How Rightmove's Bold AI Investment Sent Shares Tumbling: A Deep Dive

Rightmove, the leading property listing platform, has witnessed a dramatic decline in its share prices following an ambitious announcement regarding its investment in artificial intelligence (AI). The company’s chief executive, Johan Svanstrom, emphasized that AI is becoming “absolutely central” to the company’s operations and future developments.

In its latest projections, Rightmove has slashed its profit growth forecasts for the next year, cutting anticipated operating profit growth down to 3% to 5% by 2026, compared to an expected 9% growth this year. The company is channeling a £60 million investment over the next three years specifically towards AI and related technological advancements intended to boost returns. Svanstrom mentioned that the goal is to enhance annual revenue growth beyond 10% by 2030.

Despite the strategic plans to embrace AI, the stock market reacted harshly, with shares plunging by 28% at one point during trading before recovering slightly to a 12.5% loss by the end of the day. Investment experts like Russ Mould of AJ Bell expressed skepticism regarding the scale of Rightmove’s expenditure on AI, indicating that while AI offers potential to improve efficiency and user experience, there’s fear that the company might be overextending itself by heavily investing in what could be seen as a passing trend.

Rightmove’s management remains optimistic, suggesting that these investments will not only strengthen the company’s position but also ensure a higher-growth business structure over time. As the situation unfolds, the balance between innovation through AI and maintaining shareholder confidence will be crucial for the company’s future.