The advent of ChatGPT has stirred significant anxiety about artificial intelligence’s impact on businesses across various sectors. Two years on, the feared upheaval hasn’t fully materialized, yet the atmosphere is thick with uncertainty. Adobe Inc. (ADBE) has recently experienced a 20% nosedive in its stock value that started with a disappointing revenue forecast, reigniting fears that even with its own artificial intelligence (AI) development, it might succumb to competition from AI startups like OpenAI and Runway AI. This has put Adobe on track for one of its worst monthly performances in over two years, highlighting it as a cautionary tale in the ongoing AI narrative.
However, as Bloomberg notes in a report, the landscape of AI’s influence isn’t uniformly bleak or bright. Duolingo Inc. (DUOL), for instance, has seen its stock rise over 50% this year, leveraging AI to reduce costs and expand its educational offerings beyond language learning into math and music. Similarly, internet services providers like GoDaddy Inc. (GDDY) and Wix.com Ltd. (WIX), initially seen as vulnerable, have enjoyed significant stock increases, 94% and 80% respectively, suggesting that adaptation to AI might not be a zero-sum game where only tech disruptors win.
Yet, not all sectors have dodged the bullet. Chegg Inc. (CHGG), an online education platform, has witnessed its market value plummet by over 84% in the last 12 months, directly attributing its struggles to the rise of generative AI services. Analysts have given Chegg a unanimous “do not buy” recommendation, reflecting the harsh reality for some businesses in this new AI-driven era. Similarly, Yelp Inc. (YELP) has seen its shares dip by nearly 20%, with concerns about AI’s long-term impact on its growth model.
The market’s reaction to AI has been mixed, with a Goldman Sachs (GS) basket of AI-risk stocks gaining only 21% compared to the S&P 500’s 55% since the end of 2022. This disparity illustrates the difficulty in forecasting AI’s market impact. While tech giants like Microsoft (MSFT) continue to pour billions into AI, the anticipated revenue from these investments has been slower to materialize than many anticipated.
Investment strategies have shifted accordingly. Some investors, like those at Fulton Breakefield Broenniman LLC, have divested from companies like Accenture (ACN), fearing AI’s automation capabilities might diminish demand for traditional IT consulting. Yet, even Accenture’s recent earnings for the first quarter of fiscal year 2025 suggested a nuanced story. The company reported $17.7 billion in revenue for the quarter, reflecting a 9% year-over-year increase and surpassing analysts’ expectations of $17.1 billion. Net income came in at $2.28 billion, or $3.59 per share, compared to $1.98 billion, or $3.10 per share, in the previous year. New bookings tied to artificial intelligence reached $1.2 billion, playing a significant role in the company’s growth. Accenture also raised its full-year revenue growth forecast to a range of 4% to 7%, up from its previous projection of 3% to 6%. However, while AI contributed positively to revenue, the results highlighted a more nuanced picture, as the growth was not sufficient to position Accenture as a standout performer.
The broader consensus among experts is that the full ramifications of AI on business models are yet to be fully understood. Gil Luria from D.A. Davidson told Bloomberg that AI’s disruptive power, akin to that of the internet, will unfold over years, not months. Kevin Mahn of Hennion & Walsh Asset Management warns that the real losers will be those companies slow to invest in AI, left to play catch-up.
In this unpredictable climate, the advice for investors leans towards maintaining a diversified portfolio with a tilt towards larger companies capable of significant AI investment. As David Kotok of Cumberland Advisors notes, the divide between companies with resources for AI and those without will widen, potentially leaving some businesses behind in the long run. The narrative of AI in business is still being written, with winners and losers yet to be definitively categorized.
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