As we enter 2025, the pace of technological innovation continues to accelerate, creating lucrative opportunities for savvy investors. Three key trends are reshaping the landscape: the rapid expansion of data centers, the transformative potential of digital assets, and the groundbreaking advances in quantum computing.
Each of these trends represents a frontier in technology, with companies like Vertiv (VRT) which provides critical services to data centers, iShares Bitcoin Trust (IBIT) capitalizing on the growing popularity of Bitcoin as a portfolio diversifier and Rigetti Computing (RGTI) and the Defiance Quantum ETF (QTUM) pushing the boundaries of quantum technology. Let’s explore how these trends are shaping the future and the stocks positioned to benefit.
Image Source: TradingView
While Artificial Intelligence (AI) and the large language models that have captivated the world are among the most exciting tech developments in recent years, it’s the infrastructure powering them that serves as a critical leading indicator for the industry. The data center sector, in particular, may be the safest and most lucrative way to capitalize on this mega trend.
As emerging and established tech companies compete to develop the most effective AI products and strive to achieve artificial general intelligence (AGI), data centers will continue generating reliable cash flows. They are, in many ways, the oil refineries of the digital economy—capital-intensive, essential, and capable of producing substantial returns with comparatively lower risk.
It’s difficult to overstate the magnitude of the upcoming data center build out. The insatiable demand for compute power driven by large language models (LLMs) has created an almost limitless need for new data centers. This surge isn’t confined to AI alone; nearly every aspect of the economy is rapidly going digital.
Hyper-scalers and cloud providers like Amazon, Alphabet, and Microsoft, along with dedicated data center operators, are ramping up construction at an unprecedented pace. Industry experts believe we are on the brink of a digital era that’s hard to fully comprehend. According to the Association for Computer Operations Management (AFCOM), new data center projects are projected to increase six-fold over the next three years, underscoring the scale of this transformation.
The most obvious way to invest in this trend is through the major technology companies and hyper-scalers mentioned earlier, which I certainly recommend. However, targeting Vertiv could offer additional advantages. As a service provider to the digital infrastructure, the company takes considerably less risk and less capital investment. This keeps Vertiv more nimble and able to adjust strategy. The company also boasts strong sales and earnings growth and a reasonable valuation, at 33x forward earnings.
Image Source: Zacks Investment Research
In just 16 years, Bitcoin has evolved from an anti-establishment, experimental technology into a major financial asset—an unprecedented transformation in financial history. Over this period, it has also established itself as one of the best-performing assets in the market. It has also rapidly become an institutionally accepted asset that is statistically proven to add valuable diversification to any broad investment portfolio.
This has become evident in the launch of the iShares Bitcoin Trust. IBIT shattered records in its first year, amassing over $50 billion in assets within 11 months—making it the most successful ETF launch in history. IBIT’s unprecedented growth not only cemented BlackRock’s leadership in the ETF space but also marked a turning point for Bitcoin, driving its price above $100,000 for the first time. The fund now holds more assets than BlackRock’s gold ETF and accounts for over half of the daily trading volume among spot-Bitcoin ETFs. With strong investor demand and institutional support, IBIT’s success highlights the mainstream acceptance of Bitcoin as a financial asset.
Despite its significant volatility, Bitcoin has delivered an average annual return of approximately 109% since its inception, with a Sharpe ratio of 0.85, making this year’s appreciation fairly typical. Currently trading just above $100,000 per coin, Bitcoin has firmly established itself as a major financial asset. However, its potential for high future returns remains substantial. BlackRock currently advises a portfolio allocation of 1%-2% to Bitcoin, a shift that, if widely adopted, could propel the digital currency to as high as $800,000 per coin.
Image Source: TradingView
The quantum computing trend has absolutely exploded in the last quarter or 2024, with numerous emerging quantum stocks rallying significantly. Rigetti Computing has gained more than 400% in the last month and 1,500% in the last two months. Although there have been breakthroughs in recent years, drawing more attention to the industry, a recent development from Alphabet’s ‘Willow,’ really set things on fire.
The breakthrough with Willow, Google’s latest quantum chip, represents a significant leap for quantum computing. Willow achieved two historic milestones: exponentially reducing errors while scaling up qubits—a longstanding challenge in quantum error correction—and completing a benchmark computation in under five minutes that would take the world’s fastest supercomputer an unimaginable 10 septillion years. These advancements bring quantum computing closer to practical, real-world applications.
The broader significance lies in quantum computing’s potential to revolutionize industries. By leveraging quantum mechanics, quantum computers can tackle complex problems far beyond the reach of classical systems. This includes optimizing financial portfolios, advancing drug discovery, enhancing cybersecurity, improving traffic and transport systems, and accelerating battery and energy technology development. With Willow, the quantum computing industry is moving toward unlocking these transformative capabilities, offering immense societal and technological benefits.
Both RGTI and the Defiance Quantum ETF (QTUM) share prices are showing little sign of slowing down. For investors who are seeking more broad exposure to the industry, the QTUM ETF may be the simplest way to get access.
Image Source: TradingView
Each of these trends—data center expansion, Bitcoin’s institutional adoption, and quantum computing breakthroughs—represents a transformative force in technology investing. Companies like Vertiv, Rigetti Computing, and funds such as QTUM and IBIT offer unique opportunities to capitalize on these seismic shifts. However, investors should consider their risk tolerance and time horizon, as these cutting-edge sectors can be volatile. With careful positioning, these investments could provide exposure to some of the most exciting and potentially lucrative trends shaping the future.
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
Defiance Quantum ETF (QTUM): ETF Research Reports
Vertiv Holdings Co. (VRT) : Free Stock Analysis Report
Rigetti Computing, Inc. (RGTI) : Free Stock Analysis Report