3 Cheap Internet Stocks

Key Concepts

• AI (Artificial Intelligence): The dominant theme in the tech sector, impacting both infrastructure (capex spend by companies like Amazon, Google, and Meta) and application (improving products and services).
• ROAI (Return on AI): The market’s focus in 2026 – demonstrating tangible benefits from AI investments.
• Revenue per Employee: A key metric tracked by Arc to assess the impact of AI on productivity and monetization.
• OTA (Online Travel Agency): Companies like Expedia, Booking, and Airbnb facilitating travel bookings.
• Capex (Capital Expenditure): Funds used by a company to acquire, upgrade, and maintain physical assets such as property, plants, buildings, technology, and equipment.
• Rorowaz (Return on Advertising Spend): A metric used to measure the effectiveness of advertising campaigns.

Tech Stock Analysis: Mahaney’s Picks for 2026

This discussion features Mark Mahaney, a technology analyst from Arc, outlining his perspective on the current tech landscape and identifying three “cheap” internet stocks for 2026. The core argument centers on identifying companies demonstrating strong fundamentals and effectively leveraging Artificial Intelligence (AI) to drive growth and improve margins.

Current Tech Landscape & Investment Strategy

Mahaney emphasizes that AI is the “single most important theme” driving the tech sector. He differentiates between AI investment at the infrastructure level (capex by companies like Amazon, Google, and Meta for large language models) and the application level – how companies are deploying AI to enhance their products and services. He highlights Meta as a successful example of applying AI to increase user engagement and improve advertising relevance, resulting in higher Return on Advertising Spend (Rorowaz).

The key to identifying undervalued tech stocks, according to Mahaney, lies in analyzing company fundamentals. This includes tracking topline growth (revenue, active users), bottom-line performance (margins, cost efficiencies), and, crucially, assessing the impact of AI. He specifically points to “revenue per employee” as a simple yet effective metric showing a recent “inflection up” likely driven by AI implementation. The central question investors should ask is: “If you hadn’t had AI, would the growth rates be lower or would the margins be lower?”

Stock Picks for 2026

1. Amazon (Price Target: $335)

• Rationale: Mahaney believes Amazon will outperform due to accelerating growth in its cloud business, Amazon Web Services (AWS), driven by increased industry demand and improvements in Amazon’s offerings. He also anticipates acceleration in the retail business, boosted by retail stimulus and the new “Rufus” application, which provides personalized recommendations.
• Key Details: Advertising revenue is expected to grow in line with overall company growth. The combination of accelerating revenue growth and expanding margins is currently undervalued by the market.
• Quote: “I really like this application called Rufus…that they’ve been rolling out in a retail offering Amazon.com…that gives you more personalized recommendations.”

2. Expedia

• Rationale: Historically considered the “ugly sister” among online travel agencies (OTAs) – lagging behind Booking and Airbnb in growth and margins – Expedia is poised for a turnaround. A new management team (CFO and CEO) implemented over the past 12-18 months is showing positive results.
• Key Details: Expedia is significantly cheaper than its competitors (Booking.com and Airbnb) and has the potential to grow faster, particularly benefiting from events like the World Cup being hosted in the US.
• Quote: “Expedia has always been the kind of the the what an ugly sister…Is that the expression? Like it's the weakest of the assets.”

3. DoorDash

• Rationale: Despite a 20% correction following announcements of aggressive investments in its platform and expansion (Deliveroo acquisition in Europe, new software, automation, and potential robotic delivery), DoorDash remains a high-quality asset with a strong management team.
• Key Details: The investment cycle has already been announced, removing a key negative catalyst. DoorDash is diversifying beyond US restaurant delivery into areas like convenience and grocery delivery, becoming the “number one most popular service for grocery delivery” in the US according to internal surveys. The company is expected to sustain premium growth (20%+) and generate margin expansion.
• Quote: “This is a high quality asset, very good management team, world leader in the delivery business.”

Data & Statistics Mentioned

• Earnings Growth (Premium Names): High-quality, large-cap tech companies have experienced earnings growth exceeding 20%, compared to the market average of 15% or low teens.
• DoorDash Correction: The stock corrected over 20% due to investment cycle concerns.
• Grocery Delivery: DoorDash has become the number one most popular grocery delivery service in the US.

Logical Connections

The discussion flows logically from a broad overview of the tech landscape (AI dominance) to a specific investment strategy (focus on fundamentals and ROAI) and culminates in concrete stock recommendations. Each stock pick is presented with a clear rationale, supported by specific details and examples. The connection between AI and company performance is consistently emphasized throughout the analysis.

Conclusion

Mark Mahaney’s analysis suggests that while tech stocks may appear pricey, opportunities remain for investors who focus on companies demonstrating strong fundamentals and effectively leveraging AI. Amazon, Expedia, and DoorDash are presented as undervalued options poised for growth in 2026, each with unique catalysts and potential for outperformance. The key takeaway is the importance of looking beyond the hype surrounding AI and focusing on tangible evidence of its impact on revenue, margins, and overall business performance.