At the start of 2024, I put a few thousand pounds into Scottish Mortgage Investment Trust (LSE: SMT). That was a good move – as I write this shortly before Christmas, the Scottish Mortgage share price is up 17% year to date versus a 4% gain for the FTSE 100 index (I’m not factoring in dividends here).
Can this growth-focused investment trust beat the Footsie again in 2025? I think so. Here’s why.
Hot themes
The reason Scottish Mortgage shares have done well in 2024 is that the investment trust provides exposure to companies that are in growth industries. I’m talking about industries such as artificial intelligence (AI), cloud computing, online shopping, space exploration, and computer chips.
I fully expect these industries to continue growing next year (which should be good for Scottish Mortgage). In most cases, these industries are projected to grow by 10% or more per year up to 2030.
One industry I’m particularly excited about is AI. Right now, we’re seeing the second phase of this technology, where companies are rolling out AI solutions that are enhancing their products and driving revenue growth.
Some companies in the Scottish Mortgage portfolio that could do well in this phase include Amazon, Shopify, and Meta Platforms (which are all in the top 10 holdings). All of these businesses are very active in the AI space and are introducing features across their product portfolios.
Growth stocks
Now, many stocks in the portfolio have done well this year. For example, Nvidia, which is currently a top 10 holding, is up 170% year to date.
I see plenty of stocks Scottish Mortgage holds with potential for gains in 2025 as well. One is Amazon. It has unperformed the other Big Tech stocks in recent years and is now playing catch-up. With earnings rising sharply, I think it could do well next year although there are no guarantees, of course.
Another stock that could do well next year is ASML. It specialises in sophisticated equipment needed to manufacture AI chips. There is some uncertainty here due to export restrictions. But if orders are strong, I think the stock could do well.
Overall, I see lots of stocks with potential for 2025. If they do well, the Scottish Mortgage share price should rise.
Anything can happen
Of course, in the stock market anything can happen in the short term. So Scottish Mortgage shares may not outperform the FTSE 100.
One factor that could cause weak performance is some profit-taking in tech shares. They’ve had a great run over the last two years so they could see a pullback.
Another is interest rates. If they were to move higher, unlisted company valuations could take a hit.
Alternatively, the FTSE 100 could have a purple patch. It hasn’t done much over the last five years, so it could experience a pop and beat the investment trust.
My money is on the Scottish Mortgage Investment Trust to beat the Footsie though. I’m expecting another year of great returns.
