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Buzzfeed rallies on ChatGPT deal, but can it reach five bucks?

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What’s moving on Wall Street this week? It’s Buzzfeed [NASDAQ:BZFD] folks. Investors are piling into the stock following news that it will be working with OpenAI to create new content for its audience.

This was an obvious move for media companies, including Buzzfeed, and we anticipate that this will not be an exclusive deal either. CEO Jonah Peretti has already told his troops that AI is going to be a core part of the Buzzfeed business. It is being hailed as the beginning of major changes for the online media business.

The question is, will this be a game changer for Buzzfeed and the wider media industry? Is the buying into Buzzfeed stock simply being fuelled by hype around the OpeAI tech?

Grant Fuller, a specialist in machine learning and artificial intelligence at Irithmics in the UK cautions on the limitations of the technology: “ChatGPT is based on GBP 3 which is a large language model taught to predict the most likely words learnt from a corpus of pre-existing human text on the Internet,” he explains. “OpenAI have extended this and used human beings to curate responses from humans (the prompt) and the output from the machine. It is a similar machine learning principle as AlphaGo – reinforcement learning. While the algorithm can learn what was a good response, it is not able to do something entirely new, it relies entirely on historic data.”


Is ChatGPT a game changer in news gathering?

What this means in essence is that there are limitations on the way ChatGPT can be used in actual news gathering. Investors may also be buying Buzzfeed stock because they anticipate it will be able to make many of its journalists redundant and hence reduce its costs, but this only stretches so far. The technology will not be useful as a means of producing content that it not currently there already – i.e. breaking news.

Fuller makes the comparison with spell checking software. It can be very useful technology to supplement existing activities but it is harder to balance an entire news gathering operation on ChatGPT. It could, however, be a useful additional tool to complement humans.

Like spell checking applications, of course, this form of AI is going to become more widely available for news desks and media businesses over the next few months. We don’t anticipate this becoming a competitive moat for Buzzfeed.

Shares in Buzzfeed were up over 140% in 24 hours at time of writing on the news. Note however that the stock had been struggling going into this week. Stock has really only just clawed its way past levels last seen in October. Buzzfeed is well off the $5 level it was trading at during the first half of last year. It is still currently down 45% on the 52 week picture.

Fundamentally Buzzfeed has been holding its own against Nasdaq tech peers like Zoominfo Technologies [NasdaqGS:ZI] and Baidu, but still conceding ground in areas like equity/intangibles. The company has been looking better from a cash perspective, and it was no surprise to see its president, Marcela Martin, saying that Buzzfeed was “continuing to evaluate strategic M&A opportunities.”

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This article does not constitute investment advice. Do your own research or consult a professional advisor.

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