Key insights
- The author suggests that several tech companies, including NOW, CRM, CSCO, HPE, and ADSK, are overstating the impact of AI on their businesses, a practice referred to as "AI washing." The analysis indicates that these companies' financial performance doesn't align with their AI claims, with some masking stagnating core businesses or relying on financial engineering rather than genuine AI-driven growth. This could lead to investor disappointment and downward revisions.
More and more tech companies make these public promises, and make these workforce reducing moves in the name of AI. Seems questionable at best.
I've scanned the SEC filings of the tech sector over the past 3 quarters to see if their promises have come to hit their financials. Here are some of the more egregious actors:
Publicly announcing with no results:
$NOW, $CRM : CEO's are going on CNBC and stating "We are an early leader in applying AI to enterprise workflows and are working to remain at the forefront of AI."
Their filings are basically pointing to what you'd expect, they're an AI wrapper. "We accommodate any AI model into our platform – those built by third parties, built by customers"
Quietly AI Washing: $CSCO $HPE and $ADSK: Collectively these companies are using AI as a fog machine to mask the fact their core competencies are at best stagnating (Cisco has a 28% decline in its core Networking segment) with margin compression (especially HPE). All in all, these three aren't growing cause of AI innovation. They are growing through aggressive, arguably tapped-out financial engineering on their existing customer base.
This group seems to love these low PE names and say there's value to be captured. They appear cheap for a reason and while AI won't simply wipe them out, I don't think they are benefiting from AI as proudly as they're announcing it. Curious to hear others on this.