OpenAI's top tier AI agent is geared at software and medical professionals. (0:15) Services sector shows strength, but tariffs top of mind. (2:06) Banks rush to fill demand for bets on Russia. (3:44)Show NotesTech stocks that can withstand the stormDisney planning ABC layoffsEpisode transcripts: seekingalpha.com/wsb Sign up for our daily newsletter here and for full access to analyst ratings, stock quant scores, dividend grades, subscribe to Seeking Alpha Premium at seekingalpha.com/subscriptions.
Chapter 1: What are OpenAI's AI agents and their costs?
Welcome to Seeking Alpha's Wall Street Lunch, our afternoon update on today's market action, news, and analysis. Good afternoon. Today is Wednesday, March 5th, and I'm your host, Kim Kahn. Our top story so far. OpenAI, the Microsoft-backed maker of ChatGPT, could sell artificial intelligence agents that could cost as much as $20,000 a month.
Chapter 2: How is OpenAI planning to generate revenue from AI agents?
The information reports that OpenAI expects 20% to 25% of its revenue to come from AI agents. Overall, the company is on track to generate $4 billion in annualized revenue. The $20,000 a month agent would be a PhD-level research agent and would be geared towards those looking to supplement software engineers or medical researchers.
Chapter 3: What are the pricing tiers for different AI agents?
Other agents could be priced at $2,000 per month and marketed towards high-income knowledge workers, while $10,000 per month agents could be used for software development. AI agents are software that can interact with data and the environment surrounding them and perform tasks by themselves to meet specific goals.
The company currently generates revenue from its application programming interface and multiple tiers of ChatGPT, including ChatGPT Pro, which costs $200 a month. No word yet on development of an AI Hollywood agent, but there must be a market for software that can guarantee back-end points and doesn't need to be thanked at the Oscars.
Chapter 4: What is the current economic outlook regarding employment figures?
Looking to the economy, ADP's measure of February private payrolls rose by just 77,000, far lower than the 162,000 consensus and the 186,000 jobs added in January. It was the smallest rise since July, but there's always a but with the ADP numbers given questions over methodology.
Pantheon macroeconomist Samuel Toom says the abysmal record of ADP's data in forecasting private payrolls suggests that February's weak numbers should be largely disregarded. ADP's forecast error, regardless of sign, has averaged a hefty 85,000 and has been as large as 348,000 since its methodology was refined in August 2022.
Chapter 5: What are the implications of the ISM Services Index rise?
Based on other employment surveys and unwinding of January weather disruption, Toombs still sees a gain of $150,000 in Friday's official figures. On the more hawkish side, the ISM Services Index countered the weakness in the Manufacturing Index that spurred Monday's sell-off. ISM services rose to 53.5 in February, topping the 52.7 consensus and up from 52.8.
But SoFi strategist Liz Young-Thomas noted that the prices paid component rose to 62.4 in February, the highest level since June 2022 when inflation peaked. There could be real pressure building, and if it doesn't cool off soon, we could actually see inflation turn higher, she said.
And Peter Berezin, chief strategist at BCA Research, pointed out that the comments certainly don't mesh well with the upbeat headline number. Of the 10 selected comments of respondents, the word tariffs appears seven times and uncertainty five times. Among active stocks, William Blair upgraded Palantir to market perform from underperform in the wake of the sell-off.
Analyst Louis De Palma, not of taxi fame, said after the Doge-driven sell-off, valuation is still frothy with potential downside risk of greater than 40% on government contract delays, but there have been positive developments. Abercrombie & Fitch is slumping to a 52-week low on concerns over profit guidance. The retailer sees Q1 EPS of 125 to 145, midpoint 135, versus 196 consensus.
And Disney is planning to reduce its total workforce by about 6%, impacting almost 200 positions at the ABC News Group and the Disney Entertainment Networks. The Wall Street Journal says the move is part of a broader restructuring effort within the company as it focuses on core businesses with more spending on sports and entertainment content.
In other news of note, JP Morgan and Goldman Sachs are stepping up as brokers, among other banks, to meet investment demand for Russian-related assets through ruble-linked derivatives contracts.
Bloomberg says the two banks have offered ruble-linked derivative contracts, a trade that's not facing sanctions by Western economies because it doesn't involve physical Russian assets or Russian nationals. The contracts, called non-deliverable forwards, offer a legal workaround to profit if the Russian currency continues to climb in value. U.S.
and European investors are prohibited from acquiring rubles directly as a result of Western sanctions against the country. Year to date, the ruble has surged 20%, the largest rise of any currency. And in the Wall Street Research Corner, BMO strategist Brian Belsky says tech investors should consider GARP, growth at a reasonable price, as an investing strategy to look for outperformers.
Given the idiosyncrasies of technology, higher growth, higher valuation, higher market cap, One approach we use to identify opportunities is to take a multi-factor rank based on the market cap, two-year PE, and two-year EPS growth for stocks within the sector and select the stocks that fall within the upper half of the composite rank for performance purposes, he said.
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