Investment Rating - Industry View: Attractive [4] Core Insights - The report outlines ten key debates that will shape the internet sector, focusing on areas such as the value in the GenAI era, digital agents, the future of search, and online grocery dynamics [4][9]. - The report emphasizes the importance of first-party data and distribution, suggesting that large platforms should invest aggressively to capitalize on these advantages [13][25]. - It predicts a significant opportunity for digital advertising in the U.S., estimating a market potential of over $1.4 trillion, indicating only about 18% current penetration of online ads [25]. Summary by Sections Debate 1: Value in the GenAI Era - Leading first-party data sets and distribution are crucial for value creation, favoring large platforms [13]. - Companies like META, AMZN, and GOOGL are expected to benefit significantly from these trends [14]. Debate 2: GenAI ROIC - A path to over $1 trillion in GenAI-enabled annual revenue by 2028 is outlined, with a significant portion driven by consumer internet platforms [30]. - The report highlights that approximately 67% of this revenue will come from e-commerce and online ads [30]. Debate 3: Digital Agents - GOOGL is identified as best positioned to develop and scale digital agentic assistants due to its data, investment capabilities, and hardware [51]. - The report discusses various use cases for digital assistants, including online shopping and personalized recommendations [51]. Debate 4: Future of Search - The search landscape is evolving, with a projected 13% growth in query volumes from 2023 to 2026, driven by AI improvements [68]. - GOOGL continues to lead in commercial queries, with AI Overviews increasing search usage significantly [73]. Debate 5: Physical AI - Companies like META and GOOGL are increasing their focus on physical AI, with products like AR glasses and robotics expected to drive efficiencies [95]. - AMZN's robotics-enabled warehouses are projected to save $2-3 billion annually by 2030 [98]. Debate 6: Online Grocery - Online grocery penetration is currently around 14%, with expectations to reach 18% by 2027, driven by GenAI capabilities and robotics [110]. - The report emphasizes the importance of average order value (AOV) and pick/pack efficiency for profitability in online grocery [113]. Debate 7: Autonomous Driving - The report discusses the potential growth of autonomous driving and its impact on rideshare services, highlighting significant investment opportunities in this area [127].