How Walmart's OpenAI ChatGPT Partnership Could Transform AI Shopping

Meet Sparky.

Sparky is Walmart's (WMT) new AI shopping assistant. And it puts Walmart at the forefront of a trend that will revolutionize shopping. One that will improve shoppers' online experience, drive sales for retailers, and make e-commerce operations more efficient.

Sparky launched in early June and was met with a positive response. The initial reaction from analysts was somewhat muted, however, knowing that Sparky was just one piece of Walmart's overall AI puzzle.

With the news of Walmart's partnership with OpenAI (the company behind the ChatGPT artificial intelligence tool), however, WMT shares spiked 5% and reached an all-time closing high of $107.21 on Tuesday, October 14. Investors were excited about the future of Walmart shopping.

This is unsurprising when you consider data from Adobe Analytics. Between January and July of this year, consumer use of generative AI during shopping trips surged 4,700% year over year. During Amazon's (AMZN) Prime Days (July 8 to 11), AI tools drove 3,300% more traffic to online retailers than a year ago.

This evolution of retail artificial intelligence is an area ripe with opportunity for investors.

Let's see where these opportunities lie, starting with Walmart's partnership with OpenAI.

Walmart's AI Strategy: Why Partner With OpenAI?

Walmart could have built its own large language model ("LLM") AI. That's what Amazon did when it created its AI assistant Rufus.

Instead, Walmart collaborated with OpenAI to build Sparky. It was a sound strategy.

The partnership provides Walmart with access to OpenAI's most advanced AI models and newest updates. This gives Walmart the upper hand in developing the most intelligent and powerful shopping tools in retail, like ChatGPT Instant Checkout. This is an AI-driven feature that allows shoppers to buy products directly within Walmart's Sparky chat interface without leaving the conversation. For returning Walmart account holders, this can be a one-click purchase.

Walmart was one of the first retailers to roll this feature out to customers, following Etsy (ETSY) and several Shopify (SHOP) merchants. Notably, Amazon's Rufus does not use a feature like Instant Checkout.

Walmart also benefits from the data OpenAI can deliver regarding millions of customer interactions with Sparky. This includes:

• Conversational data (prompts, questions, and natural language interactions) that customers use when planning, comparing, and searching for products
• Insights on shopping behaviors and preferences
• Contextual information related to the user's intent or situation
• Product interaction data
• User account information and transaction history

That insight lets Walmart adjust its AI to better serve its customers.

The retail giant is also leveraging OpenAI's expertise in agentic commerce. This is a new form of online shopping where autonomous AI agents perform the entire purchase process for the user.

Of course, Walmart doesn't just hope Sparky will improve the customer experience. The retailer believes it will ultimately get customers to spend more money.

Through highly personalized and contextual recommendations, Walmart expects increased purchases of items beyond the ones customers searched for. And by managing and automating entire shopping tasks, Walmart is banking on Sparky and its new in-store shopping tools (more on that to come) to make it easier and faster for customers to find and buy items. This increases the likelihood they will spend more.

In an AI-consumed world, being recognized as an "AI-first retailer" gives clout. Walmart's partnership with OpenAI has the commerce titan positioned to be a pioneer in AI shopping.

The Rise of Agentic Commerce: How AI Agents Are Transforming E-Commerce

Agentic AI is about creating autonomous systems that can plan and act. AI agents are autonomous software systems within agentic AI that can "sense" their environment, take actions to accomplish goals, and make decisions.

AI agents manage complex workflows and learn from their interactions. This is how they answer questions and personalize the shopping experience as they keep learning.

Agentic AI is transforming retail as we speak, with customer service chatbots, tailored recommendations, shopping assistants like Sparky and Rufus, comparison shopping, virtual try-on tools, and new agentic AI features Walmart released in time for the holiday shopping season.

These include:

• In-Store Savings Tool: Walmart customers wanted the ability to see which items are on sale in their local store. Now they can with one tap of the app – Black Friday deals, clearance items, and Rollbacks.
• Enhanced Search: Customers in Walmart stores can search for products online and see whether the store has those items in stock. The app then directs shoppers to the items' specific locations in the store. Not only does this feature simplify the customers’ shopping experience, it’s also a moneymaker for Walmart. Research shows that customers spend 25% more in store when using the Walmart app while inside the store vs. shoppers who do not use the app in store.
• AI-Powered Augmented Reality Home Decorating: Rather than search for items online, Walmart offers immersive 3D experiences such as "Shop the Background," which allows customers to click on items in product images (say, a piece of art on a wall or accent furniture) and add them directly to their carts. Dynamic Showroom puts shoppers into different rooms, then lets them change the furnishings to match their style.
• Wish List Shopping: Shoppers can create wish lists online or in the Walmart app. When they go to a Walmart store, shoppers can open the wish lists in the app, which will then sort the items in each wish list by aisle.
• Party Planning: Sparky can also help customers plan festivities. By telling Sparky the occasion, it produces a list of relevant products ranging from party supplies to decorations to food.

OpenAI's agentic AI expertise allows Walmart's AI – especially Sparky – to reason, plan, and act autonomously. Its sole purpose is to create a convenient, highly personal, immersive, and full-journey shopping experience. Put simply, these innovations are a game changer for shoppers.

And these are just the innovations that customers see.

Behind the scenes, agentic AI is powering e-commerce in several ways.

• Inventory management agents predict product demand to prevent overstocking or sellouts.
• Sales forecasting agents help retailers plan by predicting future sales.
• Dynamic pricing agents alter prices in real time based on demand, competitor pricing, and inventory.
• Logistics optimization agents make delivery routes and supply chains more efficient.
• Marketing agents personalize campaigns by generating marketing emails and ad copy.
• Predictive cart-filling agents analyze past purchases, browsing behavior, and other data, then automatically add items to a customer's cart by forecasting needs.
• Procurement agents automate B2B purchasing processes like finding suppliers and reviewing quotes.

Agentic commerce is not a fad. It's reshaping e-commerce for both shoppers and retailers. And it's going to generate a ton of money for businesses that adopt the technology... and potentially for those who invest in those companies.

For example, according to McKinsey research, by 2030, the U.S. business-to-consumer retail market could generate up to $1 trillion in orchestrated revenue from agentic commerce. Global projections are as high as $3 trillion to $5 trillion.

There's a lot of money to be made through agentic commerce. And it's a brilliant strategy for Walmart to become an early adopter of this AI-driven technology. Business decisions like this are why Walmart is the largest retailer in the U.S. by total revenue, and the second-largest online retailer in the country.

While Amazon maintains a sizeable advantage in e-commerce, Walmart's approach to agentic shopping, with the help of Sparky, may help narrow that gap.

Walmart's Sparky vs. Amazon's Rufus: Key Differences

Amazon beat its e-commerce rival to the punch when it rolled out the Rufus generative AI assistant in July 2024.

Third-party analysis from e-commerce consulting firm Azoma (Amazon doesn't give official public data regarding Rufus' performance) suggests that Rufus accounted for about 13.7% of Amazon's daily searches in October 2024. By the end of this year, that figure could reach 25% to 35%.

But, while the two retail giants share a common vision of conversational and personalized shopping experiences for their customers, there is one key difference between Rufus and Sparky...

Sparky is powered by a third-party AI company (OpenAI), while Amazon uses its own AI technology to power Rufus.

This creates some benefits for both Walmart and Amazon. Let's start with Walmart.

• Because Walmart uses third-party AI, it can quickly integrate OpenAI's advanced generative AI capabilities, such as Instant Checkout in ChatGPT, without developing its own technology.

• Using the ChatGPT interface makes Walmart's products easier to find and buy without relying on search engines or a search bar.

• OpenAI does what it does best... AI. That lets Walmart do what it does best... focus on its physical stores and optimize its supply chain.

And investing in an AI innovator cuts the risk Walmart would shoulder if it tried to build and maintain its own AI model.

On the downside, Walmart relies on OpenAI for its core AI models and Microsoft for its cloud infrastructure. This arrangement reduces Walmart's control over AI operations. That could lead to challenges in tailoring AI to Walmart's precise specifications.

• Today, Walmart offers more than 400 million items through its online marketplace. Integrating a third-party AI system to complement Walmart's massive operations poses a huge technical challenge.

• Then there's the risk of continuity. What if OpenAI discontinues services? Walmart would be in deep trouble financially and reputationally.

• Finally, Walmart and OpenAI take customer data security seriously. Their collaboration follows existing data security principles, frameworks, and Walmart's public promise of responsible AI. Still, there is some inherent risk of data breaches when sending private customer (and business) information to a third party's infrastructure.

Walmart clearly believes the benefits of its partnership with OpenAI outweigh the risks. And that's something potential investors should keep in mind.

Walmart is already a wildly successful enterprise, built on smart business decisions. While it's still early, it appears the collaboration with OpenAI is yet another wise strategic choice.

Now, let's compare the Walmart-OpenAI partnership with Amazon's decision to use its own AI... which offers some advantages.

• Using its own AI lets Amazon control the entire customer experience. And it keeps all customer and purchase data within its own ecosystem, enabling Amazon to seamlessly tailor ads and recommendations.
• Amazon's AI (Alexa, warehouse robots, customized shopping tools, etc.) can easily be integrated into its current infrastructure, which includes Amazon Web Services ("AWS"), Prime, and fulfillment centers. This setup helps simplify Amazon's operations.

• Amazon can quickly customize its AI models to address specific business needs as they arise.

Using its own AI also exposes Amazon to some risk, however.

• It costs billions of dollars to build and maintain sophisticated, enterprise-level AI models. While it's a logical investment, these costs eat into Amazon's bottom line.

• Amazon's AI takes a more siloed approach versus Walmart's agentic model. For example, Rufus focuses on helping customers with product information, comparisons, research, and recommendations. It is not a truly agentic experience like Sparky.

What Investors Should Watch for Next in AI Agent E-Commerce

Will Sparky prove forecasts right and drive Walmart sales higher?

Walmart is counting on it. The retail titan is predicting that its AI super agents, led by Sparky, will help online sales account for 50% of Walmart's total sales by 2030.

Sparky also powers the company's American advertising segment, Walmart Connect, by generating personalized product suggestions. This division brings in around $3.5 billion in revenue annually and is growing more than 20% each year.

Can Rufus generate more revenue for Amazon even though it doesn't offer the agentic shopping experience Sparky ultimately will?

Leaked internal documents that Eugene Kim reported for Business Insider show that Amazon forecasts Rufus will "indirectly" contribute more than $700 million in operation profits for 2025. That projection for what Amazon calls "downstream impact profit contributions" grows to $1.2 billion by 2027.

Time will tell, though.

For now, investors can watch for retailer AI integration metrics. These include customer engagement rates, conversion rates, and any savings a company is gaining from its AI agents.

They would also do well to remember that Walmart's partnership with OpenAI isn't only about conversions and ads. It's also about optimizing its logistics and automating its warehouse operations.

In fact, Walmart's automated fulfillment centers have already cut unit costs by 20% compared with manual sites. It has projected that the number will grow to more than 30% in cost reduction by the end of 2025.

And Jefferies analysts forecasted that Walmart's operating income could nearly double by 2029 compared with 2023, partly due to automation efficiencies.

Besides, custom AI technology that optimizes delivery routes has already helped Walmart avoid 94 million pounds of CO2 by cutting 30 million miles of unnecessary driving.

Agentic e-commerce also has the potential to turn digital advertising and marketing on its head. If AI agents succeed, ad spend will be diverted from traditional online and search marketing to AI-based advertising.

This will drive more retailers to invest in AI infrastructure, cloud computing, and the development and deployment of AI agents.

That presents a golden opportunity for investors to make a play on retailers that are successfully integrating AI tools into their businesses.

Bottom Line – The Future of Walmart, ChatGPT, and AI Agents in Retail

We're witnessing a seismic shift in retail. The rise of AI agents in e-commerce is ushering in the next phase of the generative economy.

Retailers, including the world's two largest, are adopting AI tools that make decisions and act autonomously to enhance the shopping experience.

We're talking about hyperpersonalization, unseen levels of productivity, and completely new AI-driven business models.

With help from Walmart (and Sparky, of course), agentic AI is permanently changing how people like you and I shop and interact with retailers. Buckle up.

Regards,

David Engle

Editor's Note: AI is powering the next wave of retail and reshaping the shopping experience. Stansberry's Investment Advisory editor Whitney Tilson has leveraged the power of AI as well... to create an AI-driven, fully allocated model investment portfolio known as the New Engine of Wealth ("N.E.W.") System. Get a close look at Whitney's N.E.W. System, and learn how to assemble the optimal portfolio, in his free presentation. Click here to see how Tilson's system can help you stay ahead of the next cloud boom.