Walmart is the IBD Stock of the Day for Tuesday. Shares of the mega-retailer rallied back above a buy point after Walmart announced a partnership with OpenAI.
The partnership between Walmart and OpenAI, the world's most valuable startup, will allow users to buy items from Walmart directly through the ChatGPT AI bot. Walmart stock rose 5% to close at 107.21 on the stock market today, hitting a record high.
The move comes as OpenAI is making a broader push into e-commerce. The company also recently struck deals with Etsy and Shopify that allow ChatGPT users to buy products from merchants on the two platforms.
But Walmart is also focused on establishing itself as an AI shopping powerhouse, citing the importance of the technology to how people are starting to look for products. Walmart earlier this year launched an AI-powered assistant for shoppers called Sparky.
"For many years now, e-commerce shopping experiences have consisted of a search bar and a long list of item responses," Walmart Chief Executive Doug McMillon said in a news release. "That is about to change."
The new partnership between Walmart and OpenAI will allow ChatGPT users to press a buy button when the AI assistant's algorithm surfaces one of the retail giant's products. The function will launch later this fall, a Walmart executive told Bloomberg.
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Rise Of AI-Powered Shopping
Three years since OpenAI's ChatGPT became a viral success, shoppers are increasingly turning to chatbots with questions about shopping. Traffic directed to e-commerce sites by AI chatbots is expected to increase more than 500% year-over-year during the holiday shopping season, according to a recent forecast from Adobe.
The growing use of ChatGPT for shopping has industry executives buzzing about the potential for so-called agentic commerce. The general idea is that online shopping will shift from being driven by online search and social media and instead be routed through personalized recommendations from chatty AI assistants.
When Walmart launched its Sparky assistant in June, the company's blog post described how a prompt such as "I need party ideas" will soon send the bot on a quest to find recommendations for themes, food and gifts. All recommendations will be "highly personalized and coordinated within budget," the post said.
Walmart and Amazon are already the most-common e-commerce landing places for users sent from ChatGPT, according to an analysis by TD Cowen analysts.
"Walmart's A.I. innovation has impressed given customer-facing and internal initiatives underpinned by Walmart+ loyalty program (estimated 30 million members)," TD Cowen analyst Oliver Chen wrote to clients on Friday.
One challenge for retailers from AI will be balancing the reward of new customer referrals with the risks of losing customer relationships.
Walmart has a fast-growing advertising business that has helped boost its e-commerce business. But that type of advertising — known as retail media — relies at least in part on customers searching within e-commerce platforms. Amazon has the largest retail media category by a wide margin, but Walmart has been growing quickly as well.
"Less traffic to retailer/rideshare properties/apps may make retail media as a category less attractive over time," e-commerce industry analysts with Stifel wrote to clients earlier this week.
Walmart Stock Reclaims Buy Point
Meanwhile, gains for Walmart stock on Tuesday have pushed shares back above a flat base buy point of 104.72. Walmart broke out past that level on Sept. 17 but had pulled back in trading since then.
Shares also leaped up past Walmart stock's 21-day moving average with Tuesday's action, after moving off the 50-day line on Monday.
Investors are still sizing up the risk of tariffs for Walmart's business, however. Walmart stock fell following its Q2 earnings report in August, when the retail giant missed earnings estimates and gave a lower-than-expected sales forecast.
For its January-ending fiscal year, analysts project that Walmart's earnings will increase 4% to $2.61 per share while revenue increases 4.2% to $709.3 billion. Walmart is the world's largest company by revenue, but it could lose that crown to Amazon in the next couple of years.
Meanwhile, Walmart stock has gained 18% year-to-date and is ahead 34% from 12 months ago.
Meanwhile, Amazon stock fell 1% Tuesday afternoon, but recovering from a drop below the 200-day line.
But Walmart stock has a so-so IBD Composite Rating of 60 out of a best-possible 99, according to IBD Stock Checkup. The score combines five separate proprietary ratings into one easy-to-use rating.
