Investing.com – As we head into 2025, JP Morgan analysts have laid out a roadmap of their top predictions for hardware and networking companies, pointing out key themes expected to shape the tech landscape this year .
From Apple's resilience to the growing importance of Edge ai, here's a detailed look at what the year could hold.
Apple stock is expected to demonstrate surprising resilience throughout much of 2025. Analysts believe that the anticipation of the ai cycle and the progression of the iPhone 17 series will keep investor sentiment optimistic.
With Edge ai still in its early stages, Apple's (NASDAQ:) stock's premium earnings multiple is likely to face less pullback, as investors wait for clearer signs of ai adoption in consumer devices like smartphones and PCs. .
While the broader ai infrastructure space, driven by hyperscalers and NeoClouds, faces uncertainty, Edge ai is expected to remain a central focus of investment.
The nascent stage of Edge ai proliferation offers opportunities for application development, leveraging the capabilities of the existing ai model.
These developments are expected to drive upgrade cycles for smartphones and PCs, keeping Edge ai a dominant theme until 2026.
Despite efforts to quantify the revenue potential of ai investments, companies will likely continue to focus on cost savings and increased efficiency as the main benefits of ai adoption through the end of 2025.
Incremental revenue opportunities remain elusive across several verticals, keeping efficiency metrics at the forefront.
The ongoing debate between public and on-premises cloud infrastructure for enterprise ai is expected to tilt slightly in favor of on-premises infrastructure by the end of the year.
Companies such as Dell (NYSE and Cisco (NASDAQ ) are seen as potential beneficiaries of this shift, as concerns about the disintermediation of on-premises ai infrastructure by the use of the public cloud begin to moderate.
stocks of companies heavily tied to ai momentum may experience headwinds in the first half of 2025. Limited upside for server companies until Nvidia's Blackwell chips ship in volume and delays in hardware adoption of ai networks could weigh on share prices.
However, analysts expect better supply and guidance by mid-year to provide relief, especially for optical and networking players such as Consistent (NYSE:), Lumentum, I respect (NYSE:), Factory (NYSE:), and Arista.
JP Morgan predicts a tighter range of share price developments across the hardware and networking sector compared to 2024.
With most stocks trading at premium valuations, investors are likely to look for value in lagging stocks, focusing on an eventual recovery in demand or M&A opportunities, which could lead to a higher return range. compressed.
Cyclical recoveries in the telecom, enterprise and cable/MSO markets are expected to spur consolidation among equipment vendors.
Companies with strong balance sheets can look to capitalize on cost synergies and strengthen their market positions amid a rebound in customer spending.
Contract manufacturers will win favor with investors, benefiting from ai-driven growth and taking on less risk than original equipment manufacturers.
With their growing role in building hyperscale ai infrastructure and margins better than those at the corporate level, contract manufacturers are positioned to improve investor sentiment by the end of the year.
Years of supply chain investment have positioned companies to mitigate potential tariff hurdles more effectively than investors might fear.
While concerns remain over international manufacturing tariffs, JP Morgan analysts anticipate perceived risks will decline as 2025 progresses, leading to higher earnings multiples for companies initially considered at risk.
Commercial success of electric and autonomous vehicle technologies is expected to remain elusive.
Slower-than-expected growth in electric vehicle adoption, exacerbated by potential policy changes, such as the repeal of electric vehicle subsidies in the United States, and limited progress in the commercialization of autonomous vehicles, particularly in driving applications. consumption, will moderate market optimism. However, advancements in geofenced robotaxi solutions have shown promising signs.
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