How to Profit from the Coming Wave of AI Automation
With Two Stocks Poised to Disrupt $5 Trillion in US Service Sector Wages
In Part I of this post, we discovered why Joe Lonsdale, Co-Founder of Palantir (PLTR), has directed investments at his venture capital firm, 8VC, towards the disruption of the service sector with AI automation.
8VC’s investment team estimates that automating jobs in the American service sector alone is a $5 trillion a year opportunity.
That’s why venture capitalists, aka the “smart money” with their finger on the pulse of the tech industry, are pouring money into the next wave of the AI Revolution.
The big storyline for 2025 will be AI automation platforms and the rise of the AI agent.
The best AI-as-a-service (AIaaS) companies will use these technologies to help customers save on labor costs, increase productivity and scale their businesses.
The value proposition for AIaaS is: Faster, Cheaper, Better, 24/7.
Some of the fastest growing startups in the world are AI service companies targeting the low-hanging fruit for automation.
The industries with the most expensive labor forces doing easily automatable tasks are the biggest opportunities. Think billing workflows, accounting, recruiting, legal, insurance and many more operational tasks.
In this post, we’ll explore some of 8VC’s investments in the B2B service industry. I’ll also highlight two stocks following a similar playbook.
8VC has invested in several AIaaS startups using technology and vertical-integration to reshape service industries. The first portfolio company we’ll take a look at is using AI to simplify freight logistics.
Adding AI Logic to Logistics
Freight logistics is an overly complex industry involving various services such as shipping, warehousing, inventory management, and delivery.
Whether you’re moving goods to the other side of town or across the ocean, it usually requires multiple modes of transportation like trucks, trains, planes, boats and now drones. There can be multiple carriers and third-party logistics providers involved.
Every year billions of dollars are lost due to inaccurate freight audits that are supposed to ensure customers are accurately charged for freight services. This despite tens of billions of dollars being outsourced to tech companies that are supposed to streamline this process.
That’s why two founders left the freight division at Uber (UBER) to a start a company at the intersection of supply chain, finance and AI.
Loop
Loop is on a mission to simplify logistics payments, unlocking profit trapped in the supply chain and lower costs for consumers.
The founders realized that fixing the financial system for the supply chain was a data problem.
This wasn’t a Facebook “move fast and break things” approach. Instead, Loop sat down with the experts and mapped out all the complex workflows of the freight logistics industry.
In 2022, they started building a large-language model (LLM) tailored specifically for the supply chain. They used this proprietary AI model and computer vision to redesign the entire logistics process.
Using this technology-first approach, Loop optimized the entire workflow to drive efficiency and unlock cost savings hidden within the complex supply chain.
Now Loop offers a one-stop shop for customers handling everything from billing decisions to payment processing.
The AI-enabled tech has reduced lag between invoice receipt and payments from 50 days to just 3 days, while cutting invoice errors from 20% to 0%.
While Loop is using AI to streamline freight logistics and payments, another AI innovator in the logistics space went public in 2022.
The stock has come under pressure recently due to accounting issues that delayed the filing of their fiscal 2024 annual report. I’ll have to dig more into the details on it, but this pullback could be a good opportunity to buy.
Symbotic (SYM)
Symbotic is a leader in automation technology with its end-to-end, AI-powered robotic and software platform for warehouses and distribution centers.
The company was founded by Rick Cohen, who also owns C&S Wholesale Grocers – the largest wholesale grocery supply company in the US. He knows the industry well and understands how critical efficiency is to success.
The Symbotic system uses AI and robots with computer vision to automate warehouse workflows. This includes everything from receiving to shipping, as well as front-end and back-office operations.
Implementing this next-generation technology requires a big investment upfront. But the efficiencies gained will lead to significant cost-savings that quickly pays for the capital investment, especially for large-scale customers.
Early adopters of Symbotic’s modern warehousing solutions include some the largest retailers in the US: Albertson (ACI), Target (TGT) and Walmart (WMT).
The agreement with Walmart extends out to 2034 and will see the platform implemented in the retailer’s 42 regional distribution centers.
They’re expanding internationally too. Last October, Walmart’s Mexican operator announced that it will deploy the automation system at two of its locations near Mexico City.
Symbotic also owns 35% of a Greenbox, a joint-venture with Japan-based Softbank that will make AI-enabled “warehouse-as-a-service” available to a broader range of customers.
The company generated over $1.8 billion in revenue over the last year, nearly 90% of which came from Walmart.
That’s an extraordinarily high customer concentration. But it’s a little less concerning with a stable customer like Walmart that is committed to implementing these systems across its entire US distribution network.
With a $23 billion backlog of orders, there’s a lot of growth is baked into the cake. But Symbotic needs to ramp up implementation.
At first glance, the balance sheet is solid and it looks like they’re on a path to consistent profitability. This one is on my shortlist for the next deep dive.
Next, we’ll take a look an 8VC portfolio company that built an AI agent to handle lead generation and sales outreach.
Turning Lead Generation on Autopilot
Sales and marketing are among the biggest expenses for Software-as-a-Service (SaaS) companies. For a high growth business, it can amount to 50% or more of a revenue.
This is partly due to the SaaS business model, in which revenue lags investment. Another reason is that many companies are inefficient.
McKinsey consulting group found that the top SaaS company’s recover their customer acquisition costs within 16-months, compared to nearly four-years for the least efficient companies.
The top SaaS businesses also produce 3.5 times faster sales growth than the bottom tier.
According to McKinsey’s research, these four optimization tactics for sales and marketing teams are what separates the best from the rest:
Allocating resources based on future customer opportunity, not current revenue. The high-growth accounts should get the most coverage.
Pulling granular operating data from across the business into an integrated dashboard to better understand the efficiency of spend and measure performance.
Focusing on go-to-market plans that scale efficiently.
Using advanced analytics and AI to better understand customers and predict the best targets for cross-sell/upsells or churn prevention measures.
The key to success is transparent data and metrics that provides a clear sight to leadership and creates a positive feedback loop across sales, marketing, customer success and product teams.
That’s why 8VC invested in an AI company taking on this exact mission.
Landbase
Generating sales leads is a costly, time-consuming problem with repetitive processes that are often siloed across IT systems and fragmented software solutions.
Landbase built an AI agent, called GTM-1 Omni, that leverages data from over 40 million sales campaigns to deliver high-quality, targeted leads on autopilot.
The AI agent enables businesses to streamline all their go-to-market processes, such as automating prospect research, personalized messaging, campaign optimization and forecasting.
With an AI agent autonomously performing these tasks, streamlining workflows and providing data-driven insights, the sales team is free to focus on higher-level priorities like customer success and retention.
Landbase has built a powerful automation tool in a fast-growing market. The global AI sales assistant and software market is estimated to grow from about $22 billion in 2024 to over $67 billion by 2030. But it’s a competitive space.
The closest publicly-traded competitor to Landbase is a company called ZoomInfo (ZI), which has a go-to-market intelligence and engagement platform for sales and marketing teams.
Copilot is their AI-driven solution that directs sales teams to focus on the best accounts, spend more time selling and win customers faster.
ZoomInfo has built a profitable business with over 35,000 customers, including 1,809 that are paying over $100,000 annually. It has big name customers, such as Snowflake (SNOW), Paypal (PYPL) and Airbnb (ABNB).
However, growth appears to have plateaued. Sales grew at an average annual rate of 33% over a five-year period, reaching $1.2 billion in 2023. But it looks like revenue will be down a little in 2024 and flat for this year.
It may be time for ZoomInfo to consider some inorganic growth by acquiring a company with more cutting-edge technology like the AI agent at Landbase.
The stock I’m more interested in also uses AI to find targeted customers leads, but in a different niche than Landbase.
AppLovin (APP)
Applovin has a technology platform for developers to market, monetize and publish their apps with a specialty in mobile-gaming.
The company owns over 200 gaming apps run by 11 studios globally, but its primary business is an adtech solution that connects customers to over 1.4 billion active users with targeted audiences in-app, on mobile devices, and on streaming TV.
In 2023, it launched an AI-powered adtech platform called AXON 2.0 that uses predictive machine learning to target app-install ads to users that are most likely to download those apps.
The platform was trained on AppLovin’s portfolio of games, which includes trillions of daily in-app events.
AXON 2.0 uses predictive modeling to forecast user behavior and optimize ad campaigns in real-time, delivering better return on ad spend for advertiser and increasing revenue for game publishers.
The adtech platform has been so successful that management had to rename the “Software Platform” business segment to “Advertising” (starting in Q4) to better align with the nature of the business.
AppLovin reported nearly $1.2 billion in revenue in Q3 2024, a 39% increase driven almost entirely by ad revenue.
Software Platform revenue, nearly all of which was ad sales, increased by 66% to $835 million for the quarter. Adjusted EBITDA was reported at 79% for the business segment.
By comparison, revenue for the Apps segment increased 1% to $363 million with a 19% EBITDA margin.
AppLovin’s amazing new AI-powered adtech platform is printing cash. It generated $551 million in free cash flow in Q3 alone, part of which can be used for the $1.25 billion share buyback program announced in February 2024.
This outstanding growth didn’t go unnoticed by investors. Shares of APP soared by over 700% in 2024. AppLovin is now a mega-cap stock worth over $110 billion.
Shares of APP are down about 18% from the peak in early-December. But the stock still trades at a lofty valuation (55.2 FWD P/E), as is the case for most market leading AI stocks.
APP has held support above $305 ever since the post-earnings breakout on huge volume in November. But as I wrote last Friday, I think we could be in the middle of a non-recession correction.
IF we get a broader market correction, we should be able to scoop up shares of APP at a better price. Perhaps as low as the top of the November gap higher (around $240). I’d buy if we test that key support level, but I may not wait that long. It will depend on how the markets trade in the coming weeks.
AppLovin is proof of the earnings potential with breakthrough AI-driven technology. I expect the company will continue to capitalize with more growth ahead, including from new verticals beyond gaming for the adtech platform.
APP is on my radar as a potential Momentum Trade. (See my about page for more details on the different investing strategies in The Profit Nomad PRO).
In the meantime, I’ll be digging into Symbotic and other AI stocks poised to profit from the coming wave of AI automation.
Earlier this week, when Nvidia’s (NVDA) CEO Jensen Huang was speaking at CES, the biggest tech event of the year, he said “The ChatGPT moment for general robotics is just around the corner.”
I couldn’t agree more. As I said before, 2025 will be the year of automation and AI agents.
At CES, Huang demonstrated new tools from Nvidia that would help robots learn in simulated environments. This could accelerate automation in warehouses and factories. He also announced new AI Blueprints with pre-trained AI workflows that will make it easier to create AI agents.
Per usual, the VC investors were way ahead of the curve on this trend, but it’s just getting started. There are plenty of more AI stocks out there that can deliver 7X returns like AppLovin did in 2024.
I’ll do all the heavy-lifting to uncover these opportunities and deliver them straight to your inbox.
To profitable journeys ahead!
Jake Weber
The Profit Nomad
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