Jacob Mitchell: How to spot an AI imposter
Learn which red flags you should look out for to spot the companies that are masquerading as AI winners.
Note: This clip was taken from the AI Panel at Livewire Live 2024 on 17 September 2024 at Sydney's Art Gallery of NSW. You can check out the full video below:
Equities
Watch: How big is the AI pie? Who wins and who gets crushed?
View
There are probably more artificial intelligence imposters than investors realise. But how do you spot the fakers from the real winners before it's too late?
According to Antipodes' Jacob Mitchell, investors should avoid businesses that have no real technological advantage, companies that don't have a pathway to market - those that don't have distribution, and stocks that don't have any data.
"In software, there's a real difference between a platform software company like a Workday Inc (NASDAQ: WDAY) and Oracle (NYSE: ORCL) (both Antipodes holdings) or a Salesforce (NASDAQ: CRM), and at the other extreme, a Zoom (NASDAQ: ZM) or a point solution," he explained.
"I think the point solutions are really easily disrupted in this world."
Take Zoom, as an example, which once traded on a revenue multiple of around 30 times. During the COVID-19 pandemic, investors extrapolated that Zoom would put an end to all business flights... Obviously, while business flight volumes may have fallen, that hasn't happened.
"It's natural for the market to extrapolate revenue growth to continue, and then something doesn't actually work out to be a resilient business," Mitchell said.
"I'd be hunting [for shorts] in vertical software, point solution software, and then companies that are funded by private equity that don't have the resources to take their tech forward."
Roughly 20% of the US workforce is in a company owned by private equity, and funded by private credit or high yield bonds, he added.
"Because of where interest rates are, they don't have any cashflow, so they can't invest in their tech stack," Mitchell said.
"The winners are pretty much mega-caps. The losers are medium to small businesses that don't have the resources to invest and stay current."
Never miss an update
Enjoy this wire? Hit the ‘like’ button to let us know.
Stay up to date with my current content by
following me below and you’ll be notified every time I post a wire
Ally Selby is the deputy managing editor at Livewire Markets, joining the team at the end of 2020. She loves all things investing, financial literacy and content creation, having previously worked for the likes of Financial Standard, Pedestrian Group, Your Money, Sky Business and Sky News.
........
Livewire gives readers access to information and educational content provided by financial services professionals and companies (“Livewire Contributors”). Livewire does not operate under an Australian financial services licence and relies on the exemption available under section 911A(2)(eb) of the Corporations Act 2001 (Cth) in respect of any advice given. Any advice on this site is general in nature and does not take into consideration your objectives, financial situation or needs. Before making a decision please consider these and any relevant Product Disclosure Statement. Livewire has commercial relationships with some Livewire Contributors.
4 topics
4 stocks mentioned
1 contributor mentioned
Ally Selby is the deputy managing editor at Livewire Markets, joining the team at the end of 2020. She loves all things investing, financial literacy and content creation, having previously worked for the likes of Financial Standard, Pedestrian...
Expertise
Ally Selby is the deputy managing editor at Livewire Markets, joining the team at the end of 2020. She loves all things investing, financial literacy and content creation, having previously worked for the likes of Financial Standard, Pedestrian...
Expertise
Comments
Comments
Sign In or Join Free to comment
most popular
Equities
Why "buy and manage" is the better way to invest in stocks
Livewire Markets
