The $73 Billion Problem Hiding in Every Fortune 500 Company

A few years ago, I sat across from a Fortune 500 executive who changed how I think about enterprise software.

He leaned back in his chair with the weary look of someone who'd fought the same battle too many times. "Josh," he said, "I spend $10 million per year paying people to get data out of old computer systems that can't speak to our modern ones."

Ten million dollars every year... just to move data from Point A to Point B.

That's like paying a team of translators to sit between your accounting department and your inventory system... manually copying numbers sent back and forth, because the two systems are speaking different languages.

This wasn't some small regional company with outdated technology, either. It was a multinational giant with tens of thousands of employees and billion-dollar budgets.

It was simply trapped by what I call "digital quicksand." That is, the more systems you add to solve problems, the more disconnected your business becomes.

But as you'll see, one technology is set up to fill in this gap – and so far, the market is missing how important it is...

Corporate America's Technology Gap

Right now, across corporate America, armies of highly educated workers spend their days doing mind-numbing tasks that machines should handle.

They're copying data from Excel into SAP software... checking invoices between three different systems... and generating reports by pulling information from several different databases.

It's not because these companies are behind the times. Modern enterprises are just like digital versions of Frankenstein's monster – stitched together from dozens of different systems that were never designed to work together.

According to research from Salesforce, each large enterprise uses more than 1,000 different software applications on average. Most of them can't talk to each other without a human in the middle.

But what if I told you that one technology can fix this problem?

It's called robotic process automation, or "RPA." Before you picture C-3PO shuffling around an office, let me be clear: These aren't physical robots.

They're software bots. They can mimic human clicks and keystrokes. They can log in to systems, move data, generate reports, and handle simple workflows – all without coffee breaks, sick days, or salary negotiations.

In short, AI is giving us a way to automate tasks that require flexibility and decision-making abilities. But RPA bots came first... with a stable, tried-and-true way to handle structured, rule-based tasks.

The global RPA market is projected to hit $73 billion by 2032. But here's what most investors are missing: We're about to witness the convergence of RPA with AI.

The Comeback Story Wall Street Doesn't Believe

The leader in this space is UiPath (PATH). But Wall Street doesn't realize it, because of a common mistake – one you should never make...

It's confusing temporary problems with permanent decline.

Here's what happened: UiPath went public at the peak of the first RPA wave, trading near $80 per share. Then came increased competition, management turnover, and the rise of AI euphoria... which made "boring" RPA look obsolete.

The stock collapsed to around $10. But the "smart money" recognizes a pattern here.

Every transformative technology goes through the same cycle: 1) Initial euphoria, 2) a reality check and dramatic sell-off, 3) fundamental improvement during the "trough of disillusionment," and finally, 4) explosive recovery as the market wakes up to the new reality...

UiPath is deep in the third stage right now. After its massive sell-off, it's working on its fundamentals to set itself up for future growth.

The numbers tell the story...

In its latest earnings released in September, UiPath reported $1.72 billion in annual recurring revenue (up 11% year over year). It also reported 108% net revenue retention... which, in plain terms, means that its customers spend more money each year.

It has $1.5 billion in cash, with minimal debt. And because software is cheap to make at scale, the business is incredibly profitable, with 82% gross margins.

And here's the kicker... Just a few weeks ago, UiPath announced major AI partnerships with Nvidia, OpenAI, Snowflake, and Google at its annual FUSION Conference. The stock popped 25% on the news.

The Reinvigoration of Enterprise Automation

UiPath's technology is hitting an inflection point. It's about to become exponentially more powerful and useful.

Just as solar panels only became game-changing after we got battery-storage technology, RPA was valuable before AI... But it's becoming indispensable now.

In short, UiPath isn't just doing RPA anymore. It's about to become the operating system for intelligent enterprise automation.

Wall Street is still pricing UiPath like a legacy business in decline. About 14% of its float is sold short. Specifically, roughly 55 million shares are betting against the company that just partnered with OpenAI, Nvidia, Google, and Snowflake.

That's the market's mistake.

UiPath still needs to successfully carry out its AI strategy. But as AI makes existing technologies better, overlooked opportunities like this will be all over the market.

Look for the gap between expectation and reality... That's exactly what we like to see as investors.

Good investing,

Josh Baylin

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