Right move (LSE:RMV) i Car salesman (LSE:AUTO) were among the worst performing companies on the stock exchange FTSE100 on Tuesday (February 3). This compounded destitute performance over the past few months. In fact, in the last six months Rightmove is down 45% and Auto Trader is down 40%.

What’s going on?

It’s artificial intelligence again

Auto Trader has encountered some backlash against its Deal Builder product and has reported cancellations and downgrades by some of its members. However, the main problem for both companies is artificial intelligence.

They are both investing heavily in AI and continue to do so, but we are in a situation where the market is looking for AI winners and losers.

Many people find it complex to look beyond winners like ChatGPT, Gemini and Anthropic.

This creates a complex backdrop for vertical markets.

While Auto Trader and Rightmove are implementing AI in their pricing, prospecting and lead qualification tools, these are incremental improvements rather than category-defining breakthroughs. There is a risk that such investments will be perceived as defensive or, worse still, mere stakes.

Anthropic’s press release about its legal plugin – it released 11 fresh plugins on January 30 – went some way towards breaking the camel’s back.

The press release highlights that the legal plugin can do a lot of basic work, such as viewing legal documents and NDAs. But the implications are broader.

It’s about the growing capabilities of artificial intelligence. In the advertising sector, artificial intelligence will be able to obtain unstructured data directly from real estate agents or car dealers. And this means a profound change.

It creates a fresh proposition for agents, dealers and potential car/home buyers. In this context, Auto Trader may, for example, find itself in direct competition with Anthropic. And while Auto Trader may claim it’s a good value, searching on Anthropic can be a fraction of the cost for dealers.

Positive turn

Buyers are notoriously ponderous to change behavior, especially in uncommon, high-value deals like cars or homes.

This inertia continues to work to the advantage of incumbents. Despite the hype surrounding AI disruption, consumers continue to default to platforms they trust, understand and routinely exploit.

This is especially true for home buyers. You really want to see everything on the market before purchasing a fresh home. When it comes to cars, you may already know you want a white one Tesla.

In this case, the AI ​​chatbot can be quite effective in finding all the white Teslas on the market. It can view data from independent car dealers and present it to you too.

However, if you’re undecided and want to explore options, the Marketplace interface may be preferable.

Unfortunately, I don’t have a crystal ball. But it’s worth taking a look at the valuations.

Rightmove currently trades at around 14.2 times forward earnings despite a phenomenal operating margin of 66%. Auto Trader is still cheaper, earning approximately 13 times forward earnings with a margin of 63%.

For now, both companies are growing profits, but it will be compelling to see how they evolve. I think these stocks are still worth considering, but they come with a lot of risk.