After the AI hype, the mood has recently deteriorated. But according to analysts at Bernstein Research, U.S. internet stocks may be starting to find a valuation bottom.
• Bernstein: Valuation adjustment largely over in the US internet sector
• Internet companies’ earning power is intact
• Disruptive AI applications are not yet reaching the consumer space
On the markets, the euphoria about artificial intelligence is increasingly mixed with nervousness. There are two reasons for this in particular.
On the one hand, investors are increasingly concerned about the immense amounts of capital that have to be spent on building the required AI infrastructure. At the beginning of February, the Reuters news agency reported that major technology companies expect to spend around $600 billion in AI in 2026. Given such immense investment expenditure by hyperscalers such as Alphabet, Amazon and Meta, investors are now increasingly focusing on profitability and return on investment.
On the other hand, new, very powerful AI models and agent tools – especially from Anthropic – have triggered concerns about disruption in the software and Internet sectors through artificial intelligence. Anthropic recently released advanced AI models and agent functions that can automate complex tasks. This development caused investors to fear that AI agents could take over many classic software functions directly and even fundamentally displace existing Internet platforms.
These concerns have caused many Internet stocks to depreciate. But the shares of chip designer NVIDIA – the flagship of the AI hype – also came under pressure. The US company plays a key role in the global AI ecosystem because its graphics processing units (GPUs) are considered standard hardware for training and operating large AI models. The company’s high-performance chips are used in data centers worldwide and form the technical basis for applications such as generative AI, cloud services and autonomous systems. The company’s success is therefore closely linked to the continuation of the AI boom.
Bernstein: Reasonable valuation levels reached
According to Investing.com, the analysts at Bernstein Research now assume that the valuations have already priced in extreme negative scenarios – such as complete displacement by AI. According to analysts, GAAP price-to-earnings (P/E) ratios have now returned to “reasonable” levels.
The actual financial strength of the large Internet companies also speaks for this. The analysts argue that the market is currently underestimating the robustness of the profits of established Internet companies, which have remained stable despite pessimistic expectations.
Competition less than feared?
In addition, the Bernstein experts point out that leading AI laboratories are currently focusing more on business-related applications instead of direct replacements for consumer platforms. The introduction of disruptive AI applications in the consumer sector is likely to take even more time. In this transition phase, established Internet platforms would have the opportunity to integrate generative AI functions themselves without immediately losing market share, it said.
Who is vulnerable to AI disruption?
Back in February, Investing.com reported on a method used by Bernstein analysts to assess which software companies are particularly vulnerable to AI disruption. Two key factors were highlighted that make companies particularly resilient.
The first factor is the so-called “automatability”, i.e. the question of whether the core value of a company can be completely automated through AI. For example, if the value of a product is based on proprietary data, complex workflows and deep integrations into corporate systems, then it will be difficult to replace it with generic AI models. The second important factor is the difficulty of replacing an existing software product. A high level of defensibility exists, for example, with high switching costs for customers, strong integration into company processes, a large ecosystem and strong brand or community effects.
Approaching evaluation floor
Bernstein Research believes that while U.S. Internet stocks have not yet finally reached a clear bottom in valuation, the long-term devaluation trend may be nearing its end. However, for the sector to recover sustainably, the narrative must change: investor focus must shift away from the high costs of AI development towards the concrete efficiency and margin advantages of Internet companies.
Thomas Zoller, editorial team at finanzen.net
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