Investing.com — As we step into 2025, analysts at J.P. Morgan has laid out a roadmap of their top predictions for hardware and networking companies, flagging key themes that are 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 might hold.
Apple’s stock is expected to demonstrate surprising resilience through much of 2025. Analysts believe the anticipation of the AI cycle and the progression of the iPhone 17 series will keep investor sentiment buoyant.
With Edge AI still in its early stages, the premium earnings multiple for Apple shares (NASDAQ:AAPL) is likely to face less pushback, 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 predicted to remain a central investment focus.
The nascent stage of Edge AI proliferation offers opportunities for application development, leveraging existing AI model capabilities.
These developments are expected to drive refresh cycles for smartphones and PCs, keeping Edge AI a dominant theme into 2026.
Despite efforts to quantify the revenue potential of AI investments, enterprises are likely to continue focusing on cost savings and efficiency gains as the primary benefits of AI adoption through the end of 2025.
Incremental revenue opportunities remain elusive across various verticals, keeping efficiency metrics at the forefront.
The ongoing debate between on-premises and public cloud infrastructure for enterprise AI is expected to tilt slightly in favor of on-prem by year-end.
Companies like Dell (NYSE:DELL) and Cisco (NASDAQ:CSCO) are seen as potential beneficiaries of this shift, as concerns about the disintermediation of on-prem AI infrastructure by public cloud usage 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 AI networking hardware adoption could weigh on share prices.
However, analysts expect better supply and raised guidance by mid-year to provide relief, especially for optical and networking players like Coherent (NYSE:COHR), Lumentum, Ciena (NYSE:CIEN), Fabrinet (NYSE:FN), and Arista.
J.P. Morgan predicts a tighter range of share price performances across the hardware and networking sector compared to 2024.
With most stocks trading at premium valuations, investors are likely to seek value in laggards, focusing on eventual demand recovery or merger and acquisition opportunities, which could lead to a more compressed performance range.
Cyclical recoveries in telco, enterprise, and cable/MSO markets are 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 set to gain favor among investors, benefiting from AI-led growth while carrying fewer risks than original equipment manufacturers.
With their increasing role in hyperscaler AI infrastructure builds and better-than-corporate-level margins, contract manufacturers are positioned for improved investor sentiment by year-end.
Years of supply chain investment have positioned companies to mitigate potential tariff headwinds more effectively than investors might fear.
While concerns over international manufacturing tariffs persist, J.P. Morgan analysts anticipate that perceived risks will diminish as 2025 progresses, leading to higher earnings multiples for companies initially considered at risk.
The commercial success of electric and autonomous vehicle technologies is expected to remain elusive.
Slower-than-expected growth in EV adoption, exacerbated by potential policy shifts such as the repeal of U.S. EV subsidies, and limited progress in autonomous vehicle commercialization, particularly in consumer applications, will temper market optimism. However, advancements in geo-fenced robotaxi solutions have shown promising signs.
