Technology remained the undisputed engine room of global markets in 2025, but the story has evolved well beyond “AI hype”. The new phase has been about execution: enormous infrastructure investment, real commercial demand, and a flurry of partnerships and chip-supply agreements that would have been unimaginable even 18 months ago. The biggest AI firms – from Nvidia to the major cloud hyper-scalers – have spent the year locking in multibillion-dollar deals for chips, power, and data-centre capacity.
The thematic has become so mainstream that even an entertainment giant, Disney, has entered the fray, last week unveiling a US$1 billion investment in Chat GPT owner OpenAI – a striking signal of how deeply AI is now influencing creative industries and commercial strategy.
The “super-cap” cohort has again dictated major index moves. Nvidia, Alphabet, Microsoft, Broadcom, Apple, Amazon and Meta collectively now account for an extraordinary share of US market capitalisation (around 30% – 35% in some indices) a concentration often cited as both a driver of performance and a potential vulnerability. While there have been periods of volatility, markets have been comfortable with it so far because earnings momentum has (mostly) kept up with share price momentum.
Trade tensions and tariff cycles, which might once have derailed risk appetite, did not knock tech off course. If anything, they underscored the strategic importance of semiconductor leadership and supply security, prompting even more capital to pour into chip supply chains, energy infrastructure, and AI-specific hardware. AI has fuelled a global investment cycle of a scale not seen since the build-out of fibre-optic networks in the 1990s – except this time demand is real, customers are paying, and data centres are running near full capacity.
Claims of an “AI bubble” were regularly (and continue to be) made during 2025. As noted previously however, the comparisons with the 1990s dot-com period are arguably unfair. Today’s tech winners are delivering both revenue and earnings at scale, something that has helped justify the stronger valuations investors have been willing to pay. We saw this throughout the year in earnings reports from the tech sector, although more recently there has been some concern about just how much the big players are spending to keep up with the AI arms race.
It is easy to forget now, but mid-year markets did experience a sharp bout of volatility on what quickly became known as “Liberation Day” – when political developments triggered a fast, emotional downturn across several global indices.
For a moment, it looked as though investors were preparing for a regime shift in policy, trade settings and global institutional relationships. Markets fell quickly, and sentiment even faster. But they also recovered quickly. Within weeks, global indices not only reclaimed the lost ground but powered to new highs. For long-term investors, this was another chapter in the textbook lesson that short-term moves driven by emotion, headlines or politics rarely dictate long-term outcomes. Investors who reacted in knee-jerk fashion locked in losses; those who stayed the course were rewarded.
Monetary policy was again a defining force in 2025. The US Federal Reserve met just last week and cut interest rates for the third time this year, a move that was widely expected but still notable for the degree of division on the committee. Several officials argued for a pause to reassess the inflation outlook, while others leaned toward establishing clearer momentum behind the easing cycle. To be fair the central bank has been dealing with a data drought because of the (now resolved) Federal government shutdown, so some “divergence” between officials is understandable.
Nonetheless during the year equity markets took central bank uncertainties in its stride, buoyed by strong earnings and the sense that global policy settings are slowly shifting from inflation-fighting to supporting growth. The European Central Bank and Bank of England grappled with similar trade-offs, each navigating softer economic indicators alongside lingering price pressures.
Outside of equity markets there were plenty of other surprises. Gold, often the market’s barometer of uncertainty, surged dramatically, rising more than 60% at one point, supported by concerns about sovereign debt, geopolitics, and inflation expectations. Silver was an even bigger story: having its strongest run in decades, with prices more than doubling so far this year, driven by industrial demand, precious-metal spillover, and renewed investor interest. Cryptocurrencies, by contrast, notably underperformed – a striking reversal of the 2020–2021 period when crypto was considered the “anti-inflation” trade. In 2025, it was old-fashioned gold, and very old-fashioned silver, that stole the show.
Although tech carried the torch once again, market breadth improved meaningfully. Several Asian and European markets outperformed the US for stretches, and global mid-cap shares performed strongly. Active managers also found greater opportunity to add value in a year where dispersion increased, consistent with longer-term research showing that the top percentile of active managers can add meaningful excess returns when market leadership broadens.
If global equities enjoyed a strong 2025, the New Zealand market was more of a slow builder – but the trajectory has turned meaningfully more positive in recent months. The Reserve Bank of New Zealand was a significant factor as it accelerated its monetary easing process, lowering the cash rate from 4.25% at the start of the year, to 2.25% by November. Lower rates helped ease pressure on many mortgage holders, support household cashflow, improve business sentiment, and lift equity valuations, especially in yield-sensitive sectors such as listed property and utilities.
The appointment of a new RBNZ Governor later in the year added another layer of market focus. Markets generally welcomed the appointment as signalling continuity in policy discipline but with a more outward-looking communication style. Against a backdrop of improving inflation data, investors grew increasingly confident that New Zealand was shifting towards a more constructive policy environment.
Signs of improvement also emerged across the corporate sector. Trading updates in the latter part of 2025 (from the likes of Freightways and Mainfreight) were noticeably more positive than earlier in the year, with companies pointing to stabilising demand, improving cost trends, and in some cases signs of a domestic recovery. Fonterra was a notable storyline, progressing along a divestment pathway designed to simplify the business and unlock capital. Some investors are also appreciating that the resulting $3.2 billion distribution to Fonterra farmers next year will have substantial “trickle down” positive impacts for the broader economy next year.
For much of 2025 the NZX50 lagged global peers, weighed down by defensive earnings profiles, limited tech exposure, and domestic economic softness. But the combination of RBNZ rate cuts, improving local macro data, and momentum returning in parts of the corporate sector helped the market close the gap late in the year. The New Zealand dollar’s weakness provided an additional tailwind, boosting the NZD value of offshore earnings for exporters and other internationally oriented companies. A weaker currency was a further tailwind for our tourism sector as well.
The year offered several investment lessons that feel worth carrying into 2026. Emotional reactions to market shocks are usually costly, as demonstrated during the Liberation Day volatility. Fundamentals, not headlines, ultimately drive returns, particularly in sectors like technology where earnings growth validated earlier optimism. Diversification continued to matter, with leadership shifting to areas such as precious metals, and eventually the New Zealand market. The AI investment boom remained real but required selectivity as infrastructure spending reshaped global supply chains. And even in a world where passive investing is popular, active thinking remained valuable as markets responded to evolving macro and sectoral forces.
Markets have navigated a host of frictions, and a regularly “evolving” landscape to deliver strong returns this year. What does 2026 have in store? We will be sharing our thoughts in the coming weeks, but if 2025 has taught us anything, it is to expect the unexpected – and stay prepared to embrace it.
Generate is a New Zealand-owned KiwiSaver and Managed Fund provider managing over $8 billion on behalf of more than 180,000 New Zealanders.
This article is intended for general information only and should not be considered financial advice. The views expressed are those of the author. All investments carry risk, and past performance is not indicative of future results.
To see Generate’s Financial Advice Provider Disclosure Statement or Product Disclosure Statement, go to www.generatewealth.co.nz/advertising-disclosures/. The issuer is Generate Investment Management Limited.
