some big misses: 1) equity returns weren’t modest, 2) healthcare didn’t dominate, 3) M&A activity didn’t pick up, and 4) the media attention didn’t shift from LLMs to AI applications.
From an investing standpoint, 6/10 is a solid batting average, and it paid off for me with a Sharpe Ratio over 3 this year.
With 2024 behind us, let’s dive into my 8 predictions for 2025.
Modest Equity Returns: Cyclicals and Small Caps to Outperform
In 2025, I predict single-digit market returns, with cyclical sectors and small-cap stocks outperforming. Infrastructure spending and energy projects should support cyclicals, while nearshoring and domestic growth tailwinds should help small caps. US tech will stay strong, but stretched valuations will limit returns.
Short-Term Bonds Will Shine
Short-term bonds should do well in 2025. High yields and a steep yield curve make them a strong pick for investors while the Fed keeps rates elevated. With their solid current risk/return profile, bonds will draw more inflows, keeping the 60/40 portfolio in style.
Mass Adoption of Stablecoins and New ATH for Bitcoin
2025 will be a big year for crypto. Stablecoins will go mainstream, especially for international transfers and as a hedge against shaky fiat currencies. They’re fast, efficient, and perfect for cross-border payments. Meanwhile, Bitcoin will keep climbing to new all-time highs. I’m betting it’ll start closing the gap with gold as a hedge against inflation, with a long-term price target of $1M by 2030 as more institutions jump on board.
Vertical AI Agents Will Transform the Service Industry
In 2025, vertical AI agents will transform the service industry by automating specialized tasks in areas like customer support, data entry, and operations. The market for vertical AI agents will eventually grow 10x larger than today’s software market, as they replace not just IT spending but also significant labor costs. I expect to see early winners emerge in every vertical this year. These tools will have a huge positive impact on private equity, helping them streamline workflows, and cut costs within their PortCo’s.
Consumer AI Goes Viral with Game-Changing Voice Tech
In 2025, OpenAI and Google will use their unique competitive strengths to make consumer AI more accessible and integrated into our daily lives. OpenAI’s brand power, alongside its Apple partnership, will transform Siri as a go-to AI tool. Meanwhile, Google’s vertical advantage will enable Google Assistant to deliver seamless AI experiences across multiple devices.
Data Centers Will Accelerate the Push for Nuclear Power
In 2025, data centers will prioritize renewable energy to reduce costs and meet sustainability targets. As energy prices rise, CTOs will need to optimize their cloud infrastructure spend. Small modular reactors (SMRs) will provide a key solution, offering reliable, low-carbon power to help data centers meet both their economic and environmental goals.
AI and RFK Jr. To Disrupt The Healthcare Industry
In 2025, AI will transform healthcare, driving advancements in drug discovery, diagnostics, and personalized medicine. Tools like DeepMind's AlphaFold will speed up our understanding of diseases, while AI in genomics and radiology will provide more accurate, cost-effective solutions. At the same time, RFK Jr.'s push for a more transparent, patient-centered system will push biotech companies to prioritize accessibility, shifting the industry toward a more equitable, tech-driven healthcare model.
Cybersecurity Takes Center Stage
In 2025, cybersecurity will face more advanced threats and increasing national security concerns. High-profile incidents like the 2024 cyberattack on Seattle-Tacoma International Airport and the CrowdStrike update failure will force organizations to reevaluate their defense strategies. With quantum computing advances (e.g. Willow) threatening to break current cryptographic standards, businesses and governments will need to upgrade their security infrastructure. As a result, I expect steady demand for post-quantum cryptography and other next-gen cyber solutions.
As we move into 2025, AI is advancing faster than ever. OpenAI’s new o3 model, which outperforms 99.9% of programmers on platforms like Codeforces, highlights just how close we are to AGI.
As Naval Ravikant puts it, “Learn to sell, learn to build.” With AI taking over much of the technical work, the real leverage moving forward will be in building distribution. That’s where I’ll be focusing my energy, along with developing a few apps using AI coding assistants (e.g. Cursor, v0, etc.).
Feel free to reach out—I’m always up for a good debate. And be sure to follow my new project, The Startup Graveyard.
None of the above should be considered financial advice. These views are my own, and not affiliated with any organization.
Good job sir! Agree with most of this. Only one I'm less sure about is small cap outperforming Mag 7. Think its going to be another blockbuster year for Microsoft and Meta!