In some years, a fund’s style is destiny. Value and growth stocks often drive the ranks of equity funds, with the deepest-value funds outperforming when value leads and high-octane growth names screaming ahead in growth-led rallies. That was especially true in a year like 2022, when a US-centric fund’s placement on the value-growth spectrum told you much about its returns, as high-growth names suffered the most during that year’s global equity market selloff.
Not so in 2025. Value-versus-growth mattered less. While large-growth Morningstar Category funds edged out their large-blend and large-value peers—returning around 16% on average—the gap was narrow. And value-growth tilts explained almost nothing in the mid- and small-cap tiers.
## **Cap-Weighted Champions**
Several large-cap funds run by Capital Group thrived. American Funds American Mutual bet on Broadcom and Eli Lilly, which gained more than 50% and 40%, respectively. Its aerospace picks, RTX and GE Aerospace, also took flight. American Funds Washington Mutual owned those too, plus a stake in Nvidia.
T. Rowe Price Blue Chip Growth, with as much as three-quarters of its assets in mega-caps—including a hefty 16% in Nvidia—landed in the top third of the large-growth category.
## **The Chip Effect**
As the world scrambled to build out infrastructure for artificial intelligence, semiconductor stocks like KLA, Micron, and Taiwan Semiconductor delivered windfalls, in addition to Nvidia and Broadcom. In the Morningstar Large-Mid Index, semiconductors gained over 45% and were the biggest contributor to its overall return.
## **AI Arms Race Crosses Cap Lines**
The AI boom didn’t stop at large caps. Managers across the market-cap spectrum had to think hard about how to play it.
In mid-caps, Parnassus Mid-Cap and Victory Pioneer Select Mid Cap Growth made savvy bets on SanDisk and Western Digital—both data storage suppliers vital to AI infrastructure. Their allocations (at one point, up to 4% of assets combined) helped them beat four-fifths of their category peers. Both also held semiconductors.
## **The Reward for Risk**
Risk was in vogue in 2025, and the funds that chased it were rewarded. The Invesco S&P 500 High Beta ETF jumped over 30%. Funds that stuck to more cautious or low-volatility strategies, such as Boston Trust Walden Small Cap and Calvert Equity, struggled.
AI skeptics found themselves on the wrong side of history. But those who leaned in, with a willingness to take on more risk, were handsomely rewarded. This was a year when a fund’s ability to adapt and take bold bets was crucial to success.
The data is clear: in 2025, bigger was better, and those who rode the wave of artificial intelligence and semiconductors were the ones who truly excelled. As we look to the future, one thing is certain: a fund’s ability to navigate the ever-changing landscape of the markets will continue to be a key factor in its success.
In a year where value and growth stocks often drove equity funds, 2025 was a stark exception. While style and trend often dictate success in the markets, 2025 was a year when exposure to size, the artificial intelligence infrastructure buildout, and a willingness to lean into risk mattered most. The funds that thrived were those that could adapt and take bold bets. And it’s clear that those who can navigate the ever-changing landscape of the markets will continue to be the ones who truly excel.
The year 2025 was one for the record books, with a focus on artificial intelligence and semiconductors leading the charge. And while the funds that made bold bets in these areas were the ones who truly excelled, it’s clear that a willingness to take on more risk was the key to success. As we look to the future, one thing is certain: a fund’s ability to adapt and navigate the ever-changing landscape of the markets will continue to be crucial to its success.
