The 19 large-cap internet stocks Evercore ISI covers have fallen an average of 18% in 2026 while the Nasdaq Composite rose 19%. Evercore's Mark Mahaney lists six factors behind the gap and argues the selloff has created an attractive entry point for investors.
The 19 large-cap internet stocks covered by Evercore ISI have dropped an average of 18% in 2026, trailing broader benchmarks. The research firm says the sharp selloff has created an attractive entry point for investors.
The S&P 500 is up 14% and the Nasdaq Composite is rising 19% over the same period.
Six factors behind the underperformance
Evercore ISI Senior Managing Director Mark Mahaney attributed the weakness to six bear market factors. The first is elevated valuations coming out of 2025, following a three-year bull run for internet stocks.
Second, fears about AI disruption and terminal value have hit names such as Booking Holdings, Expedia Group, Shopify and Uber Technologies. Third, the scale of the AI investment cycle at major hyperscalers means capital expenditures as a percentage of revenue are likely to increase further in fiscal 2027 and potentially 2028.
The remaining three are tied to the war in Iran, IPO supply and AI agents. The note cites inflationary headwinds from the ongoing war in Iran, which raised costs and dampened consumer demand across a cyclical sector. It also points to investors reallocating capital for an incoming generation of mega-cap internet public offerings. Finally, it names Muse Risk, the emergence of autonomous AI agents as primary consumer interfaces that threatens to weaken incumbent platforms' control over customer relationships, ad monetization and transaction take rates.
Evercore sees hyperscaler cash flow upside
Evercore argues that Wall Street is overly pessimistic about free cash flow at Amazon, Alphabet and Meta over the next two to three years. The firm acknowledges that 2027 capital expenditure estimates for Amazon and Meta still skew higher, but says upward revisions to revenue and operating income could offset the spending increases.
Mahaney said positive free cash flow inflection points over the next 3 to 12 months could be a major catalyst to "right market wrongs".
Source: Investing.com
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