Internet 2025 Outlook_Remain Positive on Internet Leaders in 2025 as AI Shifts to the Next Phase; Heavy Capex Investments, But With Increasing Returns; Top Picks AMZN, META, GOOG_L, SPOT

Internet 2025 Outlook Industry Overview * The Internet sector is expected to continue its strong performance in 2025, driven by secular trends such as AI, digital transformation, and the shift to online platforms. * AI is expected to dominate the investment narrative, shifting from infrastructure to agents and applications. * Mega-caps and large-caps are expected to continue leading the sector, with significant investment in AI and infrastructure. Key Themes 1. AI Shift: The focus of AI investment is shifting from infrastructure to agents and applications, including chatbots, vertical tools, AI-driven search, and ad creation. 2. Heavy Capex: Mega-caps are expected to continue investing heavily in AI and infrastructure, which will curb margins and FCF but drive long-term growth. 3. Cloud Growth: Cloud growth is expected to accelerate, with more monetization of GenAI in 2025. 4. Online Ads: Online ad growth is expected to remain solid, with a focus on new products, direct response, AI, and margin expansion. 5. E-commerce: E-commerce growth is expected to accelerate, led by Amazon and Walmart. 6. Streaming Media: Streaming media growth is expected to be more balanced between subscriptions and monetization, with a focus on ad-supported video. 7. Rides/Food: Rides and food delivery are expected to remain resilient, driven by cohort strength and improving efficiency. 8. AV Rollout: Autonomous vehicle (AV) rollout is expected to expand as rideshare networks prove utilization and demand. 9. Online Travel: Online travel growth is expected to normalize, shifting focus to disciplined execution. 10. Regulatory Focus: Regulatory scrutiny around mega-caps and antitrust is expected to persist. 11. Trump 2.0: The incoming administration's pro-business stance is expected to be beneficial for the Internet group. Company-Specific Analysis * Amazon (AMZN): Amazon is well-positioned as the market leader in e-commerce and public cloud. The company is expected to achieve multi-year margin expansion and FCF ramp, driven by high-growing AWS and Advertising revenue streams. * Alphabet (GOOG/L): Alphabet's fundamentals are solid, and the company is expected to remain a driver of and primary beneficiary of an increasingly digital economy and advances in Generative AI. The company is focused on innovation, with healthy runway across Search and YouTube ads as AI drives higher ROI and TV dollars shift online. * Meta Platforms (META): Meta is well-positioned to become an enduring blue-chip company built for the long term. The company's massive reach and engagement continue to drive network effects, and its targeting abilities provide significant value to advertisers. Meta is also focused on the two big tech waves of AI and Metaverse. * Spotify (SPOT): Spotify is the largest pure-play audio streaming service and is driving and benefiting from the ongoing secular shift from transaction-based to access-based streaming models. The company is growing its total MAUs at ~11% and is generating positive FCF. * Pinterest (PINS): Pinterest is a visual discovery platform and productivity tool where 535M+ people around the world go to discover ideas that they can then bring from inspiration to reality. The company has a scaled user base with high commercial intent and operates in a large addressable market. * Reddit (RDDT): Reddit is a global digital city comprising 100k+ subreddits for users to share information, learn, and engage around specific topics and interests. DAUq growth has accelerated in recent quarters and there is meaningful headroom for growth. * Uber Technologies (UBER): Uber is the global leader in two secular growth industries, ride-sharing and food delivery, and is leveraging its massive scale and technological expertise to rapidly launch and scale new products. * Booking Holdings (BKNG): Booking Holdings is the best-positioned company in the online travel space. The company is expected to deliver solid revenue growth and continue returning capital to shareholders. * Expedia Group, Inc. (EXPE): Expedia is expanding its international footprint through its portfolio of strong brands with significant scale, including Brand Expedia, Hotels.com, and Vrbo. * Airbnb (ABNB): Airbnb is a leading global marketplace for Alternative Accommodations (AA) and experiences, with its community of individual hosts and strong brand the key differentiators. * WEBTOON (WBTN): WEBTOON is a leading global storytelling platform that pioneered a new form of digital content. Stories on WBTN are serialized into short, vertically scrolling web-comics or web-novels released on a weekly schedule. Conclusion The Internet sector is expected to remain a strong performer in 2025, driven by secular trends and significant investment in AI and infrastructure. Mega-caps and large-caps are expected to continue leading the sector, with significant opportunities for growth and innovation.