JPMorgan Bets: 2023 was the year of the mega-cap tech titans. The “Magnificent Seven” – Apple, Amazon, Alphabet (Google), Microsoft, Tesla, Nvidia, and Meta – dominated market action as investors sought refuge in established tech giants amidst AI hype and rising interest rates. But with a new year on the horizon, the question remains: where do we find opportunity in the world of internet stocks?
Enter JPMorgan, making a bold claim that the party isn’t over for mega-caps just yet. In a recent research note, they named Amazon (AMZN) and Alphabet (GOOGL) their “top picks” for 2024, predicting continued outperformance fueled by resilient consumer spending, strategic bets on generative AI, and company-specific catalysts.
JPMorgan’s Top Internet Stock Picks for 2024
So, what makes Amazon and Alphabet stand out?
Amazon: JPMorgan is bullish on Amazon, dubbing it their “best idea” with a 28% upside potential from its current price. This optimism stems from several factors:
- Accelerating AWS Growth: Amazon Web Services (AWS), the company’s cloud computing powerhouse, is expected to see revenue surge as new workloads are deployed, year-over-year comparisons ease, and generative AI investments contribute significantly.
- Resilient Retail: Despite some macroeconomic concerns, consumer spending has held up remarkably well, and Amazon is poised to capitalize on this with its broad retail reach and growing same-day delivery capabilities.
- Generative AI Play: Amazon’s commitment to generative AI, an area with “tens of billions” in potential revenue, adds another layer of excitement to the company’s future prospects.
Alphabet: Google’s parent company also earns a coveted “top pick” status from JPMorgan, with a 21% upside potential. Here’s why:
- Improving Ad Growth: After a period of slowdown, Google’s advertising revenues are expected to pick up again thanks to AI-powered ad tools, secular shifts in internet usage, and YouTube Shorts monetization.
- Expanding Margins: Cost-cutting initiatives are bearing fruit, paving the way for margin expansion in 2024.
- Gemini AI Catches Up: Google’s new generative AI model, Gemini, is seen as a significant step forward in closing the gap with OpenAI’s GPT-4, potentially fueling future innovation and growth.
- Undervalued and Underloved: Compared to other mega-caps, Alphabet faces less negative sentiment and lower investor ownership, making it a potentially overlooked gem with room for significant appreciation.
Of course, no investment is without risks. Potential antitrust troubles for Google and broader economic uncertainties remain considerations. However, JPMorgan believes these concerns are manageable and ultimately outweighed by the strong company-specific tailwinds propelling both Amazon and Alphabet forward.
JPMorgan’s Top Internet Stock Picks for 2024
| Stock | Ticker | 2023 YTD Return | JPMorgan Price Target | Upside Potential | Key Drivers |
|---|---|---|---|---|---|
| Amazon | AMZN | 75% | $190 | 29% | * Accelerating AWS growth * Resilient retail * Generative AI play |
| Alphabet | GOOGL | 49% | $160 | 21% | * Improving ad growth * Expanding margins * Gemini AI catching up * Undervalued and underloved |
Beyond the Top Picks: JPMorgan’s optimism extends beyond just Amazon and Alphabet. They identify other promising themes in the internet space, including:
- More balanced growth in streaming: Ad-supported models are gaining traction, offering a path to sustainable growth for streaming services.
- E-commerce’s enduring appeal: Online shopping continues to rise, presenting opportunities for companies with strong e-commerce platforms.
- Travel’s normalized rebound: After a post-pandemic surge, the online travel sector is expected to settle into a healthy, normalized growth pattern.
Investors seeking exposure to the dynamic world of internet stocks in 2024 would do well to pay close attention to JPMorgan’s insights. With mega-caps like Amazon and Alphabet leading the charge, backed by compelling company-specific drivers and broader sector tailwinds, the potential for continued outperformance seems strong.
Remember, this is just a starting point. Conducting your research and developing a diversified investment strategy is crucial before making any investment decisions.
Would you consider investing in Amazon or Alphabet based on JPMorgan’s analysis? What other internet stocks are you bullish on for 2024? Share your thoughts in the comments below!