JPMorgan Reveals Top Internet Stocks to Watch in 2025

Mega-cap tech giants drive growth in equity markets
The year 2024 saw major technology stocks fueling significant gains in equity markets, driven by investor optimism around the transformative potential of artificial intelligence (AI). This momentum has placed a spotlight on how these companies plan to invest in AI innovation and turn it into a source of long-term revenue.

AI spending remains a top priority
According to analysts, some of the biggest tech players, often referred to as the "Magnificent Seven," are allocating substantial budgets to AI development. In a report from October, experts noted these companies are adopting "essentially unlimited budgets for AI expenditure," reflecting their commitment to advancing this game-changing technology.

AI investment to boost US economic growth
JPMorgan analysts estimate that robust spending on data centres – the backbone of AI computing – could add 10 to 20 basis points to US economic growth between 2025 and 2026. This highlights the ripple effects of AI investments beyond the tech sector.

Key companies set to lead the AI charge
In a recent note to clients, JPMorgan identified three major players poised to dominate the AI landscape: Amazon, Alphabet (Google’s parent company), and Meta (Facebook’s parent company). Combined, these tech giants are expected to spend a staggering $223 billion on AI development in 2025.

The analysts emphasised the importance of these companies showcasing "early returns" on their investments, shifting the narrative from development to monetisation. While Alphabet and Amazon are projected to achieve margin growth and robust free cash flow in 2025, Meta’s outlook appears "more muted." Nevertheless, all three companies made JPMorgan’s "top picks" list for the internet sector.

Sector Outlook for 2025
Overall, JPMorgan analysts maintain a positive outlook for the internet sector as they anticipate strong results heading into fourth-quarter 2024 earnings. However, they cautioned about challenges such as tougher year-on-year comparisons, foreign exchange fluctuations, and a general slowdown in growth compared to 2024.

Ad-dependent firms face hurdles in early 2025
Companies heavily reliant on digital advertising, such as Pinterest, Snap, and online travel agencies like Booking, Airbnb, and Expedia, may face significant headwinds entering 2025. Analysts described these businesses as having the "toughest setups" for the first quarter.

(Sources: investing.com, reuters.com, ChatGPT)