Investing.com — As we head into 2025, JP Morgan analysts have laid out their best predictions for hardware and networking companies, highlighting the key themes expected to shape the technology landscape this year.
From Apple’s resilience to the growing importance of Edge AI, here’s an in-depth look at what the year could bring.
Apple’s stock is expected to show surprising resilience throughout most of 2025. Analysts believe anticipation of the AI cycle and the progress of the iPhone 17 series will keep investor sentiment high.
With Edge AI still in its early stages, the earnings multiple premium for Apple (NASDAQ: ) shares is likely to face less resistance as investors wait for clearer signs of AI adoption in consumer devices like smartphones and PCs.
While the expanding AI infrastructure space, driven by hyperscalers and NeoCloud, faces uncertainty, Edge AI is predicted to remain a central investment focus.
The initial expansion stage of Edge AI offers opportunities for application development, leveraging the existing capabilities of the AI model.
These developments are expected to drive refresh cycles for smartphones and PCs, keeping Edge AI a dominant theme in 2026.
Despite efforts to quantify the revenue potential of AI investments, businesses will likely continue to focus on cost savings and efficiency gains as the primary benefits of AI adoption through the end of 2025.
Opportunities to increase revenue remain elusive across verticals, keeping efficiency metrics at the fore.
The ongoing debate between on-premises and public cloud infrastructure for enterprise AI is expected to shift slightly in favor of on-prem by the end of the year.
Companies such as Dell (NYSE: ) and Cisco (NASDAQ: ) are seen as potential winners of this shift, as concerns about the disintermediation of on-prem AI infrastructure using the public cloud begin to subside.
Shares of companies heavily tied to AI momentum could experience trouble in the first half of 2025. Limited growth for server companies until Nvidia’s Blackwell chips ship in volume and delays in adoption of AI networking hardware could weigh on share prices.
However, analysts expect better deals and increased guidance by mid-year to provide relief, especially for fiber and network players such as Coherent (NYSE:), Lumentum, The price (NYSE:), Fabrinet (NYSE:), and Arista.
JP Morgan predicts a tighter price performance range for hardware and networking stocks compared to 2024.
With most stocks trading at premium valuations, investors are likely to look for value in laggards, focusing on an eventual recovery in demand or M&A opportunities, which could lead to a narrower range of performance.
Cyclical recovery in the telecom, enterprise and cable/MSO markets is expected to drive consolidation among equipment vendors.
Companies with strong balance sheets can seek to take advantage of cost synergies and strengthen their market positions amid rising customer spending.
Contract manufacturers will gain favor among investors, profiting from AI-driven growth while carrying less risk than OEMs.
With their increasing role in building hyperscale AI infrastructure and better-than-enterprise-level margins, 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 headwinds more effectively than investors might fear.
While concerns about international production tariffs remain, JP Morgan analysts predict that perceived risks will ease as 2025 progresses, leading to higher earnings multiples for companies that were initially seen as risky.
Commercial success of electric and autonomous vehicle technologies is expected to remain elusive.
Slower-than-expected growth in EV adoption, exacerbated by potential policy changes such as the end of US EV subsidies and limited progress in the commercialization of autonomous vehicles, particularly in consumer applications, will dampen market optimism. However, advances in geo-fenced robotaxi solutions have shown promising signs.
