Wall Street Lunch: AI Agents For Sale

Listen below or on the go on Apple Podcasts and Spotify

OpenAI’s top tier AI agent is geared at software and medical professionals. (0:15) Services sector shows strength, but tariffs top of mind. (2:06) Banks rush to fill demand for bets on Russia. (3:44)

The following is an abridged transcript:

Our top story so far, OpenAI, the Microsoft (NASDAQ:MSFT) backed maker of ChatGPT, could sell artificial intelligence agents that could cost as much as $20,000 a month.

The Information reports that OpenAI expects 20% to 25% of its revenue to come from AI agents. Overall, the company is on track to generate $4 billion in annualized revenue.

The $20,000-a-month agent would be “PhD” level research agents and would be geared towards those looking to supplement software engineers or medical researchers. Other agents could be priced at $2,000 per month and marketed towards “high-income knowledge workers,” while a $10,000 per month agent could be used for software development.

AI agents are software that can interact with data and the environment surrounding them and perform tasks by itself to meet specific goals.

The company currently generates revenue from its application programming interface and multiple tiers of ChatGPT, including ChatGPT Pro, which costs $200 per month.

No word yet on development of an AI Hollywood agent – but there must be market for software that can guarantee back-end points and doesn’t need to be thanked at the Oscars.

On the economic front, mixed data arrived, with the labor market looking soft, but output stronger.

ADP’s measure of February private payrolls rose by just 77,000 in February, far lower than the +162,000 consensus and the186,000 jobs added in January. It was the smallest gain since July.

But there’s always a “but” with the ADP numbers, given questions over the methodology.

Pantheon Macro economist Samuel Tombs says: “The abysmal record of ADP’s data in forecasting private payrolls suggests that February’s weak number should be largely disregarded. ADP’s forecast error, regardless of sign, has averaged a hefty 85K and has been as large as 348K since its methodology was refined in August 2022.”

Based on other employment surveys, and the unwinding of January weather disruption, Tombs still sees a gain of 150,000 in Friday’s official figures.

On the more hawkish side, the ISM services index countered the weakness in the manufacturing index that spurred Monday’s selloff.

ISM services rose to 53.5 in February, topping the 52.7 consensus, and up from 52.8 in January.

But SoFi strategist Liz Young Thomas noted that the prices paid component rose to 62.4 in Feb, the highest level since June 2022, “when inflation peaked.”

“There could be real pressure building, and if it doesn’t cool off soon, we could actually see inflation turn higher,” she said.

And Peter Berezin, chief strategist at BCA Research, pointed out that the comments “certainly don’t mesh well” with the upbeat headline number.

Of the 10 selected comments of respondents, the word “tariffs” appears 7 times, and “uncertainty” 5 times.

Among active stocks, William Blair upgraded Palantir (PLTR) to Market Perform from Underperform in the wake of the selloff.

Analyst Louie DiPalma (not of “Taxi” fame) said after the DOGE-driven selloff “valuation is still frothy with potential downside risk of greater than 40% on government contract delays,” but there have been “positive developments.”

Abercrombie & Fitch (ANF) is slumping to a 52-week low on concerns over profit guidance. The retailer sees Q1 EPS of $1.25 to $1.45 (midpoint $1.35) vs. $1.96 consensus.

And Disney (DIS) is planning to reduce its total workforce by about 6%, impacting almost 200 positions at the ABC News Group and the Disney Entertainment Networks.

The Wall Street Journal says the move is part of broader restructuring efforts within the company, as it focuses on core businesses with more spending on sports and entertainment content.

In other news of note, JPMorgan (JPM) and Goldman Sachs (GS) are among banks stepping up as brokers to meet investor demand for Russian-related assets through ruble-linked derivative contracts.

Bloomberg says the two banks have offered ruble-linked derivative contracts, a trade that doesn’t face sanctions by Western economies because it doesn’t involve physical Russian assets or Russian nationals.

The contracts, called non-deliverable forwards, offer a legal workaround to profit if the Russian currency continues to climb in value. U.S. and European investors are prohibited from acquiring rubles directly as a result of Western sanctions against the country. Year-to-date, the ruble (RUB:USD) has surged 20%, the largest rise of any currency.

And in the Wall Street Research Corner, BMO strategist Brian Belski says tech investors should consider GARP (growth at a reasonable price) investing strategies to look for outperformers.

“Given the idiosyncrasies of Technology (i.e., higher growth, higher valuation, higher market cap) one approach we use to identify opportunities is to take a multifactor rank based on the market cap, FY2 P/E, and FY2 EPS growth for stocks within the sector and select the stocks that fall within the upper half of the composite rank for performance purposes,” he said

GARP strategies within the technology sector outperformed the equal-weighted and market cap-weighted sector indices in the subsequent six and 12 months after periods where the technology relative valuation was above average, he added.

Among his picks are Akamai (AKAM), AMD (AMD), Dell (DELL), F5 (FFIV), Intel (INTC), Micron (MU), Super Micro Computer (SMCI) and Skyworks Solutions (SWKS).

Check out all the names.

Editor’s Note: This article covers one or more microcap stocks. Please be aware of the risks associated with these stocks.