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On several occasions in recent years, Alphabet CEO Sundar Pichai has said: “AI has the potential to be more transformative than electricity or fire.” I’ve been spending some time thinking about how AI could either electrify or burn down companies in my ISA/SIPP portfolio.
There’s evidence emerging that the internet is already shifting from being search-driven to AI-driven. In other words, a zero-click internet is developing, where users get what they need from AI summaries without visiting external websites.
This could trigger second- and third-order effects, impacting many internet-based business models.
Somewhat fittingly then, I asked ChatGPT to run its artificial intelligence over my portfolio and rank each stock as either low, moderate or high risk of being disrupted by such AI trends. Here’s what it said.
High risk
Let’s start with those it reckons are at high risk of disruption. It flagged up language learning app Duolingo (NASDAQ: DUOL), which it said is “highly reliant on app engagement, gamified learning, and digital visibility.”
I’m less worried about Duolingo struggling in a zero-click internet world, as it already enjoys very strong brand awareness on social media. Many of its 130m monthly active users signed up through word of mouth, which the bot doesn’t mention.
Q1 revenue jumped 38% year on year to $231m, with paid subscribers rising 40% to 10.3m. The company is absolutely thriving.
That said, more powerful AI-powered apps could pop up, tempting learners to cancel their paid Duolingo subscriptions. So this is worth monitoring.
Others possibly at risk
Another stock it said was vulnerable to AI and zero-click disruption was Oddity Tech. This is a fast-growing direct-to-consumer beauty brand with a strong digital marketing focus.
The stock is up 100% since I identified it as a hidden gem around one year ago.
ChatGPT said AI voice commerce, where customers tell voice assistants like Alexa to shop online and make purchases, could bypass Oddity’s offerings. That’s plausible, though I’m reassured that 60% of Oddity’s revenue is repeat purchases, indicating high customer satisfaction.
A third stock the bot highlighted was e-commerce enabler Shopify. It said its merchants “depend heavily on SEO [search engine optimisation], paid traffic, and social discovery — all threatened by AI assistants“.
I’m not convinced that Shopify is at risk. If anything, it should benefit as it rolls out powerful AI tools for merchants, something it’s already doing.
The final one was The Trade Desk, which is an ad-tech company that helps advertisers buy programmatic ads. ChatGPT pointed out that it “thrives on ads shown across the open web – news sites, blogs, websites”. But in a world of fewer clicks and shrinking third-party ad space, The Trade Desk risks losing relevance.
I would also add that the company also has a growing connected TV business. Streaming platforms like Netflix and Disney, with whom it’s partnered, are not facing changing consumer behaviour.
These ones look ‘safe’
Thankfully, most stocks in my portfolio are at low risk of AI disruption, according to ChatGPT. These include chip maker Taiwan Semiconductor (TSMC), robotics giant Intuitive Surgical, and luxury carmaker Ferrari. None rely on internet clicks.
Two others I would highlight are Novo Nordisk and AstraZeneca. These pharma giants should actually benefit from AI-driven drug discovery. While lower US drug prices present a medium-term risk to their profits, I think both are worth considering buying.
