Why US Exchanges ICE and NDAQ Are Set to Outperform in 2025: A Bullish RBC Perspective

Amid a U.S. economy forecast to grow at just 1.6% in 2025, traditional market participants are bracing for volatility and uncertainty. Yet, one sector is thriving: U.S. exchanges. Intercontinental Exchange (ICE) and Nasdaq (NDAQ) are benefiting from secular tailwinds—market volatility, digitization, and global listings—that are fueling high-margin, cash-generative growth. With RBC Capital Markets maintaining Outperform ratings and price targets implying 20-26% upside, these exchanges are poised to outperform the broader market.

ICE: A Fortress Moat in Motion

ICE's dominance in regulated markets—spanning equities, commodities, and derivatives—creates a near-impregnable moat. Its Q1 2025 results highlighted 16.2% revenue growth, driven by record trading volumes. The Rates segment, which accounts for 40% of its business, saw a staggering 55.4% year-over-year (y/y) surge in average daily volume (ADV) due to macro volatility. Meanwhile, its NYSE Texas launch—the first securities exchange in Texas—positions ICE to capitalize on the state's booming tech ecosystem and corporate-friendly policies.

RBC's bullish case:
- Price Target: $200 (up 22% from $163.50 as of July 2025).
- Growth Drivers:
- Digitization: ICE's shift to algorithmic trading and data analytics is driving cost efficiencies.
- Global Listings: Companies seeking IPOs or secondary offerings increasingly favor ICE's premium platforms.

Nasdaq (NDAQ): A Diversified Growth Machine

Nasdaq's 62.8% gross profit margin and 14-year dividend streak underscore its financial resilience. While it faces near-term headwinds in index revenue, its Financial Technology (FinTech) and Market Services segments are engines of growth. For instance, its Market Services segment—which captures trading fees—benefits directly from volatility-driven ADV increases. RBC notes that Nasdaq's $95 price target (up 12% from $84.50) is conservative, as it doesn't fully account for its $51.3B market cap leadership and tech-driven innovations like AI-powered analytics.

Key catalysts:
- Digitization: Nasdaq's Market Replay and Investor Relations platforms are gaining traction among institutional investors.
- Global Expansion: The company is targeting emerging markets in Asia and Europe, where its listing services command premium pricing.

Secular Tailwinds: Why Exchanges Thrive in Volatile Markets

1. Market Volatility = Higher Trading Volumes:
   Both ICE and NDAQ benefit from the inverse correlation between volatility and stock prices. In Q1 2025, ICE's Energy and Cash Equity ADV rose 23.9% and 23.0% y/y, respectively. Nasdaq's June ADV data showed similar momentum, though exact figures remain underreported.

2. Digitization and Innovation:
   Exchanges are racing to modernize infrastructure. ICE's NYSE Texas and Nasdaq's AI-driven data tools reflect investments in $2B+ annual tech budgets, ensuring they stay ahead of fintech disruptors.

3. Untapped Global Listings:
   Over 80% of global companies remain unlisted, creating a $100B+ opportunity for exchanges. ICE's focus on corporate-friendly jurisdictions (e.g., Texas) and Nasdaq's push into tech IPOs are strategic plays to capture this growth.

Valuation: A Discounted Premium

While ICE trades at a 34.9x P/E ratio and Nasdaq at 36.4x, both are fairly valued relative to growth prospects:
- S&P 500: A 1.6% GDP growth forecast and 18.5x P/E suggest limited upside.
- Exchanges: Their 20-26% upside stems from secular growth (vs. cyclical macro risks) and moat-driven profitability.

Investment Thesis: Buy ICE and NDAQ for Long-Term Outperformance

• ICE: A Buy at $163.50. RBC's $200 target assumes just 15% revenue growth over 2025, leaving room for upside if ADV trends accelerate.
• Nasdaq: A Buy at $84.50. Analysts' median $88 target understates its $95+ potential if FinTech ARR growth rebounds.

Risks:
- ICE's mortgage-tech division faces headwinds from low origination activity.
- Nasdaq's short interest (14.14B shares) could pressure near-term prices.

Conclusion

In a world of economic uncertainty, ICE and NDAQ offer defensive, high-margin growth. Their regulatory moats, digitization bets, and global listings pipeline align with secular trends, while RBC's price targets suggest 20-26% upside. For investors seeking stability and outperformance, these exchanges are among the best-positioned names in 2025.