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AI Could Be the New Profit Driver for Digital Platforms
In recent years, artificial intelligence has become one of the most important topics in the technology sector. While much of the attention is focused on model developers and companies providing infrastructure, the long-term winners in this technology may also emerge on the application side. The interactive media segment is particularly interesting from this perspective, as the business models of companies operating in this field rely heavily on monetizing user attention and producing digital content. In the second part of our industry analysis series, we review current trends and potential catalysts affecting search engines and social media platforms.
European Software Companies Are Set to Make a Comeback
European stock markets are currently outperforming their U.S. counterparts, and thanks to the gains of the past few days, our screenings have identified a number of interesting stocks. Among these, we have highlighted stocks that have recently shown signs of a structural turnaround, while strengthening buying pressure is also supporting the positive technical picture. One such company is Germany’s Nemetschek, a leading provider of construction and architectural design software. The other is the Dutch firm Wolters Kluwer, which offers professional information, software, and specialized database solutions. For both stocks, the search for long entry opportunities may have begun.
In the short term, the negative impact of tariffs coupled with elevated valuation levels, have increased the risk of a mild correction. However, as the threat of recession is moderate, the fiscal and monetary policy are supportive, commercial bank lending is improving, we would maintain neutral equity exposure and look for buying opportunities during corrections.
Macro
US growth got slower, but less, than expected, and as fiscal policy remains loose and interest rates will be cut further, a drastic slowdown looks less likely. The eurozone economy will manage a soft landing in H2, and growth could reaccelerate by the end of 2026. In Europe, headline inflation is back on target, but in the US, inflation is diverging from the target, and tariffs will drive it further up. ECB’s rate cutting cycle has ended at the neutral level of 2%, in case of the Fed, the priced in rate trajectory looks to be overly optimistic. Hungarian GDP growth could reach 0.6% in 2025 and ~3% in 2026, thanks to a large fiscal stimulus, which may push the deficit above 5% next year. In 2026, inflation may return back to the target level, however risks are tilted to the upside. The market expects 75-100 bps rate cuts by the MNB, but we think 6.5% will be kept for longer. Till December, HUF long positions looks to be more attractive, however after the last rating action in December this could change due to election risks.
Equities
In the short term, the negative impact of tariffs coupled with elevated valuation levels, have increased the risk of a mild correction. However, as the threat of recession is moderate, the fiscal and monetary policy are supportive, commercial bank lending is improving, we would maintain neutral equity exposure and look for buying opportunities during corrections. Although the US market is the most expensive, profit dynamics are strong, so we do not expect a sustained downturn. Encouraging developments are emerging in Europe, but there are still obstacles to overcome, which prevents outperformance. The weakening of the dollar and the Fed's interest rate cut are tailwinds for EM, but they are no longer cheap, and profit momentum is deteriorating. Although CEE related risks are increasing, investors are still compensated by the depressed valuations.
Bonds
As there are no signs of recession in either America or Europe, we recommend choosing the short/medium end of the yield curve in developed countries due to high budget deficits, rising debt trajectories, and political pressure on the Fed. We do not consider corporate bonds attractive due to narrow bond spreads.
Commodities
We maintain an overall neutral view on commodities due to various uncertainties surrounding the global economic outlook from US labor market to Chinese growth prospects. Several markedly different outcomes are possible, hence some caution is warranted. We recommend selective exposure (e.g., gold, copper, uranium).
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