AI could disrupt this FTSE 100 giant, but here’s why I’d buy its shares

AI could disrupt this FTSE 100 giant, but here's why I'd buy its shares

The artificial intelligence (AI) revolution has begun! It could affect many businesses and one FTSE 100 stock that could be adversely affected is Pearson (LSE: PSON ). Despite this, I would still buy the stock if I had some spare cash. Here's why.Publication and educational materialsPearson is an international publishing house. The business operates through three divisions: Education, Financial Times and Penguin. Most of its income comes from the education part.

So what's going on with Pearson stock right now? Well, as I write, they are trading at 841p. At this time last year the shares were trading at 880p, down 4% over the 12 month period. For context, the FTSE 100 as a whole rose by just half a percentage point over the same period.

Concerns about the rise of artificial intelligence affecting businesses like Pearson have grown, particularly in recent months. Tools like these are transforming the way individuals access materials and learn. In fact, Pearson's US competitor Chegg said in May that AI was hurting its business. This triggered a market reaction. Pearson shares actually fell 15% in one day.

In my view, AI is one of the biggest threats to Pearson's ability to perform and deliver consistent returns. The reason I'm not too concerned is that Pearson is protected through his various operations. In contrast, Chegg does not have similar diversification, which is why I believe it has expressed its stance on AI affecting its business.

Other than that, AI is still pretty much in its infancy and there is a lot of hype around it, maybe it's a bit over the top. At this stage,  has its limitations and I don't believe it can immediately replace what Pearson and similar companies offer. However, I will keep a close eye on how the technology develops.

From a bullish perspective, Pearson released its semi-annual report at the end of July, which confirmed my position on the stock. Operating profit was up 44% and underlying sales were up 6%. The reason is primarily the increase in the teaching of the English language. Finally, adjusted earnings per share rose, albeit slightly, to 25.6 pp from 22.5 pp in the same period last year.

Additionally, Pearson shares provide a passive income opportunity with a 2.6% dividend yield. I understand that dividends can be canceled at any time.Pearson stock looks like a good choice for my holdings at the moment. I believe that a company's reputation, as well as recent and historical performance, helps me make an investment. The possibility of passive income also helps.

Aside from the threat posed by AI, Pearson stock looks a little expensive with a price-to-earnings ratio of nearly 20. Any stock market correction or negative news could send the stock tumbling.Overall, I'm not afraid of the AI ​​revolution when it comes to Pearson stock. I consider it a good FTSE 100 stock to buy and hold for my portfolio.AI contribution could disrupt this FTSE 100 giant, but here's why I'd buy its shares appeared first on The Motley Fool UK.Should You Buy Pearson Plc Shares Today?Please take a moment to read it first before making a decision.

Because my colleague Mark Rogers - Chief Investment Officer of The Motley Fool UK - released this special report.Of course, the decade ahead looks dangerous. What with inflation recently hitting 40-year highs, a "cost of living crisis" and the threat of a new Cold War, knowing where to invest has never been more difficult.

And yet, despite the UK stock market recently hitting a new all-time high, Mark and his team think many stocks are still trading at a significant discount, offering savvy investors plenty of potential opportunities to strike.This is why now could be the perfect time to secure this valuable investment research.Mark's "stupid" analysts searched the markets low and high.This special report reveals 5 of his favorite long-term "buys".Please don't make any big decisions until you see them.Get your free copy nowRead more

Pearson's share price in 2023 has fallen. Time to shop?Sumayya Mansoor has no position in any of the listed stocks. Motley Fool UK recommended Pearson Plc. The opinions expressed about the companies mentioned in this article are the opinions of the author and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool, we believe that we are better investors with a diverse range of insights.

 Artificial Intelligence (AI) has been the talk of the town, revolutionizing industries and reshaping business environments around the world. Amidst this technology-driven transformation, FTSE 100 companies are not immune to the potential disruptive forces of AI. While some might fear the impact of AI on traditional businesses, savvy investors recognize the opportunities it brings. In this article, we explore how AI could disrupt one of the FTSE 100 giants and why investing in its shares could be a smart move.

The potential for AI disruption

As technology advances at an unprecedented pace, AI is no longer a distant vision but a tangible reality that is actively shaping various sectors. The FTSE 100 is home to many companies with huge amounts of data, making them potential targets for AI integration. AI-driven automation, data analytics and predictive modeling can offer significant benefits, streamlining operations and increasing efficiency.

Use of AI at FTSE 100 Giant

One particular FTSE 100 giant benefiting from AI disruption is [Company X]. With a diverse portfolio and extensive market reach, [Company X] could unlock countless opportunities by adopting AI technologies. By leveraging artificial intelligence for data analysis, customer profiling and supply chain management, [Company X] can make informed decisions and gain a competitive advantage.

AI in customer experience

In the digital age, customer experience plays a key role in a company's success. Chatbots and AI virtual assistants can greatly improve customer support by providing instant answers to questions and quick resolution of issues. This level of personalized and efficient service can foster customer loyalty and increase [Company X's] customer satisfaction.

Data-driven decision making

Data is undoubtedly the lifeblood of the AI ​​era. With access to massive amounts of data, [Company X] can use artificial intelligence algorithms to identify trends, spot market opportunities, and predict consumer behavior. With data-driven decision making, [Company X] can optimize its strategies and quickly adapt to changing market dynamics.

Supply chain optimization

Artificial intelligence can streamline supply chain management for [Company X], leading to cost savings and greater efficiency. Machine learning algorithms can optimize inventory management, predict demand patterns and optimize logistics routes, ensuring a seamless supply chain process. Such optimization not only increases profits, but also strengthens [Company X's] market position.

Embracing innovation and staying ahead

The FTSE 100 is a competitive index where innovation is vital to maintaining relevance and growth. Companies that fail to embrace AI may fall behind their tech-savvy competitors. By investing in artificial intelligence technologies, [Company X] demonstrates its determination to remain at the forefront of industry innovation and remain attractive to investors.

While AI disruption poses challenges for traditional FTSE 100 companies, it also represents huge growth potential for investors. [Company X], as a prime example, has the resources and potential to use the power of AI to their advantage. By integrating AI-driven solutions into customer experience, decision-making and supply chain management, [Company X] can optimize its operations and drive long-term growth. For investors looking to harness the transformative power of AI, investing in [Company X] stock could be a wise move in the ever-evolving stock market environment.

FTSE 100, AI Disruption, Investments, Stocks, Artificial Intelligence, Technology, Data Analytics, Automation, Customer Experience, Supply Chain Optimization, Machine Learning, Innovation, Market Dynamics, Predictive Modeling, Chatbots, Virtual Assistants, Customer Support, Data-Driven Decision Making , competitive advantage, growth potential, stock market.