By William Tamworth, manager of the Artemis UK Future Leaders investment trust and the Artemis UK Smaller Companies fund
In the past couple of years we’ve seen companies marked as ‘AI winners’ soar – Nvidia being the poster child, up over 300% since the beginning of 2024. But perhaps this is changing. Several of the hyperscalers driving the AI trade have seen double-digit share price falls from their 12-month peaks to today.
Investors are watching market updates from these companies closely but maybe they should be turning their attention to those companies marked out as victims of AI, instead. Many of these businesses have seen brutal share price falls since the AI phenomenon really took hold.
The current valuations of some of these ‘AI loser’ stocks make sense only if a negative outcome is all but guaranteed.
I recently spoke with bosses at three British companies we own that have had a difficult time. Each of these businesses has been subject to market scepticism around the AI narrative.
YouGov: AI increases demand for services
Polling company YouGov has historically traded on a relatively high valuation. Not now. It has seen its share price fall around 80% since January 2024 – against a rise for the FTSE All-Share of 39%. CEO Stephan Shakespeare puts the challenges down to fears about the impact of AI.
Shakespeare is concerned about extrapolating tomorrow’s reality from today’s patterns. He added: “What we really want to know is: is tomorrow different from the way that we expect? YouGov measures change, real change, driven by beings in a social circumstance. You can’t synthesise that.”
According to Shakespeare, AI is now creating a growing market for YouGov’s underlying data because it’s making proprietary data more valuable. “The more data you have, the more you can build it into your business in live ways with AI. It’s not like the old days, when you did a survey and you thought about it a bit. This is data coming at you every day, showing you how things are changing and how you need to adapt.”
MONY: Regulation and standards a protective moat; AI tools need its data
Best known for its Money Saving Expert and Money Supermarket brands, MONY also owns cashback brand Quidco and offers a range of services to other organisations wanting to provide comparison services. Its share price is down nearly 30% since the start of 2024.
This is despite the company having reported growing earnings and strong cashflow – and doing so while investing in and launching new products.
CEO Peter Duffy thinks concerns are overblown and its moat is not breached. “MONY isn’t a search engine but a regulated financial intermediary, therefore answerable to the FCA,” he said. “We have to produce advice for customers which is explainable, repeatable, auditable. These are all things that large language models don’t do because they’re probabilistic.”
By embedding MONY’s engine within large language models, there may be an opportunity for growth – and it tells us something about how well invested MONY’s technology stack is that the company had one of the first apps to launch within ChatGPT.
GBG: AI doesn’t have our quality data and it drives efficiency
GBG is a global leader in identification verification and fraud prevention. Dev Dhiman was appointed CEO in early 2024, as the AI investment story was taking hold in equity markets. Since then the company’s share price is down 24%.
He said: “Fraud is pervasive and will only grow. That will need to be countered. Fraud patterns also change quickly, so you need to react really fast to new trends.”
GBG’s proprietary data sources give Dhiman confidence that AI won’t generate meaningful competition. “We have the most complete data set available today in both identity and in our location business,” he said. “A lot of that data is permissioned or regulated, including government data sources and other things where access is quite tightly controlled.”
Since becoming CEO, Dhiman has taken more than £10m of costs out of the business by simplifying things and introducing automation. AI is reducing costs. “It’s GBG plus AI – not GBG versus AI,” he concluded.
Lessons
These discussions are helpful in flagging up questions investors might ask when analysing so-called ‘AI losers’. How good and important is their data? Is it publicly available or is it proprietary and protected? Can AI replicate it? Will AI analytical tools and apps increase subscriptions for data? Is the company using AI to cut costs or enhance its own offering to grow revenues?
Winners and losers are labels that are easy to apply, but do they really reflect the rapidly shifting world we live in? When a highly uncertain outcome is being treated by markets as a near certainty, it is likely to be mispriced. The interviews and research we have conducted on stocks like these convince me that many companies have been mislabelled as ‘losers’. For investors, this could turn out to be a winning opportunity.
