Musings About the Agentic Future

0:01Travis Hoium:Is Muse going to break big tech? Motley Fool Hidden Gems Investing starts now.

0:09Travis Hoium:Welcome to Motley Fool Hidden Gems Investing. I'm Travis Hoium joined today by Lou Whiteman and Tyler Crowe. And guys, we've got to talk about Muse, the biggest, probably the biggest new app introduction since ChatGPT. I don't think that's too overstating how impactful this has been. Number one in all the app stores over the past nearly week. And Meta stock has exploded this week as a result, adding hundreds of billions of dollars in value. So, but this is not disruptive to some companies. Not everybody loves the fact that everybody's downloading Muse and giving it a try. Amazon has blocked Muse from crawling its website.

0:48Travis Hoium:So it doesn't seem like all these big tech companies are playing all that nicely. But Lou, what I wanted to start with is how is Muse changing the way that we're potentially interacting with some of these companies? Because we've been talking about aggregators and the apps that we use all the time. All these big tech companies have been playing nice for a really long time. Muse comes in, gains some popularity, and suddenly everybody goes, whoa, whoa, whoa. Do we really want to change the status quo?

1:13Lou Whiteman:The question of how things have changed, we will see, I think. I mean, you know, I mean, I think it's way too early to say it. But look, everybody played nice before because they were all chasing different things. Now they're beginning to chase the same thing. So, yeah, they're playing less nice. I mean, we are so early stages here, though. I don't know what we can really draw in about anything as far as what's going on. But definitely, look, Amazon is Amazon loves being the biggest thing in e-commerce. If someone's going to come in and try to take some of what they're doing from them or kind of take some of their secret sauce, they're going to push back because this is the first time they've had to.

1:49Travis Hoium:Tyler, this does seem like an interesting place where there is now frenemies forming in this ecosystem where Muse can go out and shop every website. But now we're starting to get some of these sites blocked like Amazon. Some are going, hey, let's work together. PayPal, we'll talk about some of these partnerships in a moment with Shopify, PayPal. but do you think that something like Muse will actually change the way that we shop? Because if it does, then that's a potential threat to Amazon who makes actually more than 100 % of its profit off of advertising. I mean, that's the thing that you open up Amazon today, search for anything, you're gonna see a whole bunch of ads.

2:29Travis Hoium:That's the business model. The business model for Meta is ads on its social network but if we're suddenly shopping for stuff with an AI assistant, it seems like, both of those business models are potentially going to change.

2:42Tyler Crowe:You probably brought two of the more cynical voices when it comes to this sort of stuff onto the show today. So great choice on that. One of the things I'm thinking about this too is, you know, thinking about the business models is for Meta, it's not necessarily like, oh, we're going to go change shopping. At least the way that they have presented Muse so far to the public is it seems more like a way of just capturing more information. You know, you look at the way that they've done Meta Glasses and that this has gone out. Muse itself is an extremely popular app, but also there is something to be said of the reason that it is so popular is because the token limits are for free versus pay tiers.

3:23Tyler Crowe:Suggest that Meta's really just like, we want to almost give this thing away. I think that they're saying like 100 million tokens before you actually get into a pay tier, which I, you know, rely on. I've heard people use it constantly saying,

3:37Travis Hoium:I have still not hit that limit.

3:38Tyler Crowe:Yeah, and it's something like, you know, multiple novels worth of like language text that can be entered before you actually start hitting those sort of limits. And when you think of it that way, it's like, well, it doesn't really seem like they're trying to push for paid tiers. They're trying to gather as much information as possible. And shopping is obviously part of that. It's you could one could argue that it's part of like, you know, Meta's social media empire. They don't get as much information on the shopping side. So that certainly gives them that aspect. Again, whether this is a game changer for Meta, I don't know.

4:17Tyler Crowe:Maybe it just is supplementing the status quo of more information to sell more ideas. But here's where I come back to it. And because, as you said, we're running into walled gardens. Amazon's like, no, we're not going to let Muse do this. I can imagine that Google would or Alphabet would do the same for YouTube and Google because they have these wild gardens of advertising. Like, we don't want our competitors being able to scrape our information for this. This is ours, and it makes our data more valuable when it's not democratized to the world. And then it starts to come to the user experience where it's like, okay, well, I need an AI agent from Meta.

4:54Tyler Crowe:I need an AI agent from Amazon. And then all of a sudden, I've got four or five different agents. Do I need to bundle my agents again? Man, that almost sounds like streaming services all over again.

5:04Travis Hoium:that that's probably a good analogy that this amazing technology but the business model and how this is going to play out the other thing lou that i i think we need to think about as investors is we get really excited about the new thing the popular thing you can go back through the history of artificial intelligence and there's a there was an image creation app that went from zero to like a hundred million dollars in revenue in a matter of weeks and now i can't even remember the name because it's completely irrelevant. Even ChatGPT was supposed to disrupt Google's entire business search. Is there an end game here that is something like Muse is going to fundamentally disrupt tech and the way that we interact with technology?

5:53Travis Hoium:Or is this going to be much more of a slow burn, which is, I think for Normie, is kind of the way that this has played out so far?

5:59Lou Whiteman:Yeah. Yeah, and we can get to this more in a second. But yeah, it is a slow burn. Everything that we think, we have declared the winner probably half a dozen times here, right? And it's always been different, guys. So I don't think we know anything. I tend to agree with Tyler on especially meta. I don't give the benefit of doubt for data harvesting. But I do think the kinder view of what they're doing right now, given away, is the land and expand, just trying to get market share because it is so new. They can't get people to pay for it right now because nobody knows they want it yet. And we'll see if they really want it.

6:34Lou Whiteman:But yeah, we are early days. This is the new big thing because it is better today. That's not to say someone else won't come back with somebody else tomorrow. The where does it end? The end game is one of these things becomes so good that the Amazons of the world can't block because they're costing themselves business or there's just a dominant player that you You had like the same way Apple got the Apple tax with the App Store. You just needed to be there. We're a long ways off from that. And I don't think anyone who tells you they know who the winner is, is just trying to sell something.

7:07Tyler Crowe:Travis, I almost want to offer a third option because you gave like pivotal moment versus slow burn. It seems like we're having these game changing moments like all all the time these days to the point where they're just kind of commoditizing the game changing aspect of it. And perhaps it's to this point where, you know, the speed at which it moves so fast, the rapid, you know, slide down the cost commodity curve and the commoditization of this, that it is really hard to have a standout pivotal moment because it is moving so quickly.

7:40Travis Hoium:Yeah. And it's really hard to see what is sustainable in this market as well. I do want to talk about some companies that have a big opportunity ahead of them, including Shopify. We'll do that in a moment.

8:21Tyler Crowe:We'll be right back. Hey, Fidelity. What's it cost to invest with the Fidelity app? Start with as little as$1 with no account fees or trade commissions on U.S. stocks and ETFs. Hmm, that's music to my ears. I can only talk. Investing involves risk, including risk of loss. Zero account fees apply to retail brokerage accounts only. Zero dollar commission does not apply to customers designated by Fidelity as a professional equity trader. A limited number of ETFs are subject to a service fee of$100. See details at Fidelity.com slash commissions. Fidelity Brokerage Services, LLC, member NYSE SIPC.

8:53Travis Hoium:Welcome back to the show. We did have some interesting partnerships with Muse. So Amazon taking a little bit of an adversarial approach to Muse, but Shopify, PayPal, Expedia have said, hey, if you want to use our products, connect to us, we're more than happy to work with you. So Tyler, are these opportunities, we talked about some of the walled gardens, and I think that's an interesting way to frame this is Amazon is a walled garden. They want you to go to Amazon and shop there. If you're going to a Shopify shop, they don't necessarily care whether you came from Muse or you came from Facebook or you knew which website to go to.

9:33Travis Hoium:As long as you're coming to their site, that's a win for them. So it almost seems like some of these business models are gonna be very conducive to opening up and saying, hey, Muse, ChatGPT, whatever Google comes out with, we're happy to be partners with you.

9:46Tyler Crowe:There is a world in which some of this can pull some discretionary spend away from Amazon. If uptake of this is so popular and everyone decides to cede all of their life and shopping decisions to Muse or some other non-Amazon, non-alphabet, non-exclusive sort of agent that would benefit a company like Shopify. That is to say, a Shopify or a PayPal or any of these aren't building their own products. I don't know, maybe there was some sort of like, they tried to build their own, they saw it wasn't working. It's like, maybe we just partner with somebody. Might be a heck of a lot easier to have some sort of aggregator above us.

10:23Tyler Crowe:But at the same time, it's pretty a low cost sort of thing. Like all they have to do is sign on the dotted line with Muse and go, hey, yeah, we'll partner. The opportunity costs here seems pretty low. So I don't want to say it's like picking up a few dimes on the floor, but it does benefit, but I wouldn't necessarily call it like a game changer to the investment thesis in any of the companies mentioned.

10:46Lou Whiteman:Yeah, I mean, what Tyler says is exactly right. And this is not just unique here. Every one of these product launches, there are, there's a whole page of partners and all that. And there is very little downside to these partners. There's nothing to go in. It sort of reminds me of, you know, we were talking not too long ago about Joby and Archer and all of the companies that did refundable deposits for a thousand aircraft. There's no downside to being there on day one. The takeaway for investors is be careful. Don't read much into that. If Muse turns into something, it could turn into something.

11:22Lou Whiteman:But in terms of guarantees or endorsements, what the revenue means, what it means for these businesses, how things evolve, it's not worth the paper it's printed on.

11:31Travis Hoium:So Meta's stock jumping 9%, maybe a bit of an overreaction short term. Lou, I did want to get your thoughts on some of these changing business models, because as we think about some of the other companies in tech, and Expedia is one of the ones that was announced as a partner yesterday. Uber is always the one that I always think about because it's sort of a similar aggregator position. But thinking about Muse, if you're going to do travel search with Muse, sure, you could go through Expedia. But if Muse is a really smart AI, why can't it just go straight to the website, which is essentially what Expedia was doing was being a discovery engine for hotels, you know, for airlines, things like that.

12:12Travis Hoium:Is that a good way to think about that, that maybe they're coming at this kind of from a point of weakness where they just don't want to be out of the game at all? Whereas Uber, I always think about, is this really just something that will be disruptive to Uber? those drivers still have to connect with somebody and have to you know work for some sort of application that's going to connect them are they going to connect directly to muse probably not so something like an uber sitting in the middle maybe doesn't have the same aggregator position but it is at least some sort of valuable position that can't be just completely cut out by just going directly to a person's you know website saying where they are is that a good way to think about this competitive dynamic as we kind of go down from who may see tailwinds from Muse short term, but maybe isn't in a strong position long term.

13:00Lou Whiteman:I want to push back on everything you said, because I did. Back to what you said about Meta, I actually think the 10 % stock jump makes sense because the market is always pricing the future. It didn't double. It didn't say it's guaranteed. But if Muse is on to something, this is powerful. So seeing it come out and seeing the investors get excited about it again, it's not for today. It's not something I'm chasing, but that makes sense. I also don't really see a difference between Expedia and Uber long term in this. I think that the promise of these agents is more direct commerce and destroying the middlemen.

13:35Lou Whiteman:And yes, for now, Uber is better protected because the airline websites are set up. But there is no reason why a driver wouldn't be incented to come up with a new system where they're available to some smart agent if it means that you don't have to pay Uber their fee. So long-term, I would be very careful assuming one middleman makes it and another doesn't, because the whole point of this is to relieve the friction, get rid of the middleman.

14:04Travis Hoium:When we come back, we're going to talk about where there's potential hidden opportunities in this agentic future. You're listening to Motley Fool, Hidden Gems Investing.

14:39Tyler Crowe:Fidelity Trader Plus Brokerage Services, LLC. Member NYSE SIPC. Trading at Schwab is now powered by Ameritrade, bringing you an expanding library of education with even more ways to sharpen your trading skills. Access new online courses, insightful webcasts, articles, engaging videos, and more, all curated just for traders. Plus, guided learning paths with content designed to fit your unique interests.

15:15Travis Hoium:Welcome back to the show. Okay, Tyler, where are there some hidden gems here? I mean, Meta is one of the biggest companies in the world, almost a$2 trillion valuation. Is that still a sort of underappreciated gem or are there other areas that you're looking if muses and shopping agents are going to be successful? Yeah.

15:31Tyler Crowe:So as I'm thinking about agentic AI, I actually have more doubts about it from a like an individual consumer level because it will help in some ways. but I think that it doesn't have as much power with discretionary spending because people tend to buy things on a whim and some even think of like the most basic things of like a TJ Maxx or Ross stores where the actual in-person experience is still like a thing as as ancient as that may

16:01Travis Hoium:sound and I thought we were gonna have so much extra time for those in-person things now that agents are doing all of our work for us but but maybe not well one should hope so but I actually

16:12Tyler Crowe:think there's going to be a little bit more opportunity in this agentic commerce on the B2B side rather than from the individual consumer perspective. It just seems like a more appropriate outlet for this. You have, you know, purchases are made on regular schedules where inventories are closely monitored and often digitized. Like all that data is there versus, you know, somebody on a consumer level just like pops in my head one day, hey, I want to go to the movies or something like that. It just seems like that automation, regular cadence, it would take stuff off of someone's plate at a business.

16:47Tyler Crowe:Those are the sort of things where it's going to make a real difference. Now, we talked about big agentic AIs, but I think there's actually more value in some of these real niche products that not necessarily these big companies are thinking about. And I want to bring one company to the table here. It's within the hidden gem services. It's called AAR Corp. This is really deep in the playbook here. It's a parts distribution and enterprise resource planning software company for commercial aircraft and military aircraft. I mean, that's like apples to apples for hidden gems, don't you think? Exactly.

17:24Tyler Crowe:So what they're building right now is actually agentic AI capabilities into their ERP systems that are going to take away a lot of the inventory planning for its commercial airline customers. So say like Delta is like, hey, we need some new, instead of like routinely scheduling actuators for its landing gear, their AI ERP software is going to handle it. It's built on AAR system, who also happens to distribute those parts. Bing, bang, boom. It's saved a lot of people headaches. It's also starting to predict those sort of things, knowing the schedules on which these things sort of break. I think things like that are going to make those kind of companies immensely valuable to their customers versus this absolute knife fight that we're going to have with the Muse agentic AI companies and the Alphabet agentic AI trying to take every last shred of our data to try to figure out what we want when half the time we don't even know what we want.

18:21Tyler Crowe:So I really do think it's going to be these, you know, niche, niche companies working in very esoteric areas that could generate immense value from this agentic commerce sort of revolution.

18:33Lou Whiteman:On the consumer side, it is fun to think about. The LG introduced the smart refrigerator in June of 20, 2000, guys, 26 years ago. And how many of us are letting our appliance handle our grocery list every week? OK, now you could say, but Lou, now that the AI is here, can do that. But that is, I think, something to reflect on about consumer adaptation. The difference with B2B, as Tyler's noting, is there's more of a regular cadence. I don't want to eat the same meal every day, every week. So, you know, but but an airplane needs this many parts. So I do think it's more there on the consumer side.

19:10Lou Whiteman:this is somewhere between glorified search and an imaginary friend who makes decisions for you and pays for them without you knowing it. I am probably more on the glorified search side, but I do think there is ways where this can become the new big thing and it does eat into the search business the way we've all been talking about forever. It's going to take a lot of time. The only urgency is podcasts, analysts, media, stuff like this saying, is this the new big thing today. The reality is this is going to take a generation to play out, if not longer. And I think there's a lot of opportunities.