New Year, New Ideas

 

2025 – A Look Back

After a brief hiatus during the holiday season, I’m back and ready to share my thoughts on the year ahead — the themes I’m watching, the companies on my radar, and where I believe opportunity may emerge in 2026. But before we look forward, it’s worth revisiting 2025, a year that proved to be one of the most fascinating markets I’ve traded since the COVID‑19 era.

The first half of 2025 brought us to the edge of a bear market, largely driven by the tariff policies introduced by President Donald Trump. Many argued that American exceptionalism was fading and that capital would begin flowing out of the U.S. economy. Globalism, some said, had been taken out back and put to rest. Concerns mounted that consumers and businesses would shoulder the burden of these new trade policies.

Yet despite the pessimism, the market shrugged off the gloom. By summer, an epic rally was underway — one that carried through the fall and ultimately defined the year.

The Rise of A.I. and the New Industrial Revolution

If tariffs dominated the first half of the year, Artificial Intelligence dominated the rest. Businesses, governments, and markets collectively declared that the next industrial revolution had arrived. Capital expenditure spending surged to levels we’ve never seen before, with hundreds of billions committed to A.I. infrastructure and enterprise adoption.

Chipmakers, utilities, and classical infrastructure companies all benefited. Major indices strengthened, GDP growth surprised to the upside, and A.I. cemented itself as the defining investment theme for the foreseeable future.

Other Key Themes of 2025

• Labor Market: The job market entered what many called a “no hire, no fire” phase. I watched this closely in 2025 and will continue to do so in 2026, especially as A.I. adoption accelerates and reshapes labor dynamics.

• Interest Rates & Housing: The Federal Reserve cut rates three times, bringing mortgage rates down modestly. But affordability remained strained, and the real estate market stayed sluggish — more sellers than buyers for the first time since the pandemic.

• Cryptocurrency: Bitcoin, Ethereum, and other major tokens hit all‑time highs before ending the year lower. Still, 2025 was arguably the most important year yet for mainstream crypto adoption. Regulatory clarity improved, and legacy financial institutions rolled out crypto ETFs and related products.

• Consumers & Consumer Stocks: One of the quieter but more important stories of 2025 was the pressure on the consumer. Higher prices, elevated borrowing costs, and stagnant wage growth weighed on spending. As a result, many of the market’s strongest consumer‑oriented names — Nike, Chipotle, Target, Costco, Lululemon, and others — struggled. This weakness was broad and persistent, and it created a noticeable drag on several sectors. But this is also where I see potential opportunity in 2026. Consumer sentiment doesn’t need to surge for these names to rebound — it simply needs to stabilize. With rate cuts beginning to filter through the economy and inflation cooling, I believe the consumer could quietly strengthen as the year progresses.

In short, 2025 was volatile, surprising, and ultimately rewarding. It was a record year for me personally, and many investors found success. More importantly, the year revealed several themes that I believe will drive opportunity in 2026.

As always, before we dive in, let me remind everyone that I am not a financial advisor. Nothing should be taken as advice, nor am I making a recommendation of any of the securities discussed. I am simply sharing my thoughts and providing education. You should do your own research or consult with a financial advisor before making investment decisions.

The Next Legs of the A.I. Trade

As we enter 2026, one of my top priorities is identifying the next phases of A.I. investment. The first phase — the infrastructure phase — was dominated by NVIDIA, AMD, Palantir, and alternative energy names like Oklo. This was the “get A.I. up and running” stage.

But that was only the beginning.

1. The Data Center Buildout — and the Energy Bottleneck

One of the most important developments of 2025 was the explosive growth of A.I. data centers. These facilities require staggering amounts of reliable energy, and that demand is only increasing. Utilities and alternative energy stocks benefited early in 2025, but many pulled back toward year‑end. The bottleneck, however, has not eased — it’s intensifying.

This is where I see significant opportunity in 2026.

IREN Energy — High Potential, Real Execution Risk

IREN is a name I own and one I believe is well‑positioned. They own the land, build the data centers, provide the infrastructure, and supply the energy. With several gigawatts of capacity ready to come online — and a $9.7 billion agreement already signed with Microsoft — IREN could be at the forefront of the next A.I. buildout wave.

But the risks are real. IREN must execute flawlessly on its grid‑connected buildout. Any delays, cost overruns, or regulatory hurdles could materially impact the company’s trajectory. Their valuation already reflects high expectations, and the market will not be forgiving if execution slips.

Fermi America — A High‑Risk, High‑Reward Moonshot

Fermi America is a startup with enormous potential — and enormous risk. Their plan: build an 11‑gigawatt data center campus, roughly four times IREN’s current capacity. They expect the full buildout to take 4–5 years, but aim to have 1 gigawatt operational in 2026.

If they hit that milestone and attract major customers, the credibility boost alone could be transformative.

But this is a high‑risk, high‑reward play. Fermi has no proven track record of delivering infrastructure at this scale. The capital requirements are massive. The timeline is aggressive. And the company’s current $5 billion market cap already prices in meaningful success. If they fail to deliver that first gigawatt on time — or fail to land a major customer — the downside could be significant.

2. Cybersecurity — Expensive but Unavoidable

As more data is created, stored, and analyzed through A.I., cybersecurity becomes mission‑critical. The sector is expensive, but the long‑term bull case is strong. I plan to spend meaningful time researching this space in 2026 and will share names as I develop them.

3. A.I. Software — The Next Wave of Adoption

2025 was the year of hardware. 2026 may be the year of software.

Some investors wrote off software companies, fearing that ChatGPT and other LLMs would dominate the landscape. I don’t believe that’s the case. High‑quality software companies are building tools that will meaningfully improve productivity for individuals and enterprises.

One name I’m watching is Adobe. Once a market darling, Adobe fell out of favor during the LLM hype cycle. But their A.I. products appear strong, and I believe they could surprise to the upside.

The risk: Adobe must prove that its A.I. tools drive real enterprise value — not just marketing buzz. If adoption is slower than expected, the stock may remain range‑bound.

A Few Non‑A.I. Ideas to Start the Year

If you’re tired of hearing about A.I., here are a few names outside the space that I’m watching — all tied to a broader theme that quietly defined 2025 and may set up opportunity in 2026.

Consumer Stocks — A Rough 2025, but a Setup for Recovery

One of the most important but under‑discussed stories of 2025 was the pressure on the consumer. Higher prices, elevated borrowing costs, and stagnant wage growth weighed heavily on spending. As a result, many of the market’s strongest consumer‑oriented names — Nike, Chipotle, Target, Costco, Lululemon, and others — struggled throughout the year.

This weakness was broad and persistent, and it created a noticeable drag on several sectors.

But this is also where I see potential opportunity in 2026. Consumer sentiment doesn’t need to surge for these names to rebound — it simply needs to stabilize. With rate cuts beginning to filter through the economy and inflation cooling, I believe the consumer could quietly strengthen as the year progresses. Even modest improvement could be enough to drive meaningful upside in several of these names.

Nike — A Turnaround With Tariff Headwinds

Nike is navigating a turnaround while working through tariff‑related challenges. I own Nike and believe it has long‑term potential, but the company must execute on product, brand, and supply chain improvements. If the turnaround stalls, the stock could remain under pressure.

Sezzle — Cheap, Growing, and Still Risky

Sezzle operates in the Buy‑Now‑Pay‑Later space, offering flexibility to lower‑income consumers who still want to spend. Trading at 19x trailing and 14x forward earnings, it’s cheap relative to peers Affirm and Klarna.

But the risks are meaningful. Sezzle serves a more credit‑sensitive customer base. If the lower‑end consumer weakens further, defaults could rise. Competition from larger players remains intense. And while fundamentals are strong today, the BNPL space is notoriously cyclical.

If they continue to execute and gain share, the stock could outperform — but investors should be prepared for volatility.

Conclusion

I’m excited to get back to work in the new year and continue striving to outperform the market. The ideas above are just a starting point — not an exhaustive list. The beauty of investing is that opportunity is everywhere for those willing to do the work.

If you’ve ever considered trying to outperform the market, 2026 is as good a time as any to start. Watch the market with purpose. Do your own research. Develop your own theses. Test them. Refine them. It’s not easy, but it’s deeply rewarding.

Wishing everyone a successful and prosperous 2026. Stay tuned to Main Street Investor for updates throughout the year.

Cheers, Eric Patterson M.S.I.