Where Are We Trading Now: AI Revenue and Funding Front and Center

This Morgan Stanley update reviews where North American internet stocks are trading, with AI revenue realization and funding dynamics as the central focus. Internet names fell ~4% last week versus -2% for the S&P 500 and -6% for the NDX, led by AMZN and GOOGL at -5%/-3%, with META -1%, DASH -4%, UBER -2% and APP -4%. AMZN/GOOGL/META trade at 19x/17x/24x 2026 EPS, or -32%/-32%/+9% versus their trailing-twelve-month averages. Sector NTM EV/EBITDA stands at 12.1x, 11% and 19% below 5-year and 10-year averages, while NTM EV/sales of 4.7x is 12% and 13% above those averages. The team also quantifies treating stock-based compensation as cash, which lifts median 2026 EV/EBITDA by roughly 38% for digital media, 26% for eCommerce, 13% for video games and 51% for travel/shared economy and real estate tech, highlighting valuation sensitivity to SBC treatment. Industry view remains Attractive.