Investing.com – As we head into 2025, analysts at JPMorgan have laid out a roadmap of their top forecasts for hardware and networking companies, noting the key themes expected to shape the technology landscape this year.
From Apple's flexibility to the growing importance of Edge AI, here's a detailed look at what this year might hold.
Apple stock is expected to show amazing resilience through most of 2025. Analysts believe that the anticipation of the AI cycle and the evolution of the iPhone 17 series will keep investor sentiment buoyant.
With Edge AI still in its early stages, the premium earnings multiple for Apple (NASDAQ:) stock is likely to face less resistance, as investors wait for clearer signs of AI adoption in consumer devices like smartphones and PCs.
While the broader AI infrastructure space, led by hyperscalers and NeoClouds, faces uncertainty, Edge AI is expected to remain a major focus of investment.
The emerging phase of Edge AI deployment provides opportunities for application development, leveraging the capabilities of existing AI models.
These developments are expected to drive refresh cycles for smartphones and PCs, making Edge AI a dominant theme through 2026.
Despite efforts to measure the revenue potential of AI investments, companies will likely continue to focus on cost savings and efficiency gains as the primary benefits of AI adoption through the end of 2025.
Additional revenue opportunities remain elusive across sectors, keeping efficiency metrics at the forefront.
The debate between on-premises and public cloud infrastructure for enterprise AI is expected to tilt slightly in favor of on-premises infrastructure by the end of the year.
Companies like Dell (NYSE:) and Cisco (NASDAQ:) are seen as potential beneficiaries of this shift, as concerns about disintermediation of on-premise AI infrastructure through the use of public clouds begin to moderate.
Shares of companies closely tied to the AI momentum could face headwinds in the first half of 2025. A limited rally for server companies until Nvidia's Blackwell chips ship in volume and a delay in the adoption of AI networking devices could weigh on stock prices.
However, analysts expect better supplies and increased guidance by mid-year to provide relief, especially for optical and networking players such as coherent (NYSE:), Lumentum, respect (New York Stock Exchange:), factory (NYSE:) and Arista.
JP Morgan expects a tighter range of stock price performance across the Hardware and Networking sector than in 2024.
With most stocks trading at premium valuations, investors will likely look for value in laggards, with an eye on an eventual demand rebound or M&A opportunities, which could lead to a more compressed performance range.
A cyclical recovery in the telco, enterprise and cable/MSO markets is expected to spur consolidation among equipment suppliers.
Companies with strong balance sheets may seek to capitalize on cost synergies and strengthen their market positions amid a rebound in customer spending.
Contract manufacturers are expected to be popular with investors, as they benefit from AI-led growth while taking on less risk than original equipment manufacturers.
With their increasing role in building hyper-scale AI infrastructure and better-than-corporate profit margins, contract manufacturers are positioned to improve investor sentiment by the end of the year.
Years of supply chain investment have helped companies mitigate potential tariff headwinds more effectively than investors might fear.
While concerns about international manufacturing tariffs persist, JPMorgan analysts expect perceived risks to diminish as 2025 progresses, leading to higher earnings multiples for companies that were initially considered at risk.
Commercial success of electric vehicle and autonomous vehicle technologies is expected to remain elusive.
Slower-than-expected growth in EV adoption, exacerbated by potential policy shifts such as the elimination of EV subsidies in the US, and limited progress in commercializing autonomous vehicles, especially in consumer applications, will dampen market optimism. However, developments in geo-fenced robo-taxi solutions have shown promising signs.
