Time to Reconsider the AI Frenzy?

Join TradeAlgo's Free Live Trading Session ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ [EARN WHILE YOU LEARN! JOIN OUR FREE LIVE TRADING SESSION!]( Hello investor, Time to Reconsider the AI Frenzy? Could a CEO be worth $15 billion to a company? Wall Street seems to think so. Snowflake announced yesterday that its CEO Frank Slootman is retiring and will be replaced by former Google ad chief Sridhar Ramaswamy. As a result, the stock plummeted by as much as 24% in extended trading. At the same time, the company also issued subpar guidance. Product revenue in the first quarter will be between $745 million and $750 million — lower than the $759 million estimated. Frank Slootman (Photo: CNBC) Speaking of revenue forecast, Salesforce also fell in extended trading after issuing a light revenue outlook. Its revenue grew 10.8% year over year in the quarter, but it expects $37.7 billion to $38 billion in revenue for the 2025 fiscal year. (A revenue growth of 8.6%.) Analysts expected $38.62 billion. Wall Street didn’t like it at all. The stock fell by as much as 6% after the report. Technology stocks skyrocketed this year on the back of AI frenzy, but investors are starting to demand companies to show how AI has actually translated into higher profits. Salesforce is one of the biggest marketers for AI products, but these products have failed to accelerate growth in the company. That’s something that investors will pay attention from now on. - “The AI hype is not sustainable because much of the stock gains seen due to AI are about the marketing of AI and the hype. Only one or two companies have actually experienced a specific revenue bump from AI,” said David Bahnsen, chief investment officer at The Bahnsen Group. - “Where there has been AI fever — and there has been a lot of it — it has priced in perfection and then some. It is a 1999 déjà vu.” David Bahnsen, chief investment officer at The Bahnsen Group (Photo: CNBC) The biggest catalyst for today’s trading: Get ready! We will get the latest inflation reading for the personal consumption expenditure reading for January this morning. It is the Federal Reserve’s preferred measure of inflation, and the market has been waiting for this data to determine if inflation is getting sticky. - “The market is clearly just treading water ahead of the PCE report,” said Jay Hatfield, CEO at Infrastructure Capital Advisors. The European Union will also release its consumer price index data tomorrow. This data is key because it’ll be for February, so it’d be more real-time data than the US’s PCE data due today. Infrastructure Capital Advisors CEO Jay Hatfield said if inflation keeps dropping, the ECB might start cutting rates which might push the US central bank to cut rates, as well. - “The ECB will be forced to actually cut rates in June because inflation is going to be below their target,” said Infrastructure Capital Advisors CEO Jay Hatfield. “If the ECB cuts rates then U.S. rates will drop accordingly.” Don’t Sleep on This “Almost-Bulletproof” E-Commerce Brand Today’s Stock Pick: Chewy, Inc. (CHWY) Virtually every e-commerce company is terrified of Amazon, but Chewy has proven to be a formidable competitor in the pet industry. Chewy has the focus advantage where it can offer customer experience exclusively for pet owners. As a result, it offers wide-ranging products and services: pet food, telehealth, insurance plans, and generic and specialty medications. And the company is fully aware that it is difficult to master fulfillment. Rather than outsourcing, Chewy built a strong fulfillment center network with more than a dozen centers in operation. Notably, fourof them are automated. CEO Sumit Singh said the company could save between 18% to 20% on items shipped from its automated fulfillment centers versus its traditional fulfillment network. That’s a huge competitive advantage that almost any competitor would have a difficult time matching. You simply can’t build an automated fulfillment center overnight. It takes years of investments and trials and errors to master the process. And this would lead to lower prices on Chewy’s products. Plus, the company has a very nice gross margin of 28% for an e-commerce company — a phenomenal jump from 20% in 2019: (Source: Chewy.com) Expanding product lines: Once a company builds a relationship with customers, there is plenty of opportunities to expand its offerings. Chewy recently announced an expansion in its CarePlus program (partnered with Lemonade) where customers can purchase insurance products for their pets. Vibeful is the first private brand in pet wellness that Chewy launched. It is a line of products that include multivitamins to hip and joint supplements. The company said the non-prescription pet health and wellness category has an estimated TAM of over $2.4 billion, thus bringing a huge opportunity for the company to tap into. Lastly, Chewy just launched the beta version of its sponsored ads program. Like Amazon, it allows vendors to purchase dedicated product placements on Chewy.com. This is a high-margin business that could boost Chewy’s revenue for many years to come. Predictable revenue: Believe it or not, 75 percent of Chewy’s sales were from Autoship customer sales. By selecting Autoship, customers would re-order products automatically and bring more predictable revenue to Chewy. This is absolutely essential for a stock to rise over time. (Source: Chewy.com) In the graph below, you’ll see how revenue grew steadily over the years. It had just $2 billion revenue in 2018 and the company grew it to $10 billion in fiscal year 2023. (Source: MacroTrends) Bottom line: Chewy operates in a fast-growing pet industry, and it would be difficult for any competitor to penetrate its e-commerce advantage. Fulfillment centers are notoriously expensive and tough to build. With over 75% of its revenue coming from Autoship, Chewy has the foundation to become a compounding stock that could pay off handsomely for many years to come. [EARN WHILE YOU LEARN! JOIN OUR FREE LIVE TRADING SESSION!](       © All Rights Reserved, Trade Alliance [Unsubscribe]( | [Manage Preferences](