AI’s Impact on the Internet Sector: Which Stocks Are Best Positioned?
The internet sector is currently facing a period of reassessment as investors grapple with the potential disruption of Agentic AI. According to a recent report by Bank of America, the sector is underperforming the broader market, down 17% year-to-date, despite strong revenue figures from many companies in the fourth quarter.
The Rise of Agentic AI and Investor Concerns
The primary driver of this negative performance is “multiple compression on AI risk,” as noted by Bank of America analyst Justin Post. Investors are concerned about how emerging Agentic AI tools could reshape traffic patterns, competition, and monetization models. While the real-world impact has been limited so far, anxieties are building about potential future disruptions.
Currently, traffic sourced from AI to e-commerce sites remains limited, even as the use of generative and Agentic tools continues to grow. Still, the bank highlights potential risks as these systems develop into more capable, including the “cannibalization” of direct traffic and increased distribution costs.
Why Scale and Service Matter in the Age of AI
Despite these concerns, Bank of America argues that the market may be overlooking the significant barriers to replicating the scale of audience, fulfillment networks, and customer service that established internet leaders possess. Superior service levels from companies like Amazon, Booking Holdings, DoorDash, and Uber could be favored by AI Agents when making purchase decisions.
Did you know? Agentic AI refers to AI systems that can act independently to achieve goals, rather than simply responding to prompts.
Three Stocks Poised to Weather the AI Storm
Based on this analysis, Bank of America has identified three companies that are best positioned to navigate the challenges posed by Agentic AI: DoorDash, Take-Two Interactive, and Chewy.
DoorDash: The Delivery Advantage
DoorDash benefits from a three-sided marketplace that is difficult to replicate. Justin Post expects DoorDash to be favored by AI agents due to lower delivery costs, speed, and selection, and sees limited risk of new competitive entry given its scale advantages.
Take-Two Interactive: Defending Against Disruption with IP
Take-Two Interactive is considered “highly defendible against potential disruptions from AI” because of its legacy intellectual property, cultural relevance, and vast player networks within its key franchises. The firm believes AI is more likely to be a tailwind than a threat to Take-Two.
Chewy: Loyalty and Convenience in a Competitive Market
For high-turnover products like pet food, Chewy’s success hinges on brand loyalty, service quality, delivery speed, and convenience. While AI agents can provide convenience, they cannot replicate last-mile delivery, giving Chewy a competitive edge.
Pro Tip: Focus on companies with strong network effects and established customer relationships when considering investments in the face of disruptive technologies.
The Broader Implications for the Internet Sector
The current market downturn in the internet sector highlights the importance of understanding the potential impact of emerging technologies. While Agentic AI presents challenges, it also creates opportunities for companies that are well-positioned to adapt and innovate.
FAQ
Q: What is Agentic AI?
A: Agentic AI refers to AI systems capable of independent action to achieve goals.
Q: Why is the internet sector underperforming?
A: Concerns about the potential disruption of Agentic AI are driving multiple compression and negative investor sentiment.
Q: Which companies are least vulnerable to AI disruption?
A: Bank of America identifies DoorDash, Take-Two Interactive, and Chewy as being well-positioned.
Q: What factors make these companies resilient?
A: Scale, strong network effects, established customer relationships, and unique competitive advantages are key factors.
Desire to learn more about the evolving landscape of AI and its impact on the market? Explore our other articles on technology and investing.
