There's no discussion of technology trends in 2024 without mentioning the massive inroads of artificial intelligence into our everyday worlds. The year saw AI come roaring into our joint consciousness with the promise of seemingly reworking practically everything humans do.
NVIDIA (NVDA) shares nearly tripled (183%), with the AI-chip colossus temporarily deposing tech giant Apple (AAPL) as the world's most valuable company. However, veteran fund manager Doug Kass predicts a dark turn for AI agents in 2025.
Doug Kass on the Future of AI Stocks in 2025
Doug Kass, a longtime hedge fund manager, has expressed some strong views about the future of AI in a post on TheStreet Pro. Kass, whose career stretches back to the 1970s at Putnam, wrote a list of "15 big surprises for 2025."
His predictions, which covered politics, technology, and sports, say AI stocks in 2025 will be compromised by a lack of sufficient electricity and the absence of a "killer app" or related income stream.
Talking about competition, Kass claims that there's a race for AI arms amidst limited electricity provision. According to the veteran fund manager, the AI revolution's electricity needs for data centers are expected to more than double by 2030 based on current grid capacity.
Meanwhile, the analyst referenced an estimate by Barclays Research that data centers account for 3.5% of U.S. electricity consumption today. According to the investment firm, that figure could exceed 5.5% in 2027 and 9% by 2030.
Kass explains, “With AI data centers so powerful and the AI arms race continuing apace our nation’s supplies of electricity prove inadequate. Power outages become commonplace and consumers’ utility bills soar.”
He further argued that the need to build new natural gas-driven power stations could double the prices of natural gas, "contributing to further inflationary pressure." Eventually, an outraged public will demand government action and AI data centers will be hit with large taxes to subsidize lower prices for consumers, Kass says.
“As the year progresses it becomes clear that there is no material killer app or related revenue stream that is derived from the use of generative AI. “Focus shifts from being directed to consumers to helping corporations cut costs,” he said.
The transition, according to the veteran, benefits tech integrators and consultants in a way that negatively deters hyperscalers, the large cloud-service providers like Meta Platforms and Amazon's AWS. Both tech giants are currently spending billions to build out their AI capacities.
Kass claims they will recognize the lack of a revenue stream and scale back their capital outlays and budgets.
Consequently, Kass predicts a significant correction for NVIDIA’s stock price. “Nvidia’s ‘day in the sun’ abruptly ends,” he proclaimed. “The share price falls to between $50-$75 in a matter of days, as it grows clear that double and triple ordering buoyed the company’s past reported top and bottom lines.”
Conclusion
Beyond predicting a sharp correction in his NVIDIA stocks forecast in 2025, Kass predicts quantum computing will take over the center stage in the coming year. While only time can predict if – or just how much – AI stocks will dip in 2025, tech giants and other concerned bodies will do well to pay some attention to the accompanying stats in Kass' presentation and provide the matching AI technology implementations for the situations.