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AI’s Impact: Winners and Losers in the Evolving Market

Hello, Reader.

Years ago, I asked my dad why his father moved from Illinois farms to the cattle ranches of Montana in the early 1900s.

“Henry Ford destroyed all the farm jobs,” he said. “My dad couldn’t find work on farms anymore, so he went to Bozeman to work as a cowboy.”

While Ford didn’t personally end farm jobs, his innovative tractor did. The “Fordson Model F” tractor began production in 1917 and quickly appealed to farmers in the Midwest.

By 1922, these tractors captured an impressive 70% of the market share. Their production soared, with 700,000 units produced annually by 1928.

Artificial intelligence is similar to Henry Ford’s groundbreaking tractor.

AI represents a new technology that promises vast efficiency gains but also threatens to reduce or eliminate many job categories.

Such significant changes can be hard to grasp, making them challenging to accept and adapt to profitably. Therefore, it’s crucial to “future-proof” our lives as much as we can.

This necessity underlines the importance of recognizing unique investment opportunities that AI presents.

Essentially, AI is dividing the commercial landscape into two groups: those who apply AI successfully and those who fall victim to its rise.

Companies that aim to survive must embrace and integrate AI technologies quickly. Failure to adapt may result in extinction, particularly as we approach the development of artificial general intelligence (AGI).

I first raised concerns about AGI’s impending arrival last August, sharing insights on companies poised to succeed or struggle in the AI space with subscribers to my elite trading service, The Speculator.

I’m pleased to note that my predictions have proven accurate, leading to tangible gains.

Today, we’ll explore one notable success story in AI and identify a company that investors should steer clear of.

A Toast to This AI Winner

Since I highlighted this AI success story last August, its stock has surged by 80%.

This Boston-based company provides AI-enabled solutions across nearly every aspect of the restaurant industry—from online ordering to reservations management and supply chain oversight.

I’m referring to Toast Inc. (TOST).

Founded in 2011, Toast has developed a comprehensive platform that caters to the technological needs of restaurants, specializing in online ordering, contactless payments, delivery services, and bookkeeping.

As a result, many of us—especially those who order takeout or delivery—are familiar with their technology.

This innovative approach has allowed Toast to achieve an outstanding 119% net revenue retention rate since 2015. This metric gauges the percentage of revenue retained from existing customers over time.

In essence, Toast has transformed into a data-driven software company, amassing one of the largest and most valuable datasets in the restaurant sector. This wealth of data enables the development of advanced AI tools tailored for the industry.

With its software, Toast can help restaurants accurately calculate costs in real-time and determine optimal pricing strategies. Such insights can significantly influence success or failure in the competitive restaurant landscape.

As Toast continues to accumulate data from its growing client base, its AI effectiveness improves.

After years of negative operating margins, Toast’s profits have turned positive over the past nine months. Consequently, the company’s gross profits (EBITDA) are also positive and trending upward.

Last week, Toast reported record revenue and EBITDA for the first quarter, exceeding analyst expectations. Following the earnings release, the stock jumped by 10%.

Toast is quickly and thoroughly integrating AI into its leading platform, which is a key factor supporting my belief that the company will continue to thrive.

This is a business worth further investigation, as it is positioned for rising revenues and profits in the coming years.

As AI technology becomes more entrenched in our daily lives, the number of successful “AI appliers” will increase, while the count of “AI victims” will expand even faster.

Let’s now discuss a potential stock to avoid.

There Can’t Be Winners Without Losers

Companies resistant to adopting AI technologies may lack the necessary expertise or operate under business models incompatible with AI’s potential.

In either scenario, we want to avoid holding stocks that are unlikely to adapt and thrive in this evolving landscape.

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Shutterstock Faces Financial Challenges Amid Rising AI Competitors

Artificial intelligence poses significant risks to various companies, and one notable example is Shutterstock Inc. (SSTK). Last August, I highlighted the company’s vulnerabilities to AI advancements.

Once a leader in graphics, Shutterstock is now caught in a challenging position as its library of proprietary images becomes less valuable.

AI technologies such as OpenArt have diminished the role of “proprietary graphics” in the market.

The increased competition has led to rising subscriber “churn,” driving down gross margins and net income—a reflection of dwindling demand for Shutterstock’s content.

Since that warning, Shutterstock’s financial standing has worsened. The company reported earnings per share (EPS) of only $1.01 last year, falling short of the $1.90 analysts had predicted. The expected earnings for this year have also declined sharply from $3 to $2.10. Consequently, Shutterstock’s stock has dropped over 40% since my initial analysis.

This situation is not isolated. All investors should assess potential investments with regard to AI’s influence, considering both the opportunities and risks it presents.

To address this, I have completed four new research reports focused on investing in AI, particularly before artificial general intelligence (AGI) becomes more widespread. Three reports recommend stocks to buy, while one alerts investors to three stocks to sell.

Furthermore, I will be hosting an event to discuss the risks and advantages associated with AGI.

The urgency to prepare for the rise of AGI is escalating, prompting me to issue my “Final Warning.”

During this event, which is available for viewing now, I present a three-part strategy that includes:

• Insights on sectors such as precious metals, energy, real estate, and biotech that could be promising right now.
• My top AGI-related stock pick, which has already shown a 46% gain while the S&P 500 index fell 5%.
• Essential stocks to avoid or sell immediately to prevent potential losses.

Watch my urgent “Final Warning” presentation for more details.

Regards,

Eric Fry