Silicon Valley's New Reign: Why AI-Powered Tech Leads the Next Investment Cycle

Intro

The next industrial revolution isn't coming; it's here, and it's powered by Artificial Intelligence (AI). As AI moves from the laboratory to mass adoption, US Technology, particularly Silicon Valley, is positioned as the undisputed global leader in this transformative cycle. This isn't just about efficiency; it's about solving the next generation of complex problems and unlocking trillions in new economic value. We are still in the early stages of the AI Life Cycle, presenting an unprecedented, multi-year opportunity for investors who capitalize on the sector's exponential trajectory.

Analysis

A Vanguard Technology ETF (VGT) showed 23.51% growth YTD (as of December 5, 2025) compared to a standard S&P 500 ETF (SPY) which showed a 17% growth YTD for 2025 (as of December 5, 2025), leading to the thought that other sectors within the S&P 500 were more of a drag on overall growth compared to Tech. More specifically, the evolution of artificial intelligence (AI) in Silicon Valley makes technology the clear leader for growth in the US and in the World for the foreseeable future.

The AI Life Cycle

It is clear there is more to come in the life Cycle of AI. Companies continue to innovate and develop solutions to make everyone’s life more efficient. There are still more problems that can be solved by AI or for which the current AI solutions can be improved. As a result, more growth will happen in that sector.

Related Industries

As AI continues to lead the growth, there are secondary sectors that are likely to benefit from the growth. For example, more data centers are expected to continue to be built which should bring growth for real estate developers in that sector. More energy will likely be needed to power the data centers, which should trigger more growth in that sector.

Closing

While the technology sector is not without its risks—including the challenge of public acceptance, the risk of obsolescence as innovation accelerates, and the dampening effect of high interest rates on financing—the fundamental opportunities for long-term growth and substantial investor returns remain highly compelling.

Mike Germain, CFA

Chief Investment Officer

Propulsion Capital Management