When you think about Walmart (NYSE:WMT) stock, several phrases come to mind: discount retailer, one-stop shop, everyday low pricing. However, artificial intelligence – particularly generative AI – isn’t likely an attribute commonly associated with the big-box retailing giant. That’s about to change, making WMT stock a worthwhile long-term investment idea.
Aside from cryptocurrencies, the hottest topic on Wall Street arguably is AI. Several innovators – most notably Nvidia (NASDAQ:NVDA) – have thrust into the spotlight for obvious reasons. According to Grand View Research, the global generative AI market size reached a valuation of $13 billion last year. But that’s just scratching the surface.
From 2024 to 2030, experts in the filed believe that the sector could expand at a compound annual growth rate (CAGR) of 36.5%. By the forecast’s culmination point, the industry could be worth $109.37 billion. And that could be grossly understating the total impact of digital intelligence. For example, Bloomberg cites research that generative AI could become a $1.3 trillion market by 2032.
Here’s the bottom line: everyone wants a piece of the AI pie. Intriguingly, though, Walmart may have one of the best opportunities in extracting maximum practical value out of digital intelligence. Therefore, WMT stock should be on your radar.
Artificial Intelligence Isn’t Always Intelligent
To really understand the value of WMT stock as an underappreciated AI play, we must start with the negative: artificial intelligence isn’t always intelligent.
According to the Harvard Business Review, “[g]enerative AI can and will automate some of the tasks of knowledge workers, but that doesn’t necessarily mean it will replace all of them.” No kidding. One of the main problems that makes AI currently ineffective as a human replacement protocol is its accuracy or lack thereof.
Early this year, Axios reported on a rather unflattering assessment of the popular chatbot ChatGPT. Researchers discovered that the AI platform incorrectly diagnosed over eight in 10 selected pediatric case studies. Naturally, this high error rate raises serious questions about AI’s deployment in certain fields such as medicine.
What makes the problem even more perplexing for AI research and development teams is the so-called black box problem. Basically, AI algorithms present transparency and interpretability challenges. Subsequently, it’s difficult to understand how a particular system arrived at its answers.
One explanatory factor is that AI may not presently perform well under open-ended circumstances. However, in pre-defined conditions — such as a chess-playing algorithm – AI represents a far superior option to human operators. For example, in chess, AI protocols can calculate millions of moves per second.
Plus, the framework is standardized. Pawns and bishops can only move in certain ways and so on. This dynamic may give WMT stock a key advantage when it comes to practical AI solutions.
WMT Stock Aims for Higher-Hanging Fruit
With ChatGPT and Gemini (previously called Bard) part of the public domain, the low-hanging fruit of digital intelligence has been plucked. To distinguish themselves, AI competitors must start going for the higher-hanging fruit. And that’s exactly why WMT stock is so appealing.
Earlier this year, Walmart stated that it is integrating generative AI functionality into its website’s search engine. Rather than customers typing in products that they’re seeking, they can instead pose questions to Walmart’s systems, such as requesting ideas for a party that they’re hosting. In this way, Walmart can accelerate the planning process.
According to one study, 80% of Americans will spend nearly a year of their life doing chores. Part of that involves planning for certain events. Moving forward, then, Walmart won’t just be another retail solution. Rather, it can be a resource for day-to-day enhanced productivity, thus freeing up time for things that matter.
Further, AI should be a truly accretive innovation for WMT stock. That’s because of the predefined conditions of the retail context. Walmart customers aren’t going to pose open-ended questions about the meaning of life. Rather, they’re asking questions under the framework of purchase intention. With the rules of game defined, Walmart’s AI should be surprisingly effective.
AI That Matters
While much attention has been paid to the rise of AI, the innovation has run into some challenges. Key among them is the accuracy and utility question. However, Walmart’s digital intelligence protocol centers specifically on retail solutions for customers with strong purchase intentions. Therefore, the company’s AI should help boost the top and bottom lines, making WMT stock a compelling investment.
On the date of publication, Josh Enomoto did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
