Welcome to Smart Money! My name is Eric Fry, and I’m glad you’re here.
Wall Street has sold investors on the idea that they should start with “micro” analysis – the idea that they should make investment decisions by comparing things like price/earnings ratios, income statements, or other company details.
But I do the opposite; I start with “macro” analysis.
I look for big-picture trends that drive huge, multiyear moves in entire sectors of the market.
I’m talking about trends that can spin off dozens of triple- and even quadruple-digit gains in just a few years.
Catching just one of these trends – at the right time – can help anyone accumulate enough capital to finance their dreams and to provide themselves with an enviable retirement…
When investors use a global macro strategy, they identify investment opportunities from a broad, global, top-down perspective, rather than by examining stocks one by one (a micro, bottom-up perspective).
And today, I want to highlight my Top 7 Stocks for 2025, each of which capitalizes on a powerful megatrend.
Let’s get started…
2025 Stock No. 1: Corning
If we were to play a word-association game and I said, “Artificial intelligence,” you might respond with something like “Nvidia,” or “Google,” or maybe “robots.” You probably would not say “Corning.”
But as it turns out, this iconic glass maker could benefit significantly from the AI boom, as a classic “picks and shovels” play.
For more than 170 years, the Corning Inc. (GLW) name has been synonymous with best-of-breed glass products. It has continuously innovated and set the industry standard for excellence.
In 1879, a 32-year-old Thomas Edison approached Corning with the concept of a lightbulb. This new invention would require a specialized glass that would be stronger than typical window glass but could also encase delicate filaments inside the bulb. Corning fulfilled the mission and became Edison’s sole supplier.
Over the ensuing decades, Corning produced a variety of glass-based marvels, dominating one industry after another. In the 1960s, for example, Corning was producing 100% of the world’s TV screen glass.
In 1970, Corning introduced the world to the company’s most marvelous marvel of all: low-loss fiber optics. With this groundbreaking invention, thin strands of Corning glass could replace copper wire in telecommunications networks and transmit millions of bits of information per second via photons (pulses of light), rather than electrons.
Thus, the world of optical communications was born… and it has continued to thrive ever since.
Today, the company operates in five different business segments – Optical Communications, Display Technologies, Environmental Technologies, Life Sciences, and Specialty Materials – each of which has been battling cyclical headwinds for the last two years.
Despite these challenges, third-quarter 2024 results exceeded expectations, being led by strong performance in Optical Communication. The segment saw a 55% year over year sales increase in its Enterprise business, fueled by growing demand for optical-connectivity products used in generative AI. Meanwhile, Display Technologies raised prices and projects segment net income of $900 million to hit $950 million in 2025, with a target net income margin of 25%.
But throughout good times and bad, Corning continuously invests in its future. Last year, the company spent about $1 billion on research and development, just like it has every year since 2018.
These sizeable R&D efforts help fortify Corning’s dominant position in its primary markets. Additionally, the company’s innovative product refinements and launches enable it to advance the over-arching strategy it calls “more Corning.”
“We aren’t exclusively relying on people just buying more stuff,” CEO Wendell Weeks explains. “We’re putting more Corning into the products that people are already buying.”
One notable example of the “more Corning” strategy at work is the Mercedes-Benz hyper-screen dashboard display, which features a Corning “Gorilla Glass” cover nearly five feet wide. As a result of commercial successes like these, Corning now generates $100 of revenue per car on some models – up from just $15 a few years ago.
Now, AI has come to power a massive “more Corning” upgrade cycle.
“More AI”
The path from AI to Corning is fairly direct and intuitive. AI technologies require enormous processing power from data centers. Because this new source of demand is surging, the companies that operate data centers are ramping up their capacity by building new centers and/or boosting the capacity and speed of existing centers.
That means surging demand for the optical fiber and components that Corning produces. Importantly, the growing AI workloads not only require more data centers, but also more fiber optic connections per data center.
According to CEO Weeks, modern data center systems that rely on Nvidia Corp.’s (NVDA) popular Hopper H100 GPUs require 10 times more fiber optics than a conventional data center server rack.
As Weeks explained on CNBC, “We’ve invented new fibers, new cables, new connectors, and new custom integrated optical solutions to dramatically reduce installation costs, overall time and space, and carbon footprint.”
Therefore, it is easy to see how more data center processing power means “more Corning.” On average, Corning estimates that data centers running AI large language models (LLMs) will require five times more optical connectivity than they have today.
In 2024 alone, hyperscalers like Alphabet Inc. (GOOGL), Amazon.com Inc. (AMZN), and Meta Platforms Inc. (META) invested about $200 billion in data centers, hardware, and other technologies required to deploy generative AI models.
This massive investment caps a multi-year data center construction wave that has doubled the total capacity of hyperscale data centers during the last several years, according to Synergy Research Group. The Group predicts capacity will double again during the next few years, as 120-130 new hyperscale centers come online each year.
This building boom is finally showing up on Corning’s order books, with the company citing “strong adoption of our new optical connectivity products for Generative AI.”
Coincident with the data center boom, Corning is seeing trend improvements in its other major end markets, like smartphones. As a result, Weeks believes a $3- to $5-billion revenue surge will land on Corning’s income statement over the next year.
If these expected revenues arrive in a timely manner, Corning could earn as much as $3.00 per share within one year, and $3.50 within two years. At that level of profitability, Corning shares will be trading for 15 times 2026 earnings and just 13 times the 2027 result.
Obviously, this hoped-for revenue surge is not yet in the door. But the trajectory is very promising. If/As/When this revenue does materialize, Corning shares could easily double from the current quote.
In the wake of a favorable Barron’s story about Corning in June 2024, and the company’s subsequent upward earnings revision, the stock is no longer the “secret” AI play it once was.
However, it remains a relatively cheap and underappreciated AI play.
So, as these tech darlings like Nvidia and Amazon continue to prosper, I would favor the unloved Corning for the next phase of the AI boom.
2025 Stock No. 2: Alcoa
EVs and other green technologies require battery metals – like copper, nickel, lithium, and aluminum – and, as such, are creating powerful long-term demand trends.
These metals all play a critical role in a megatrend I first highlighted more than four years ago. I called it the “Second Electric Revolution.”
These 2018 observations are just as relevant today, perhaps even more so, since the related booms in EVs, energy storage, and other green technologies have become a global phenomenon of incalculable scale.
That spells good news for Alcoa Corp. (AA), the largest U.S.-based aluminum producer.
Now, aluminum does not receive the same high-profile attention that other battery metals do, but the solar industry is a prodigious consumer of aluminum, and, as I said, so is the EV industry.
Alcoa’s current valuation is cheap enough that the stock could deliver outsized gains, especially if aluminum demand ramps up more quickly and powerfully than investors currently expect.
But first the bad news…
After spiking to $4,000 a tonne in February of 2022 – during the early days of the Ukrainian invasion – the aluminum price tumbled about 40%, which caused Alcoa’s share price to drop as much as 65%.
However, the long-term outlook for the silvery metal is excellent.
A report from the London-based International Aluminium Institute (IAI) finds that global aluminum demand will jump about 40% by 2030 – and cleantech industries will power most of that growth.
As a result, the report states that aluminum producers will need to ramp up their production from 86 million metric tons in 2020 to 120 metric tons by 2030.
According to the research firm, Wood Mackenzie, solar industry demand for aluminum could increase from just under 3% of total world consumption to nearly 13% by 2040.
In the EV industry, aluminum does not play a significant electrification role, but the body and chassis of each Tesla Model S contains about 410 pounds of aluminum!
That’s no accident. Because aluminum is so much lighter than steel, EV manufacturers covet the metal. An aluminum vehicle can travel much farther on a single charge than a steel vehicle can.
For this reason, many EV manufacturers are ramping up their aluminum consumption. In fact, aluminum is the fastest-growing material in the automotive market.
In 2021, the auto industry accounted for about 20% of global aluminum demand. Within that slice of the pie, the EV portion was only about 2%.
But that percentage is certain to grow rapidly over the coming decade. Wood Mackenzie expects aluminum demand for EVs to hit 2.4 million tonnes by 2025, and then quadruple to nearly 10 million tonnes by 2040. At that point, EV demand for aluminum would total about 12% of the global total.
Obviously, these forecasts are merely guesses, but the trend is clear. EV demand for aluminum is ramping higher. And that’s just one source of demand from the cleantech sector.
According to the IAI, renewable energy needs will create demand for aluminum to replace existing copper cabling for power distribution. In total, the electric sector will require an additional 5.2 million metric tons by 2030, according to the group.
You get the idea.
Despite the strong supply-demand dynamics in the aluminum market, the Alcoa share price is reflecting all doom and no boom.
However, from this low valuation, Alcoa offers substantial upside potential.
2025 Stock No. 3: Global X Uranium ETF
“Everything old is new again,” according to the wisdom of 18th century author, Jonathan Swift. The nuclear energy industry lends truth to that saying.
Decades ago, the industry seemed to be limping toward certain extinction, or at least irrelevancy. But then a funny thing happened; artificial intelligence arrived on the scene and started demanding spectacular volumes of electric power that existing sources would not be able to provide.
To overcome this looming shortfall, the nation’s largest data center operators turned to the old energy source and made it new once again.
Strange, but true; some of the world’s largest purveyors of AI infrastructure are investing directly in nuclear power. This unlikely marriage is the newest reason why the young bull market in uranium may last several more years.
The data centers that power AI technologies require such prodigious – and reliable – volumes of electricity, that tech giants like Amazon and Microsoft Corp. (MSFT) “rediscovered” nuclear power as an ideal energy source.
In October 2024, Amazon announced that Amazon Web Services (AWS) – its cloud computing platform – is set to invest more than $500 million in nuclear power.
AWS has signed an agreement with Dominion Energy Inc. (D), Virginia’s top utility company, to explore the development of an SMR near Dominion’s North Anna Nuclear Generating Station (located about halfway between Washington, D.C., and Richmond).
An SMR is a type of advanced nuclear reactor that can produce electricity. It has a smaller footprint and can be constructed faster than traditional reactors. They are about a third the size of the average reactors in the current U.S. fleet, with a power capacity of 300 megawatts or less – which could power more than 200,000 U.S. households.
As such, SMRs could revitalize nuclear as a vital power source needed for the rise of artificial intelligence, electric vehicles, and manufacturing.
Around the same time, Google announced it will purchase power from Kairos Power, a small modular reactors developer. And in September 2024, Microsoft made a deal with Constellation Energy Corp. (CEG) to restart a reactor at the infamous Three Mile Island nuclear facility.
Geopolitics and Uranium: A Supply-Demand Imbalance
But even before AI burst onto the scene, a new bull market in uranium had been underway. As the chart below shows, the uranium price rocketed higher immediately after the invasion of Ukraine, then continued soaring to a peak of $106/pound in early 2024.
Since then, the uranium price has been retracing part of that big rally. But the identical factors that powered the initial phase of the uranium bull market are intensifying. For starters, the structural supply deficit in the uranium market is widening.
According to the World Nuclear Association, the mined supply of uranium provides only three quarters of the fuel the global nuclear industry consumes each year. The remaining 25% comes from “secondary” supplies like ex-military weapons-grade uranium and the stockpiles at nuclear power facilities.
Since the secondary-supply data are somewhat opaque, the true supply deficit is difficult to quantify. That said, most industry insiders believe secondary supplies have fallen significantly over recent years, making mined supply a more important influence over the uranium price.
For example, the managers of the Sprott Physical Uranium Trust (SRUUF) stated, “We firmly believe the era of destocking is over, and utilities are likely to buy more uranium for supply security.” Lending credence to that assertion, U.S. nuclear plants boosted their uranium purchases by 27% in 2023.
Secondly, Russian uranium is starting to disappear from the supply chains of the Western world. That’s a big deal, as Russia has been supplying about 12% percent of the uranium U.S. nuclear utilities require each year.
From the moment Russia invaded Ukraine in February 2022, Western governments have been attempting to end reliance on Russian uranium and fuel services. For example, the Prohibiting Russian Uranium Imports Act took full effect in August 2024. This new legislation bans the importation of Russian-sourced enriched uranium into the U.S.
Lastly, the flow of uranium from Kazatomprom, the world’s largest producer, is falling short of expectations. Also in August 2024, the Kazakhstan state-owned uranium miner surprised industry observers when it announced it would produce 25,000 tons to 26,500 tons of uranium in 2025 – down significantly from its prior forecast of 30,500 to 31,500 tons.
Since U.S. nuclear utilities source about 25% of their uranium from Kazakhstan, a supply shortfall could add upward pressure to uranium, especially because the U.S. has close-to-zero uranium production of its own.
The image below shows the U.S. uranium concentrate (U308) production from 2000 to the first quarter in fiscal year 2023.
Meanwhile, on the demand side of the uranium market, most trends are also pointing to rising prices. The worldwide nuclear energy industry is entering a new growth phase. Although the worldwide tally of operating nuclear reactors has been hovering around the 430-level for three decades, a construction boom is underway. Sixty-two reactors are currently under construction globally, with another 92 on the drawing board.
Because of this construction activity, the International Atomic Energy Agency just boosted its annual projection for nuclear power for a fourth successive year. The Agency now expects global nuclear capacity to increase 2.5-fold by 2050.
The uranium mining industry is not prepared to accommodate growth of that magnitude. Cameco Corp. (CCJ), the largest uranium miner in the Western world, plans to boost output by nearly 5 million lbs. But that increase would barely compensate for the “lost production” from Kazakhstan.
A handful of smaller mining companies are planning to open uranium mining operations over the next few years. But these efforts will not add significant volumes to the market. U.S.-based Uranium Energy Corp. (UEC), for example, opened a uranium-production facility in August that has a licensed production capacity of just 2.5 million pounds.
Bottom line: A major supply-demand imbalance is developing in the uranium market, and it will likely push uranium prices significantly higher. Furthermore, because this imbalance traces its roots to both major geopolitical forces and major geological constraints, lofty prices could become the “new normal” in the uranium market.
To capitalize on that potential, I recommend buying the Global X Uranium ETF (URA). This $3.3 billion ETF holds a broad portfolio of uranium companies – both those that are currently producing, and those that hope to being producing in the future.
Canada’s Cameco Corp. (CCJ) is URA’s largest position, representing 23% of the portfolio. As the largest North American uranium miner, Cameco produces nearly 20% of the world’s mined uranium, either from its own operations in Canada or from its share of joint ventures.
The Sprott Physical Uranium Trust (SRUUF) is the ETF’s second-largest position, representing nearly 10% of the portfolio. As its name implies, SRUUF is a fund that stockpiles physical uranium. The fund has accumulated a surprising large inventory that totals 65.6 million pounds of U3O8 and is currently worth $5.4 billion.
Rounding out the top four positions of URA, we find NexGen Energy Ltd. (NXE) at 6.4% of the fund and Uranium Energy Corp. (UEC) at 5%.
As companies like Cameco boost production, and companies like NexGen and UEC advance their North American projects into production, the uranium industry should enter a new era of prosperity. Additionally, the new, high-profile demand for nuclear power from the tech industry could accelerate the industry’s growth and profitability.
2025 Stock No. 4: Coupang Inc.
Coupang Inc. (CPNG) may not be a household name here in the United States, but the company is well known in every Korean household. Coupang is Korea’s go-to provider of Amazon-like services.
The company’s founder, Bom Suk Kim, dropped out of Harvard Business School 14 years ago to return to Korea and launch his Amazon-wanna-be company. This ambition did not come cheap. He attracted billions of investment dollars from venture capital firms like Softbank Group and Sequoia Capital to build an end-to-end e-commerce and logistics infrastructure throughout Korea.
In 2015, SoftBank invested $1 billion in Kim’s start-up company, which made Coupang Korea’s first “unicorn” – i.e., a private company worth more than $1 billion. Softbank injected another $2 billion into Coupang in late 2018.
Thanks to early investments like these, Coupang has become the dominant e-commerce retailer in Korea. Its core business, Rocket Delivery, delivers 99% of its orders within 24 hours. This service also offers same-day delivery for many products.
In addition to this core business, Coupang also runs a takeout delivery business called Coupang Eats and an online grocery delivery business called Rocket Fresh.
Even though Rocket Fresh has already become Korea’s largest online grocer, it continues to grow rapidly. In the first quarter of fiscal year 2024, its delivery volume surged 70% year-over-year.
The company also provides a range of ancillary services, like Coupang Play, which allows customers to live-stream movies and sporting events, and Coupang Pay, which provides seamless payment processing across all Coupang services.
The company has been growing rapidly over the last several years, as it has expanded its dominance and improved its profitability. But its share price tells a different story.
Coupang came public in 2021 in an IPO priced at $35 a share. The stock nearly doubled on its first trading day, but has been drifting lower ever since. In February of 2024, the stock hit an all-time low of $13.50 a share, despite the fact that the company posted 18% revenue growth in 2023 and generated $1.75 billion in free cash flow.
For perspective, the company’s 2022 free cash flow was negative. Coupang also boasts a rock-solid balance sheet that features $1.6 billion in net cash. Because Coupang has reached the critical inflection point from negative free cash flow to positive flow, it gains the ability to expand its market share, both through acquisitions and targeted investments in foreign markets.
The company is pursuing both of these initiatives.
Coupang Expands Its Empire
Coupang purchased Farfetch in 2024, an e-commerce company focused on luxury clothing and beauty products. This acquisition expands Coupang footprint, both demographically and geographically. The London-based Farfetch sells its high-end products primarily to customers in the U.S. and Europe.
In addition to this diversification, Coupang is making a big push into the Taiwan e-commerce market and is making plans to expand into other regional markets.
Coupang is also investigating and testing ways to enhance its businesses with AI technologies.
As Kim explained on the company’s first quarter 2024 earnings call…
Machine-learning and AI continues to be – have been a core part of our strategy. We’ve deployed them in many facets of our business from supply chain management to same-day logistics.
We’re also seeing tremendous potential with large language models in a number of areas from search and ads to catalogue and operations among others. There is exciting potential for AI that we see and we see opportunities for it to contribute even more significantly to our business. But like any investment we make, we’ll test and iterate and then invest further only in the cases where we see the greatest potential for return.
Kim’s interest in AI and other cutting-edge technologies is not a new focus. Coupang’s e-commerce platform already utilizes AI and advanced robotics. Additionally, as of 2022, Coupang had 1,362 patents for its technology-enabled supply chain.
Although the company’s growth rate will likely slow as it becomes larger, Kim emphasizes that Coupang has captured only a “single-digit share” of the $560 billion Korean retail market “and an even smaller share of Taiwan’s.”
“We remain as energized as ever,” he says, “to transform the lives of every customer and stakeholder we touch to create a world where everyone wonders, ‘How did I ever live without Coupang?’”
After a slight earnings dip in 2024, the company is on track to post earnings of about $0.87 in 2025 and $0.95 in 2026. At that level of profitability, the stock is selling for 27 times 2025 earnings and 25 times 2026.
On the surface, these valuations are not classically cheap. However, it bears remembering that fast-growing companies like Coupang often command premium valuation multiples.
During Amazon’s first 10 years of profitable operations, from 2001 to 2010, its valuation averaged 78 times earnings, and never traded for less than 30 times earnings during that entire decade.
As Coupang expands its empire, and its earnings continue ramping higher, I expect its share price to post solid market-beating gains for many years.
2025 Stock No. 5: PayPal Holdings Inc.
PayPal Holdings Inc. (PYPL) is a titan of the digital payments industry.
The company traces its history to the year 2000, when Elon Musk merged his online bank, X.com, with Peter Thiel’s software company, Confinity, to form PayPal. The merged entity started spinning gold almost immediately for Musk and Thiel, as the inventive pair sold the company to eBay just two years later for $1.5 billion.
Then in 2015, eBay spun out PayPal as a separately traded company, which it has remained ever since. (Interestingly, 2015 was also the year that Musk and Thiel partnered up again to form OpenAI, the company that would go on to create the AI sensation, ChatGPT.)
During the last several years, the tally of active accounts on PayPal’s platform has swelled 63% to 435 million, while the annual volume of processed payments on its platform has doubled to a whopping $1.37 trillion.
PayPal’s dominant position in the “branded checkout” segment has powered most of that growth. The “PayPal/Venmo” checkout button you might see when shopping online is an example of that business. 80% of the top 1,500 retailers in North America and Europe feature PayPal in their digital wallets.
But PayPal is not taking its success for granted. The company is fortifying its market leadership by integrating leading-edge AI and machine-learning processes into key aspects of its operations. For example, the company uses AI to detect fraudulent transactions and to boost the approval rate of valid transactions.
Buy Now, Pay Later
PayPal’s growth strategy relies on three key initiatives…
- Strengthening its core “branded checkout” solution…
- Growing its “unbranded checkout” solution…
- And developing and integrating AI processes that increase merchant sales, boost customer “stickiness,” and/or reduce operating expenses.
Branded Checkout is the foundation of PayPal’s business because of its high-margin fee structure. This business segment accounts for about one-third of the Total Payment Volumes (TPVs) the company processes, but it produces more than half of its total revenues.
PayPal is the market leader in branded online checkout with 35 million merchants on that platform. Although the company does not possess the commanding 99% merchant acceptance rate of legacy credit card companies like American Express and Mastercard, it has the largest acceptance rate of any “alternative payment method” (APM) provider. This category of payment solutions includes direct debit transactions, prepaid debit cards, and eWallets like PayPal, Venmo, Google Pay, and Apple Pay.
In 2020, PayPal launched a new “Buy Now, Pay Later” (BNPL) feature to bolster the appeal of its branded checkout offering.
This credit facility is similar to what established BNPL players like Klarna, Afterpay, and Affirm offer an immediate opportunity for shoppers to finance an online or in-store purchase at the point of sale.
Despite the brief operating history of PayPal’s BNPL offering, it has made rapid strides. Since launching BNPL, PayPal has issued loans to nearly 30 million customers. In 2022 alone, PayPal processed more than $20 billion of BNPL loans – up 160% from the prior year.
PayPal’s momentum in this market should propel it to undisputed leadership… and that’s no small matter in a sector that is growing as rapidly as BNPL consumerism.
BNPL-financed transactions now account for more than $300 billion in transactions worldwide.
Importantly, this category of transaction delivers an outsized benefit to merchants. PayPal customers who adopt BNPL solutions spend 30% more through PayPal than those who do not.
As PayPal attempts to expand its presence in the BNPL market, it will benefit from one major competitive advantage. The company has preexisting relationships with a huge swathe of the target market – both the merchants and the individual consumers.
Unlike its competitors, which must win new business to establish a BNPL relationship with a merchant, PayPal can deliver BNPL capabilities as a “bolt-on” to an existing relationship.
PayPal simply incorporates BNPL functionality into the existing checkout protocol. It is not a “new sale.” PayPal added BNPL capabilities to its existing relationship with Microsoft. Online shoppers at Microsoft’s Xbox Store can now access BNPL if they wish.
As CEO Dan Schulman explained…
Buy Now Pay Later continues to provide meaningful value to both our consumers and merchants. Over 32 million consumers have used our Buy Now Pay Later service since inception, at nearly 3 million merchants. We are now one of the most popular Buy Now, Pay Later services in the world… growing at 70% [year-over-year] on a currency-neutral basis.
Prudently, PayPal is working to “externalize” these loans by selling them to a third party, rather than retaining them on their own balance sheet. By selling the loans, PayPal removes the risk of holding bad loans.
The company took a giant step forward toward achieving that goal when it struck a deal to sell up to €40 billion of BNPL loans to the global investment firm KKR.
Under the terms of the agreement, KKR acquired PayPal’s existing European BNPL portfolio, along with future originations of eligible BNPL loans. PayPal will continue to conduct all the customer-facing activities of the loans, including underwriting and servicing.
This major transaction not only removes a large dollop of credit risk from PayPal’s balance sheet, but it also frees up capital to accelerate BNPL originations in Europe and/or to conduct shareholder-friendly activities like buying back stock.
PayPal expects to generate about $1.8 billion in net proceeds from this transaction and states that it will use a portion of the proceeds to boost its 2023 share repurchase program to $5 billion. In 2022, the company repurchased $4 billion in stock, which reduced the share count by about 3%.
Paving the Way
In addition to fortifying its leadership position in branded checkout, PayPal is expanding in the rapidly growing Unbranded Checkout segment.
The company refers to this solution as the PayPal Complete Payments (PPCP) platform, and it opens the door to a vast, new opportunity. Because this solution primarily serves small to mid-sized businesses, the total market opportunity is enormous. PayPal estimates the Total Addressable Market (TAM) to be roughly $750 billion.
The PPCP platform enables small businesses to accept credit cards and digital wallets as well as a range of Venmo and PayPal services. In April of 2023, PayPal gave this platform a major upgrade by adding Apple Pay to it.
That means that small businesses using PayPal as the backend for their payment processing can now accept Apple Pay alongside various other popular payment options.
Additionally, PayPal merchants can use their iPhone as a mobile point of sale terminal without the need for a dongle or other accessory device. Apple launched the technology in February of 2022.
CEO Schulman says that growing the unbranded checkout business has become a “strategic imperative” for PayPal – not just because it adds incremental revenue but also because it broadens and deepens customer relationships.
These expanded relationships produce vast troves of data that can fuel future AI enhancements.
2025 Stock No. 6: Dutch Bros. Inc.
If you live in the Pacific Northwest, you probably know this company and have frequented one of Dutch Bros. Inc (BROS) drive-thru coffee kiosks. If you live anywhere else in the U.S., you probably haven’t… but you will.
This Starbucks-like juggernaut from Grants Pass, Oregon got its start in 1992 when a couple of brothers opened an espresso-vending pushcart down by the railroad tracks in the downtown area.
Since then, it has grown to nearly 900 stores across 17 states. But the company’s new CEO, Christine Baron, a former VP from Starbucks Corp. (SBUX), has plans to expand the company’s U.S. footprint to more than 4,000 stores over the next 10 years.
If you read a Reddit message board about this company, or talk to anyone who frequents one of its stores, you realize quickly that Dutch Bros. is not merely a place to buy coffee to go; it is a destination.
Its product offerings and overall vibe elicit the same sort of cult-like devotion that Chick-Fil-A or In-N-Out do.
Dutch Bros. is especially popular with the Millennials and Gen-Zers who tend to buy highly customized, sweet coffee drinks, and/or energy drinks. The company offers a wide array of both, including the company’s own “signature” energy drink called “Rebel.”
The company’s formula for success is definitely working. As the chart below shows, its same-store sales have been trending sharply higher, while Starbucks’ have been sliding lower.
In fact, many high-profile companies in the Quick-Serve Restaurant (QSP) space are suffering from declining or sluggish sales trends.
Looking ahead, Dutch Bros. will pull two main levers to generate rapid growth…
- Expansion. This process is already well underway. The company has opened at least 30 new stores each quarter, for 11-straight quarters. In the first quarter 2024, it ramped that tally to 45 new stores, including its first-ever openings in Florida.
- Mobile ordering. Incredibly, mobile ordering has not been part of the Dutch Bros. growth story. Instead, it generates about 90% of sales from “old-school” drive-through or walk-up ordering. The company added mobile order-ahead functionality to its app in 2024, which sets the stage for a potential sales boost per unit.
Every decade, a “magical” restaurant-based firm seems to appear. McDonald’s… Starbucks… Subway… Panda Express… these brands seem to grow like wildfire.
On the fundamental level, popular food service companies succeed simply because people like the product. People will drive for miles for the food. And don’t you dare criticize any of these popular restaurants in front of their fans.
But there’s also a financial reason why these firms grow so quickly: cash flow.
By bringing in more customers and generating higher profits per store, these stores often break even faster than competitors. Theoretically, that means popular chains can double their footprint every couple of years by simply channeling its internal cash flow to build new stores, which generates more cash flow. Two stores turn into four… which turn into eight… 16… and so on.
It’s why companies like Panda Express expanded so quickly without ever going public or taking on franchises. Chain restaurants are simply great businesses if the economics are right.
Dutch Bros. takes that truth to the next level.
On the fundamental side, we’ve already talked about how people simply love Dutch Bros. The drive-through coffee shop has a cult-like following, and its stores are a destination, not just a place for caffeine.
Then there’s the financial story.
Dutch Bros. has a phenomenal business model because it is even more capital-light than rivals. As a drive-through coffeeshop, the firm has no hot kitchen, no public bathrooms, and no inside seating area. According to third-party estimates, startup costs per location can be as low as $150,000 – less than half of the cheapest strip mall Burger Kings.
Meanwhile, each location is a profit-spinning machine. In the second quarter of 2024, the average corporate store (which includes newly-constructed ones) added $149,000 in quarterly gross contribution. The company does not publish cash-on-cash returns, but even rough back-of-envelop calculations suggest that new locations are breaking even in under three years.
The result is a multi-bagger opportunity hiding in plain sight. Dutch Bros. plans to increase its store footprint by 27% in 2025, and will do so with a combination of existing cash flows and cash-from a $150 million debt issuance in the first quarter. Similar internally-driven growth rates could arise going forward, which means Dutch Bros. will grow exponentially until it finally saturates its relevant markets, perhaps sometime in the 2030s.
2025 Stock No. 7: HPQ Inc.
Although the upgrade cycle from legacy PCs to AI PCs is underway, it is just getting started. That’s because most AI PC models are so new that they are not yet for sale in the marketplace.
Once this new AI hardware finally arrives, it will require AI software as well.
That’s part of the reason why the early part of this boom is producing a windfall for companies like Dell Technologies Inc. (DELL) that do have access to AI chips. Dell primarily uses chips from Nvidia.
Dell has a first-mover advantage. But the second-movers of the AI PC upgrade cycle should also profit handsomely, as the cycle gains momentum and their product offerings come to market.
One of those movers is HP Inc. (HPQ)
Let’s take a look at the big picture.
PC sales have been fairly dismal for most of the last few years. Unit shipments fell 16.6% in 2022 and another 13.8% in 2023. But in the final quarter of 2023, sales inched 3.3% higher.
IT research firm Canalys believes this modest uptick is a sign of things to come. It expects the personal computer market in the U.S. to grow about 10% in 2025, thanks to the coming AI PC boom and the transition to Windows 11.
As the Canalys researchers explained…
With the anticipated release of AI-enhanced features in the latest version of Windows by late 2024 and the widespread integration of AI tools in commercial and productivity software, the AI-capable PC market is set for substantial growth in 2025 and 2026. By 2027, shipments are forecasted to exceed 175 million units, constituting over 60% of total PC shipments. Between now and then, this sector is set to rise at a compound annual growth rate (CAGR) of 64%.
Looking further down the road, roughly 1.5 billion legacy PCs are in existence today. Gradually, AI PCs will replace almost all of them.
“Hallelujah to this category [of PCs],” said President Alex Cho, of Hewlett Packard’s Personal Systems unit. “While you can run AI models in the cloud, there will be distinct value and opportunity in running AI models locally on the PC because of the unique benefits around cost, privacy and overall performance and personalization.”
By reputation, HP is an “old school” PC and peripherals company. Enterprise and consumer PCs account for about two-thirds of total revenues, while printers and printing supplies account for the other third.
Even though the company remains a technological leader, its stock does not receive the same level of affection from investors as stocks like DELL do. Both companies sell a nearly identical number of PCs per year – about 53 million.
And yet, Dell’s $80 billion market cap is nearly triple HP’s. This striking disconnect is presenting a buying opportunity.
As HP begins capitalizing on its second-mover status by shipping its AI PC offering, its single-digit multiple should begin to expand into double-digits.
Already, the company is showing signs of improvement. Although total revenues slipped 4% during the first quarter of 2024, that rate of revenue decline continued a trend of shrinking revenue declines. The prior three quarters saw revenues drop 22%, 10%, and 6% in succession.
Importantly, HP also gained PC market share in the fourth quarter of 2023, both year-over-year and quarter-over-quarter. These modest achievements are setting the stage for what could be a new long-term growth phase for HP, powered by AI PC sales.
But HP CEO Enrique Lores cautioned that its AI PC sales would not really hit their stride until late 2024. The “growth is going to be gradual,” he said.
David Einhorn disclosed he is buying HP shares. Explaining his found enthusiasm for the stock, Einhorn wrote…
The more exciting opportunity is through a possible AI-driven PC adoption cycle, fueling higher unit prices and a more robust PC market recovery. While we have spoken with experts that are divided between being enthusiastic and skeptical on the AI PC cycle, we don’t believe any of the optimism is currently reflected in the share price.
So, HP should benefit from the PC upgrade cycle, as both its product offerings enter the marketplace and as the AI PC boom gains additional traction.
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