Is It Too Late to Invest in the S&P 500's 3 Hottest Stocks This Year?

Concerns about a potential bear market appear to be greatly eased, at least for now. The S&P 500 (SNPINDEX: ^GSPC) is no longer in the midst of a crash, and instead, it's actually been rallying in recent weeks. And as of the end of last week, the major index was in positive territory for the year, now up a modest 1%.

Three of the hottest stocks in the index are NRG Energy (NYSE: NRG), Palantir Technologies (NASDAQ: PLTR), and Uber Technologies (NYSE: UBER). They are all up more than 50% this year. But have these stocks gotten too hot and too expensive to invest in? Or should you consider adding them to your portfolio?

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1. NRG Energy: Up 76%

The top-performing stock on the S&P 500 entering trading this week is NRG Energy, an energy company whose share prices have rallied by over 76%. It was having a solid year of 30% gains in early May, but what really lit a fire under its valuation was news that the company would be acquiring natural gas generation facilities from LS Power. It says that by doing so, this will double its generating capacity. The day of the announcement, on May 12, shares of NRG closed at $150.61 -- up 26% from the previous day's close.

Also on May 12, the company released its first-quarter earnings numbers, which showed strong growth, as CEO Larry Coben said that "every part of our organization operated at a high level to meet customer and market needs amid the backdrop of increasing power demand."

As companies invest heavily in artificial intelligence (AI) and their energy needs rise, a company such as NRG is in a great position to benefit. Through the first three months of the year, the company's revenue totaled $8.6 billion and rose by 16% year over year. Net income of $750 million also jumped by 47%.

Shares of NRG Energy trade at around 25 times its trailing earnings, which is a bit of an expensive price for an energy stock. However, this could make for a good long-term position to hold, given the ongoing need for more energy due to AI.

While it's not the cheapest stock to own, if you're willing to be patient, NRG can make for a good long-term investment. And while you wait, it also offers a modest dividend that yields 1.1%.

2. Palantir Technologies: Up 71%

One of the hottest AI stocks is undoubtedly Palantir. The company is reporting strong growth as its data analytics business leverages AI to add more value for its customers, which includes both government and commercial businesses.

On May 5, Palantir reported Q1 earnings that showed impressive 39% year-over-year revenue growth through the first three months of the year, with sales totaling $883.9 million. And its margins looked strong, with net income totaling $214 million. The company projects that its full-year revenue will total around $3.9 billion, which is a considerable improvement from the $2.9 billion it posted in 2024.

Strong ties to the government and a growing AI business are a couple of key reasons why investors have remained bullish on the stock. But heading into this week, its valuation continues to look more and more obscene, with the stock now trading at 560 times its trailing profits. Although it's been a hot buy, investors may want to look at other AI stocks instead; at such a high valuation, Palantir looks overdue for a steep correction.

3. Uber Technologies: Up 52%

Rounding out this list of top-performing S&P 500 stocks this year is Uber Technologies. The ridesharing stock is up 52% thus far in 2025 (as of Friday's close). And it also recently posted its updated financial results.

For the period ending March 31, Uber's gross bookings rose by 14%, and that rises to 18% when you factor out foreign exchange. Revenue totaled $11.5 billion for the period, and Uber's operating profit soared from just $172 million a year ago to $1.2 billion this past quarter. Its solid financials, asset-light model, and strong position in the market are why I think it's the type of stock that would be suitable for Warren Buffett and other long-term investors.

Uber still has many growth opportunities ahead, and investors may be overestimating the threat from driverless vehicles. The reality is that Uber has a flexible and versatile business that can easily grow in many parts of the world, which won't be nearly as easy for self-driving cars. I love its efficiency, and while the stock has been hot this year, it may still not be too late to invest in the business. Uber currently trades at 16 times its trailing earnings.

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David Jagielski has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Palantir Technologies and Uber Technologies. The Motley Fool has a disclosure policy.