Capitalizing on AI Disruption: Steven Cress's Data-Driven Strategy for 2025's Volatile Markets

In 2025, the global economy is a high-wire act. Geopolitical tensions, inflationary pressures, and the relentless march of AI-driven innovation have created a market rife with opportunity—and peril. Steven Cress, the VP of Quantitative Strategy at Seeking Alpha, has long been a voice of clarity in this chaos. His data-driven approach, rooted in fundamental analysis and sector-specific trends, has guided investors through turbulent years. Now, as the world navigates 2025's volatility, his insights into AI stocks, geopolitical hedging, and inflation-resistant sectors offer a roadmap for profit in an uncertain landscape.

The AI Opportunity: Where Data Meets Disruption

Cress's framework for AI investing centers on quantitative rigor and sector specificity. His system identifies companies with strong fundamentals—high growth, robust profitability, and attractive valuations—that are positioned to dominate the AI infrastructure boom.

Key Picks for 2025:
1. Credo Technology Group (CRDO): Credited as Cress's top pick for 2025, Credo designs high-speed semiconductor solutions critical for data centers and AI systems. Its strong liquidity and balance sheet, highlighted in his recent analysis, suggest it can scale amid rising demand.

2. Celestica (CLS): A leader in advanced manufacturing for AI hardware, Celestica benefits from the global shift toward localized production of semiconductors, spurred by U.S. restrictions on China.
3. Intapp: This cloud-software firm caters to professional services firms adapting to AI-driven workflows, offering recurring revenue streams.

Ask Aime: Which AI stocks will lead in 2025, as per Steven Cress's predictions?

Why Utilities Are AI's Unsung Heroes
AI's hunger for energy is driving demand for reliable power, particularly from utilities with clean, scalable energy sources.

Cress's picks here include NextEra Energy (NEE) and Dominion Energy (D), which leverage nuclear and natural gas facilities to power data centers. The utilities sector surged 28% in 2024 amid EV adoption and AI energy needs—a trend likely to persist.

Mitigating Geopolitical Risks: Defense and Decoupling

The U.S.-China tech war remains a central risk. Cress advocates for sector diversification and geopolitical hedging to navigate this divide.

• Defense Stocks: The aerospace and defense sector is primed for a “Trump Bump” under the administration's pro-military policies. Companies like Boeing (BA) and Raytheon Technologies (RTX) stand to benefit from rising global defense spending (projected at $2.4 trillion in 2023).
• Semiconductors: U.S. chipmakers like NVIDIA (NVDA) and ASML Holding (ASML) are beneficiaries of export controls on China. While ASML faced a temporary setback in 2024 due to manufacturing bottlenecks, its long-term role in AI infrastructure remains irreplaceable.
  

Inflation and Fed Policy: Navigating the Crosscurrents

Inflation's retreat—core PCE dipped to 2.8% in late 2024—has fueled hopes of Fed rate cuts. Cress's strategy here is twofold:
1. Small-Caps and REITs: Rate cuts historically boost small-cap stocks (e.g., SPDR S&P 600 Small Cap ETF (IJR)) and real estate investment trusts (REITs), which thrive on lower borrowing costs.
2. Dividend Plays: Utilities and telecoms with stable cash flows, such as AT&T (T) and Verizon (VZ), act as ballast against market volatility.

The Risk-Adjusted Playbook

Cress's advice for 2025 is clear: balance aggression with defense.
- Aggressive Bets: Allocate 40% to AI leaders (CRDO, CLS) and defense stocks (BA). These sectors offer asymmetric upside if geopolitical tensions or tech adoption accelerate.
- Defensive Anchors: Deploy 30% to utilities (NEE, D) and dividend stocks (T) to hedge against inflation or market selloffs.
- Wait-and-See: Keep 30% in cash or short-term bonds to capitalize on dips, particularly in tech, as the Fed's next rate move becomes clearer.

Conclusion: Data as the North Star

In 2025, markets will reward investors who blend quantitative discipline with geopolitical awareness. Cress's success in 2024—where his Top 10 Stocks gained 124%—stems from this approach. For the year ahead, his focus on AI infrastructure, defense resilience, and inflation-resistant sectors offers a path to navigate volatility. As Cress himself might say: “The data never lies—follow it, but always look over the horizon.”

Investment Advice: Consider a diversified portfolio emphasizing Credo Technology, NextEra Energy, and Boeing, with a buffer in utilities and cash to exploit market fluctuations.