The Magnificent Seven and Big Tech stocks dominated the markets this year. But what's in store for 2024? Citi Director of Internet Equity Research Ygal Arounian joins Yahoo Finance Live to discuss his outlook for internet stocks next year. Arounian expects another strong year for internet stocks for several reasons, including strong fundamentals, potential Federal Reserve rate cuts, and a recovery in consumer spending.

Arounian expects the generative AI hype to continue into 2024, saying he thinks that next year, investors will see more "actual real implementation of AI across different end businesses that will start to drive more meaningful change."

When it comes to stocks Arounian likes for 2024, he is picking The Trade Desk (TTD), Wayfair (W), and VeriSign (VRSN).

Click here to watch the full interview, including more insight into Arounian's stock picks, on the Yahoo Finance YouTube page or you can watch this full episode of Yahoo Finance Live here.

Video Transcript

JOSH LIPTON: Meanwhile, the Magnificent Seven dominated markets this year. And now, as investors searching for returns in other pockets of tech, and our next guest says, one area they might turn to in the new year is internet stocks. Ygal Arounian, Director of Internet Equity Research at Citi, joining us now. Ygal, it is great to see you. So strong year for your coverage universe, Ygal, average return about 40%. And you see that momentum continuing, Ygal, in 2024. How come? Walk us through the reasons.

YGAL AROUNIAN: Yes, certainly. So 2023 was a great year for internet. It was a rebound year of what was a really tough 2022. Like you said, Josh, our coverage across about 50 internet stocks was up about 40%. A lot of that was really driven by, like you said, the Magnificent Seven and larger cap internet stocks.

We think the fundamentals within the internet universe are continuing to be strong. If anything, they'll strengthen into next year. You know, that includes share gain across a number of sectors, like e-commerce, like digital advertising, like website builders, for example. And all the momentum that's kind of driven internet over the last few years should continue.

Now, in a better inflationary environment, a better consumer environment, hopefully, as we kind of get through this last leg of a more challenged consumer, lower rates, I think all that supports growth within internet stocks. We saw a good amount of multiple expansion in 2023. But we're still below historical averages across the internet sector. So there's more room to run within multiple expansion. We think we can start to see upward estimate revisions.