Looking ahead to 2025, macro resilience continues, combined with the ongoing integration of GenAI technology, the performance cycle of the USA Internet Plus-Related sector is expected to persist, reflected in sectors such as online advertising, e-commerce, streaming, local living, and CNI Xiangmi Lake Fintech Index. However, factors such as tariffs imposed by the Trump administration & industry regulatory policies, inflation data, and advancements in AI technology are likely to act as ongoing disruptive variables, requiring close attention. At the individual stock level, leading Internet giants will remain foundational positions, while we recommend investors moderately increase allocation to small and mid-cap stocks in fields like advertising technology and CNI Xiangmi Lake Fintech Index to enhance portfolio flexibility.
In 2025, the USA Internet Plus-Related sector: continue to maintain an overall optimistic view of the industry.
In terms of the macro economy, at the current moment, the risks on both the US economy and inflation sides appear balanced, with US Consumer remaining resilient, approaching a 'soft landing'. In terms of valuation, from January 1 to December 6, 2024, the overall performance of the USA Internet Plus-Related sector has been robust. $Meta Platforms (META.US)$ 、 $Alphabet-A (GOOGL.US)$ 、$Amazon (AMZN.US)$、$Netflix (NFLX.US)$、$Uber Technologies (UBER.US)$The increase rates reached 72%/23%/41%/92%/23% respectively. This round of Internet Plus-Related asset growth is accompanied by economic resilience, cost reduction and efficiency improvement, and performance expectations adjusted due to AI application. The current valuation level is basically in line with the growth rate expectations for the next two years. We expect that by 2025, valuation may become a neutral variable, but overall it remains in a reasonable range. Macroeconomic resilience continues, combined with major companies' AI commercialization introduction, increase in market share of main businesses, rising profit margins, and policies from the Trump administration, it is expected to become the main catalyst for the subsequent Internet Plus-Related sector.
Online Advertising: Continuous AI introduction + macroeconomic resilience, it is expected that the revenue growth rate will reach double digits in the middle by 2025.
Global online advertising, as a pro-cyclical sector, shows strong certainty driven by macroeconomic resilience, with AI penetration and commercialization bringing catalysts.
In terms of Large Cap, since 2024, the global advertising market has maintained strong performance. We expect that under the conditions of a soft landing for the USA economy, resilient consumer markets, and advancements in AI technology, major platforms are likely to maintain double-digit growth in 2025.
In terms of AI technology, the impact of AI on advertising is reflected in: 1) Improved conversion efficiency leading to price increases, 2) Content recommendation and optimization of ad formats driving exposure growth, 3) Cost optimization among other dimensions. We expect that AI will subsequently bring a double-digit level of additional revenue growth to internet companies' advertising business.$Applovin (APP.US)$、$The Trade Desk (TTD.US)$Companies like Ad Tech based on data and AI model upgrades are driving advertising efficiency increases in mid-tail traffic, CTV, and other areas, with optimization effects being more significant, focusing on the rhythm of algorithm updates and iterations. Future key points of focus include: USA government antitrust policies, overseas company regulations, etc.
E-commerce: Focus on first-tier manufacturers, paying attention to potential impacts of tariffs and inflation.
Since 2024, improved infrastructure, changes in the structure of USA consumers, and the rapid development of low-priced e-commerce have driven the upward trend in penetration rates, showing a significant head effect in the competitive landscape of e-commerce platforms; profits are expected to be released by e-commerce platforms through income dilution effects, fulfillment efficiency optimization, growth in advertising subscription revenue, and advancements in AI technology. The total e-commerce amount in the USA for Q1/Q2 2024 is projected to be 268/282.3 billion dollars (up 8.4%/6.6% year-on-year), with penetration rates of 20.1%/19.6% (up 2.1/1.8ppts year-on-year). Under the expected moderate inflation and potential tariff increases in 2025, investors are focused on the impact of price fluctuations and changes in price-sensitive consumer demand on e-commerce platform pricing strategies and profit margins. It is believed that if the Trump administration imposes substantial tariffs, the additional tariff costs in the e-commerce industry may be passed on to consumers, potentially affecting the overall order volume of the industry, but the ASP is expected to stabilize and recover. Cost optimization in fulfillment, diversified income, income tax reductions, etc., are expected to hedge profit pressures. In terms of market structure, the imposition of tariffs may narrow the price gap between leading platforms and emerging low-priced e-commerce platforms.
Streaming Media: Content optimization coupled with advertising growth is entering a profit release cycle.
As of December 9, 2024, $Netflix (NFLX.US)$ 、 $Spotify Technology (SPOT.US)$ Leading streaming platforms have significantly outperformed the industry average, mainly due to content releases, cost optimization, and growth from new businesses such as advertising. We believe that in 2025, with the accelerated release of content from mainstream platforms, the constraints on content supply will be greatly alleviated. Along with macroeconomic resilience, the likelihood of price increases in streaming services will further rise. Considering that streaming advertising is expected to accelerate in 2025, we believe that there will still be investment opportunities in the US streaming sector in 2025.
Local Living: Profit improvement continues, pay attention to the disruption in the Robotaxi landscape.
In terms of growth, based on Uber's investor day data, by the end of 2023, the penetration rate of Online Car-hailing in North America is only 7%. We estimate that each 1 percentage point increase in penetration will bring over 20% growth in order volume. It is expected that North America's Online Car-hailing market will continue to maintain a growth rate of over 20% in 2025, and the growth potential is still promising.
In terms of competitive landscape, according to Bloomberg Second Measure, as of March 2024, Uber and Lyft hold approximately 76% and 24% of the North American market share, respectively. We determine that under the profit-oriented operation strategy of mainstream companies, the competitive landscape will likely remain stable.
In terms of Robotaxi,$Tesla (TSLA.US)$it is expected that Cybercab, as a heavyweight product in the field of Self-Driving Cars, will be put into production in 2026. The Uber Technologies Online Car-hailing platform will strengthen cooperation with third-party self-driving companies and launch a trial operation of Robotaxi. It is believed that Uber is likely to maintain strong growth by leveraging advantages in vehicle supply and user network effects, thus remaining competitive in the era of Robotaxi.
In terms of profitability, the potential for profit margin increase in Online Car-hailing comes from driver incentives, advertising business, membership, and fixed cost reductions. Uber is expected to see total order volume grow at a rate of 15% to 20% in the next three years, according to investment documents released on its Investor Day in 2024, while adjusted EBITDA is expected to maintain a growth rate of 35% to 40%, continuing the trend of profitability improvement.
Fintech: one of the core beneficiaries of regulatory relaxation.
In terms of the Industry, it is expected that in 2025, as the economy soft-lands and interest rates enter a downward path, the fundamentals are likely to improve, and leading companies will gradually resume growth after the industry clears out.
Regarding regulations, the Trump administration mentioned reducing excessive regulation and establishing a regulatory framework for Cryptos during his previous presidential term and this election campaign. If measures for regulatory relaxation are implemented, it is expected to support financial companies in expanding profits and balance sheets.
In terms of profitability, financial technology companies are expected to quickly release profit potential, and the driving force is expected to mainly come from: 1)$PayPal (PYPL.US)$1) Payment companies raising payment rates, 2) Enterprises providing more new payment and Crediting products for 2C users, 3) Interest rate cuts leading to optimized funding costs and reduced default rates.
Risk factors:
Risks arising from US inflation worsening repeatedly; risks of valuation decline due to rising long-term interest rates; risks of weakening consumption due to a sluggish US macro economy; risks to cash flow and profits from new business investments; risks from regulation related to antitrust, data privacy, etc.; risks arising from changes in industry competition landscape.
Investment strategy:
We remain Bullish on the performance of the US stock Internet Plus-Related Sector in 2025 and suggest stock selection based on AI progress, new business growth, market share changes, profitability, and policy friendliness.
1) Internet giants are amplifiers for AI and macro factors in the US stock market, maintaining their foundational configuration status in the Technology Sector.
2) Mid-cap Internet companies exhibit characteristics of accelerated AI penetration and rapid profit enhancement, with changes in the competitive landscape of their markets being a significant factor affecting stock prices.
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