Editor's note: Companies are prioritizing AI today. And according to Joel Litman of our corporate affiliate Altimetry, this is changing the game for big tech companies... and for the smaller players, too. In this issue, recently published in the free Altimetry Daily Authority e-letter, Joel explains why the potential upside is so high for this space in the years to come – and why this trend could reshape the wider economy.
Shopify's (SHOP) recent hiring freeze could redefine the U.S. workforce...
The e-commerce giant announced it will only approve new hires for roles that artificial intelligence ("AI") can't fill.
This comes on the heels of similar decisions by technology giant IBM (IBM)... and even smaller companies like Klarna, which provides payment solutions.
They're all pursuing an "AI first" strategy, mirroring Elon Musk's Department of Government Efficiency's ("DOGE") mandate for the U.S. government.
Altogether, this is part of a growing trend among tech companies to double down on AI capabilities. It's what they need to continue evolving... and dominate the competition.
Today, we'll explore how Shopify's AI-driven strategy is leading the pack... This technology could unlock big cost savings, boost profitability, and meet growing investor expectations. And, just as important, it's not the only company capitalizing on this trend.
AI is already shifting this company's financial outlook.
Analysts have long speculated that AI could reduce operational costs, optimize products, and enhance user experience. And now, we're finally seeing tangible actions and results.
Shopify's pivot to AI is a strategic bet on efficiency and growth.
The company has already leveraged AI tools, like Sidekick and Shopify Magic, to boost productivity... These tools are helping merchants streamline and automate routine tasks.
With an AI-focused hiring approach, Shopify will scale its offerings without significantly growing its workforce. This will keep company costs in check.
Simply put, the company is using AI to redefine the future of work in the U.S. And investors are catching on to the trend...
Wall Street Expects Shopify to Profit From AI
In fact, they already seem to understand the opportunity in Shopify...
At Altimetry, we analyze this through our Embedded Expectations Analysis ("EEA") framework.
The EEA starts by looking at a company's current stock price. From there, we can calculate what the market expects from the company's future cash flows. We then compare that with our own cash-flow projections.
In short, it tells us how well a company has to perform in the future to be worth what the market is paying for it today.
Shopify's Uniform return on assets ("ROA"), a measure of the company's profitability, has hovered around 23% since 2019. (We're setting aside two outlier years of much higher returns due to the COVID-19 pandemic.)
Analysts are projecting a Uniform ROA of 36% by 2026, thanks to the surge in the company's AI initiatives.
Similarly, investors expect Shopify's profitability to continue expanding and its Uniform ROA to reach an impressive 80% by 2029. Take a look...
In other words, the market is already pricing in Shopify's future gains from AI technology.
The popular names will get plenty of attention. Wall Street has similar expectations for IBM... Its Uniform ROA is expected to stay near record highs over the next few years, thanks to AI.
This underscores just how powerful these tech investments can be. And it's encouraging smaller players (like Klarna) to get on the AI bandwagon, too...
That's why investors should look beyond the usual suspects...
Shopify's AI-focused strategy highlights an important point... Businesses must keep up with the latest technology to compete in a rapidly changing environment.
Right now, AI is revolutionizing the corporate playbook. And the companies that embrace this technology – big and small – could see exponential growth.
Folks, there are many potential AI winners out there. What's happening at Shopify will play out at scale in the wider economy...
Lots of smaller, under-the-radar companies may become critical players in the value chain. And they may offer even bigger upside potential than Shopify.
Regards,
Joel Litman
Editor's note: Joel and his team believe Musk has come to Washington to roll out AI across the entire government – which will create huge opportunities for the companies poised to profit from the AI boom.
And last week, with the help of a 25-year government insider, Joel revealed the four specific moves you can make with your money before May 1 – to exploit the next chapter of Musk's AI agenda. Click here to learn the details.
Further Reading
"AI is reshaping the future of work, cybersecurity, and global influence," Joel writes. The U.S. is emerging as a key player in the global AI boom. But investors need to be careful – and separate the genuine innovation from the hype... Learn more here.
Not all companies are adopting AI technology at the same speed. But the biggest winners will be those that adopt early and execute fast. And for your portfolio, that could mean the difference between double-digit gains – and double-digit losses... Read more here.
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