Bank of America Group reveals the best AI-related internet stocks for 2026
Bank of America Group said artificial intelligence will remain the dominant theme for internet and e-commerce stocks through 2026, with the performance of large market capitalization firms driven by AI sentiment, returns on capital expenditure, and clearer paths to cash flow.
Analysts led by Justin Post said that enthusiasm surrounding artificial intelligence continues to grow, and peak optimism may not arrive until prominent AI-focused companies begin going public. Until then, investors are likely to remain focused on established platforms with advantages in scale, data, and distribution.
In this context, the team highlighted that Amazon, Google (Alphabet), and Booking.com are the best options with large market capitalization in the field of artificial intelligence across e-commerce, media, and travel.
For Amazon, analysts see benefits from the undervalued advantages of capacity additions in 2025, along with accelerating demand for cloud services and improved returns from AI investments.
They also pointed to Amazon’s growing role in proxy AI, which they believe could enhance shopping experiences, advertising effectiveness and conversion rates over time.
Google is expected to benefit from several positive factors related to artificial intelligence. The team pointed to the growth of Gemini-driven traffic, the rise in cloud services, and the company's broad exposure across search, advertising, and AI infrastructure.
They said the tech giant is in the best position through artificial intelligence, bolstered by improved sentiment following recent product launches and partnerships, as well as its ability to capitalize on AI-driven advertising and subscription revenues.
In the online travel sector, Bank of America Group identified Booking.com as a prime beneficiary of proxy AI. Analysts highlighted the potential launch of a proxy booking product in 2026, which could simplify trip planning, enhance personalization, and drive higher user engagement across the platform.
Bernstein upgrades ASML and considers it the top pick among European semiconductor stocks for 2026
Earlier in the week, Bernstein upgraded ASML's stock rating to Outperform and named it its top pick among European semiconductor stocks for 2026, citing accelerating investment in memory, rising logical demand, and a more supportive valuation background.
The broker raised its target price to 1,300 euros from 800 euros.
Analyst David Day said the Dutch chip-making equipment supplier would benefit disproportionately from an emerging upward cycle in dynamic random-access memory (DRAM), arguing that the market underestimates the scale of the planned capacity expansion.
It is estimated that the three largest DRAM memory producers will add up to 250,000 chips per month of new capacity in 2026, with the transition to the 1c node also accelerating.
This is great for ASML, where the lithography density for 1c is estimated at 28%, which is much higher than previous decades' 20-24%, Day wrote.
He also stated that the short-term risks associated with DRAM technology shifts have eased. Concerns about the move to the 4F² architecture—which would be detrimental to extreme UV devices—appear to have subsided as suppliers prioritize manufacturability over cost in a strong demand environment. This, in his view, supports higher adoption of extreme UV technology during the second half of the decade.
Advanced logic is another key driver of growth. Dai pointed to leading foundries' plans to expand their advanced capacity to meet AI-driven demand, with a focus on 3nm production. He noted that 3nm offers the highest lithography density and is expected to underpin most GPUs and AI accelerators over the next two years.
As such, Day described 2026 and 2027 as big years for extreme UV radiation and ASML, and raised his earnings growth forecast to a compound annual rate of 18% through 2025-27, higher than the consensus forecast of 15%.
Morgan Stanley lowers its target for Alibaba amid weakness in core e-commerce.
Morgan Stanley this week lowered its price target for Alibaba to $180 from $200, citing a deteriorating outlook for the group’s core e-commerce operations even as momentum continues in cloud computing.
Analyst Gary Yu affirmed the overweight rating but said that the fundamentals of e-commerce are deteriorating. He warned that core e-commerce business is beginning to decline due to weak consumption, adding that the sector could remain under pressure in the first half of fiscal year 2027 due to a high base.
But the bank's view of the cloud remains positive. Yu said Alicloud's performance continues to support Alibaba's position as the top AI enabler in China, fueled by accelerating demand related to AI workloads.
The analyst expects Alicloud's revenue growth to accelerate to at least 35% year-on-year, while EBITDA margins are expected to remain steady at around 9%, reflecting the benefits of scale despite rising AI-related investment.
In contrast, near-term trade trends are expected to weaken. Yu anticipates that customer management revenue growth will slow sharply to 3% year-on-year (compared to 10% in the second quarter), citing weak online retail sales and intense industry competition. Consequently, China's e-commerce earnings before interest, taxes, depreciation, and amortization (EBITDA), excluding QC, are projected to decline by 3%.
Pressure is also mounting at the group level. Morgan Stanley expects consolidated adjusted EBITDA to fall 45% year-on-year to 30 billion RMB, driven in part by widening losses in the All Others segment, which is expected to post a loss of 7 billion RMB as AI-related costs rise.
Morgan Stanley lowered its adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) estimates by 7% for fiscal year 2026 and 15% for fiscal year 2027, driven by weaker customer relationship management assumptions, while keeping its cloud valuation unchanged at $84.
BMO downgrades Adobe's rating and sees no clear motivator
BMO Capital Markets downgraded Adobe Systems to market performer from outperformer, saying the stock lacked a clear catalyst even though the valuation seemed reasonable. The broker lowered its price target to $375 from $400 and left its earnings estimates unchanged.
The downgrade comes after BMO's seventh Creative Cloud survey, which showed intensifying competition across the creative software market. The pressure was most pronounced among small businesses, students, and freelancers, as alternatives gain traction.
While Adobe Systems' current valuation is not claimed, we do not foresee positive catalysts and believe the stock will remain range-bound, analyst Keith Backman wrote in a note on Friday.
Bachmann said he does not believe that application software is structurally broken, but added that investor sentiment toward the sector is likely to remain cautious until 2026. In his view, near-term performance will depend on evidence of steady or improving growth, including how effectively AI features translate into use and monetization.
In the long term, the analyst said application software will continue to play an important role, but the competitive landscape has become more challenging. Within front-office software, Bachmann said he favors HubSpot and Salesforce, arguing that Adobe Systems now has the weakest competitive position among the three.
He pointed to increasing pressure within Creative Cloud and a growing willingness among users to rely on third-party tools across different stages of the creative workflow as key concerns.
As a result, BMO sees limited upside potential in the near term. We don't foresee a clear catalyst for the stock, Bachman wrote.
Tensions surrounding Taiwan cast a shadow over the prospects for global AI trade: Jardini
According to Yardney's research, geopolitical tensions surrounding Taiwan are adding uncertainty to the global AI trade.
Of all the ways the cordial relationship between President Donald Trump and Chinese President Xi Jinping could sour, Beijing’s move against Taiwan might be the quickest, Yardney wrote in a report, highlighting speculation in Chinese online forums that recent U.S. actions in Venezuela could embolden Beijing.
Yardney warned that the idea of Xi choosing 2026 to consolidate control over Taiwan is no longer as far-fetched as Asian leaders and investors had hoped, a shift that would have profound implications for global markets and the semiconductor ecosystem.
Recent military activity, including missile launches into waters near Taiwan after Washington approved a standard arms package for Taipei, has heightened concerns. Investors fear that US operations in Venezuela could inadvertently provide political cover for China to escalate pressure on the island.
Taipei remains on high alert, with growing concern due to the broader geopolitical context since Russia's invasion of Ukraine and mixed signals from US allies about defending Taiwan.
Yardney outlined reasons why Xi might refrain from taking public action, including the risk of comprehensive Western sanctions and severe economic repercussions. However, he cautioned that China is unlikely to accept losses passively, pointing to potential measures such as banning rare earth exports and flooding the market with U.S. Treasury bonds, which could destabilize markets.
Any blockade or invasion of Taiwan would disrupt supply chains and impact the AI trade. Taiwan Semiconductor Manufacturing Co., a vital supplier of advanced AI chips whose shares have soared over the past year, represents a dominant share of Taiwan's market capitalization and global chip production.
Yardney said that Chinese control of TSMC, along with rare earth mineral resources, would be a powerful bargaining chip in US trade talks.
He added: We are not predicting that any of this will happen in 2026. However, Trump's actions in Venezuela increase the likelihood of a reaction from China.
