In his personal blog in December, Microsoft (MSFT 0.47%) co-founder Bill Gates wrote, “Over the next few years, people are going to see the incredible progress in AI.” And according to more recent statements from Gates, that incredible progress is coming straight for e-commerce and other major industries.
This article will explore the developing technology of artificial intelligence (AI) digital agents. And when it comes to advancements in this field, I’ll explain what Gates meant when he said, “You’ll never go to Amazon (AMZN -0.66%) again.”
Disruption from digital agents is coming
When it comes to AI, Gates isn’t easily impressed. Microsoft is at the forefront of the movement thanks to its partnership with OpenAI, the developer of ChatGPT. But Gates has had a front-row seat to discussions involving AI since his college days and he’s very aware of the technology’s shortcomings to date.
In a recent episode of Microsoft’s Behind The Tech podcast, Gates said he wasn’t impressed with the early versions of GPT-4 — the latest iteration from OpenAI. It was able to create grammatically correct sentences. But he wanted to see the technology apply reasoning skills to pass a biology test. He said that this would get his attention.
Gates hoped the OpenAI team could pass his challenge after years of hard work. In reality, it took the team a matter of months. And Gates now is consequently all aboard the AI excitement train.
This is where an AI personal agent or digital agent comes in. According to Oracle, an AI digital agent or assistant is an advanced version of an AI chatbot — not all chatbots are good enough to be considered a digital agent. Basically, a digital agent can take a prompt and respond with contextualized information sourced from multiple places. Not only will it answer a question, it might complete a task or even offer personalized recommendations.
Based on how impressed Gates now is with GPT-4, it’s possible that chatbot technology is advanced enough to truly unlock the power of AI digital agents.
Speaking at the Goldman Sachs and SV Angel AI Forward conference in May, Gates reportedly said, “Whoever wins the personal agent, that’s the big thing, because you will never go to a search site again, you will never go to a productivity site, you’ll never go to Amazon again.”
In other words, Gates believes AI digital agents will disrupt incredibly huge industries including internet search and e-commerce. And that’s a big deal.
What will the disruption look like?
To be clear, Gates isn’t saying that people will stop using internet search engine tools or that people will no longer make online purchases. However, digital agents — if widely adopted — would act as a middle-party, disintermediating companies from the end user. And in my view, that could have massive ramifications for digital advertising.
Digital advertising is a valuable tool because it can intelligently target certain users based on their online histories and results can be measured. AI digital agents could change this dynamic.
According to Statista, Alphabet (GOOG 0.16%) (GOOGL 0.07%) has over 85% global market share for internet search. And over half of the company’s revenue comes from ads from its Google search. So, Alphabet clearly has a lot to lose here.
Amazon has more to lose here than what many people might realize. E-commerce marketplaces also place ads — this is known as retail media. According to third-party advertising insights company MediaRadar, Amazon attracted 37% of investments in retail media in 2022. It’s clearly the place that advertisers want to be, due to its prominence.
For perspective, Amazon has generated $39.3 billion in advertising revenue in just the last year and this revenue source grew at a 23% year-over-year pace in the most recent quarter. This is a big and fast-growing part of the business. And if we trust Gates’ intuition, it could be in jeopardy.
What can investors do now?
Here I’m reminded of something from author and economist Morgan Housel in his book The Psychology of Money. “Extremely good and extremely bad circumstances rarely stay that way for long because supply and demand adapt in hard-to-predict ways.” I eagerly apply this statement here.
Internet search and e-commerce appear to be facing disruption from the possible proliferation of AI digital agents. But I’d hardly sell shares of Alphabet and Amazon on this alone. These two companies are huge and have the ability to respond and adapt.
That said, it does seem like a company (or companies) could create a lot of value from taking the digital agent idea and running with it. For his part, Gates said he really likes where a private start-up named Inflection is with its AI called Pi.
But of course, Gates is also hopeful that Microsoft will be at the forefront of this AI innovation. And indeed, given its place in the industry, I believe Microsoft is the stock to watch if you’re interested in the potential of digital agents.
John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. Jon Quast has positions in Amazon.com. The Motley Fool has positions in and recommends Alphabet, Amazon.com, Goldman Sachs Group, and Microsoft. The Motley Fool has a disclosure policy.
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