Why I’m Red-Flagging These Two Likely AI Losers

Some things you never forget...

Like what very well may have been my first appearance during the first year of my pal Jim Cramer’s “Mad Money” show on CNBC.

Back then, with me living in San Diego, Jim had invited me on for a weekly segment called “East vs. West,” where I would generally take the other side to whatever he was talking about.

In this case – silly me! – I was the bull. And die-hard newspaper guy that I was at the time, I was arguing the case for the few remaining public newspaper chains... in large part because at that time they were still producing gobs of free cash flow.

But what Jim saw – as someone who was deeply ingrained in the rapidly evolving world of online media through his creation of TheStreet.com – was that newspapers were dying.

Coulda, Woulda, Shoulda...

I coulda, would and shoulda seen it. After all, I was one of the first mainstream journalists to hop to what was then called “online journalism,” starting with six years at TheStreet.

Yet when it came to newspapers, I was no doubt in denial – blinded by legacy, loyalty and the cash flow, which at that point was merely starting to melt, not disappear.

And let’s not forget, at the time three newspapers were still landing on my driveway... even though by the time they arrived, I had probably gone through all online except the San Diego paper, which I sometimes never took out of the bag.

I was thinking about all of this when researching the two companies I’m adding to the Red Flag Alerts list...

Both are likely to be hit by AI the same way newspapers were hurt by Craigslist, the rise of social media and whatever else ate into advertising revenue.

And with both of these companies, the unwind is not evident quite yet if you just do a cursory look at the numbers.

Then Again...

Disintermediation is not always easy to see in the early stages, which is why it’s so easy to dismiss in the moment. We’ve seen it over and over...

Newspapers thought they could beat it with their own online operations....

Cable thought the answer would be its pay-per-view.

Broadcasters, well... as kings of the content hill they simply didn’t see their own rapid decline coming until it arrived.

The same is true with these companies, which both say they’ve endured change before and will now, in fact, thrive with AI.

And it very well may be, by helping them cut costs. But thanks to the rapid adoption of the early rounds of generative AI, it’s helping their customers cut costs too... by taking some of that outsourced business in-house.

That, in turn, is starting to siphon off business.

Which gets to these two companies...

The Envelope, Please...