| PROSPERITY PUB MARKET TALK
“Man Bites Dog”: AI Losing Its Job at McDonald's Drive-Thrus… To Humans
We've heard of plenty of jobs being replaced by AI, but here’s a new twist.
It seems an IBM-supplied AI system, which McDonald's was testing in its drive-thrus, is losing its job to humans.
McDonald's is ending its trial of the Automated Order Taker (AOT) AI drive-thru technology, developed in partnership with IBM, across more than 100 restaurants.
The technology was meant to streamline operations with voice-activated ordering, but it faced challenges interpreting different accents and dialects, which impacted order accuracy.
As a result, the AI system will be shut off by July 26, according to a memo sent to franchisees.
Despite the end of this particular experiment, McDonald's hasn't abandoned its AI ambitions.
The company remains optimistic about the future role of AI in its drive-thrus, acknowledging the potential for voice ordering solutions to enhance customer experience.
The fast-food giant's decision comes amidst a broader industry trend of experimenting with AI and robotics to streamline operations. While other restaurant chains like Chipotle and Yum Brands have made significant strides in AI and robotics investments, McDonald's continues to evaluate long-term, scalable solutions for its operations.
Interestingly, Alphabet's Google might be the next player in McDonald's AI journey. Speculation arose after Google's significant presence at McDonald's Worldwide Convention in April, hinting at a possible partnership to replace IBM.
For now, the focus remains on achieving accuracy of at least 95% and cost savings, with McDonald's franchisees expressing frustration over the AOT's performance.
McDonald’s Stock — The Golden Arches Are Sagging
Meanwhile, our own Geof Smith weighed in on MCD in no uncertain terms:
“Think about this: The S&P is up 15% on the year, NQ is up 18%, the Dow up 3% and MCD is down 15% on the year. MCD is a DOG.”
He went on to share his view of where MCD is headed next, including key levels:
“I think if it breaks below 249 it will probably test 246 and if it gets below 245.40 next stop is 241, then 235, then 231, after that, it is not too far from the 2022 lows of 217.”
It seems the downside outlook on MCD is unanimous, as Jeffry Turnmire weight in with his commentary:
“MCD might be heading down regardless. The setup is bearish. The target is a lower low than the low that was struck back in October 2023.
232-239 area would be the "ideal" spot to find a bottom, and if it moves on down.... well that might mean a longer correction is in store for MCD.”
He shared the following chart, pointing out that the past 18 months of MCD’s price action resembles a giant McDonald’s logo:
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