Will Artificial Intelligence (AI) help you run Opendoor's business?

Key Points

• Opendoor recently appointed Shrisha Radhakrishna as new interim leader.

• Radhakrishna believes that artificial intelligence can support companies in multiple areas of their operations, including pricing and home assessments.

• The company is routinely suffering losses and carries over $2 billion in debt to its books.

• 10 stocks I like more than Opendoor Technologies›

Artificial Intelligence (AI) has transformed businesses across all sectors of the world and across all sectors of the economy. It doesn't necessarily fix a broken business, but it helps to increase efficiency, unlock new growth opportunities, and reduce costs.

They are all that Opendoor Technologies (NASDAQ: Open) You can benefit from it. Many investors and analysts consider Ibuing Company just the latest meme stock and benefit from the hype from retail investors.

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However, management wants to solidify its operations for AI, with less, the more. Is this a great idea that will make Opendoor a better purchase, or is it just too dangerous to keep stock?

Can AI fix the company's biggest struggle?

Opendoor's new president and interim leader, Shrisha Radhakrishna, took over last month after Carrie Wheeler resigned, looking at AI as a way to improve the company's operations. Radhakrishna sees many ways AI can become a critical part of the company's future growth, helping businesses in marketing, pricing, and at-home valuation.

Turning to AI is a way to improve efficiency, but it takes time and money to do so. And yet, it is doubtful how much AI can generate for Opendoor's business. Consider that the company's gross profit is usually only in single digits. IBUING BUSINESS involves turning the house upside down, and if there's not enough spread to create enough margins, it'll be very difficult for businesses to cover other operating expenses and leave the red.

AI can help with pricing, but unless it brings about a significant increase in margins, it doesn't necessarily lead to a big return on the business and its shareholders.

Many AI projects are not meeting expectations

The excitement around AI is captivating investors, but that doesn't mean that simply throwing money at AI will solve the problem. In fact, Opendoor spends too much without showing it, and could create something new.

According to a recent report from the Massachusetts Institute of Technology, 95% of companies generate no meaningful revenue or rewards from their investments in AI. Hyperscalers with large budgets and large tech companies have undoubtedly grown their businesses for AI, but this study underscores the importance of keeping expectations under control.

It may be appealing to assume that AI will improve the operation of a company, but that is by no means certain. And it can be particularly concerned with businesses like Opendoor, who post losses on a daily basis and already have over $2 billion in debt on their books. Last quarter (ends June 30th), its interest expense totaled $36 million, roughly triple the operating loss of $13 million.

Investing in AI could make Opendoor a better stock

Opendoor's business requires a lot of work before it has a realistic path to profitability and becomes a great investment option. There is a lot of risks investors will take on, and stock prices have skyrocketed by more than 300% this year (as of Monday), but that doesn't mean that the rally is sustainable or will continue.

The volatility associated with Opendoor's stock is an option that the majority of investors are not suited to consider their portfolio. This is a stock I'm eschewing in the near future, in preparation for the many question marks surrounding challenging market conditions, poor finances, and the long-term viability of the OPENDO business. At the very least, I recommend waiting until the company actually shows some tangible improvements and rewards from its efforts and AI investments. Otherwise, you could assume a significant risk. This is a stock that can go a long way given the keen meeting this year and the volatility that comes with it.

Should I invest $1,000 in Opendoor Technologies now?

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David Jagielski has no position in any of the stocks mentioned. Motley's fools have no position in any of the stocks mentioned. Motley Fools have a disclosure policy.