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Opendoor recently appointed Shrisha Radhakrishna as its new interim leader.
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Radhakrishna believes artificial intelligence can help the company in multiple areas of its operations, including pricing and in-home assessments.
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The company has routinely incurred losses and it's carrying more than $2 billion in debt on its books.
Artificial intelligence (AI) has been transforming businesses across the globe and across all sectors of the economy. While it may not necessarily fix a broken business, it can help add efficiency, unlock new growth opportunities, and drive down costs.
Those are all things that Opendoor Technologies (NASDAQ: OPEN) could benefit from. Many investors and analysts see the iBuying company as nothing more than the latest meme stock, benefiting from a flurry of hype from retail investors.
Management, however, hopes to solidify its operations and do more with less, due to AI. Is this a great idea that could make Opendoor a better buy, or is this simply too risky of a stock to hold?
Opendoor's new president and interim leader, Shrisha Radhakrishna, who took over last month after Carrie Wheeler stepped down, is eyeing AI as a way to improve the company's operations. Radhakrishna sees many ways that AI can be a key part of the company's future growth, helping the business with marketing, pricing, and in-home assessments.
Turning to AI can be a way to improve efficiency, but it'll take time and money to do so. And even then, it's questionable how much generative AI can do for Opendoor's business. Consider that the company's gross margin is typically in just single digits. The iBuying business involves flipping houses and if there's not enough of a spread there to make enough of a margin, it's going to be incredibly difficult for the business to cover its other operating expenses and stay out of the red.
AI may help with pricing, but unless it results in significant margin expansion, it may not necessarily lead to a big payoff for the business and its shareholders.
Excitement around AI has captivated investors, but that doesn't mean that simply throwing money at AI is going to solve problems. In fact, it may create new ones as Opendoor spends excessively without having much to show for it.
According to a recent report from the Massachusetts Institute of Technology, a staggering 95% of companies haven't been generating any meaningful revenue or payoff from their investments into AI. While the hyperscalers and big tech companies with massive budgets have undoubtedly grown their businesses due to AI, the study underscores the importance of keeping expectations in check.