Maybe the Best A.I Investment Strategy is to Buy Sabre
How a little known company may be the greatest source of value in A.I
I've been pondering the best way to ride the wave of the growing AI trend, especially if you have sizeable resources at your disposal. Consider companies like NVIDIA, a semiconductor manufacturer, which has become the go-to choice for those looking for chips to create and scale their own AI applications. In their latest earnings call, NVIDIA outperformed earnings estimates and presented a positive revenue forecast for Q2. In fact, Stan Druckenmiller purchased NVIDIA stock before their Q1 earnings release, and since then, the stock has surged by 36% as more and more companies place orders for their products.
Yet, if you truly want to create substantial value, a different approach might be more fitting - owning the company in a tangible manner. A great way to evaluate an investment here is to use a barbell strategy, envisioning two endpoints. On one end stands a company like NVIDIA, producing the foundational technology (semiconductors) crucial for the functioning of AI. On the other end are companies with vast data reserves, which are pivotal for training AI models, like “X”, formerly Twitter. Everything in the middle we can forget about.
As ChatGPT becomes an integral part of our lives, the trend is clear: we're heading toward a future where AI can carry out tasks like crafting travel itineraries and handling bookings. In this scenario, one company positioned to emerge as a frontrunner is Sabre. Serving as a software and technology provider that helps airlines, hotels, and travel agencies plan and manage trips, Sabre plays a central role in the global travel industry.
Collaborating with over 400 airlines, 50 rail carriers, 400,000 travel agents, 20 cruise lines, 40 car rental brands, and over 1.6 million accommodation options - across more than 160 countries, Sabre possesses an abundance of data that positions it perfectly to develop a remarkable AI engine.
Picture having an AI travel companion that takes charge of your entire trip. It knows precisely when to book flights, tracks down cozy accommodations, and even offers suggestions for your destination - akin to having a personal travel expert tucked in your pocket.
Sabre has already laid the foundation for such technology through one important product suite, aptly named Sabre Travel AI. This is a partnership with Google Cloud that allows AI-driven technologies which continuously learn from consumer behaviour, enabling airlines to offer an array of benefits including dynamic pricing based on real-time market conditions, personalised ancillary sales like preferred seating and vacation packages, and even market size forecasting to predict popular travel destinations.
Furthermore, Sabre's innovation extends to scenarios like disrupted passenger re-accommodation. Imagine if your flight schedule changes unexpectedly - Sabre's system would provide alternative itineraries based on global availability and passenger preferences, ensuring a smooth experience.
Now, you might wonder about the traveller interface, especially since Sabre operates predominantly in the backend. Initially, Sabre could develop a ChatGPT-style interface, possibly integrating voice interaction. Eventually, this interface could evolve into a more personalised tool, aligning with the vision of innovators like Imran Chaudhri and the team at Humane1.
Here's the kicker: Sabre has an affordable enterprise value of only $5.9 billion. For context here are a few stats to compare that to:
the global travel and tourism market size hit around $2 trillion in 20222
current size of a few airline companies:
The best way to ride this AI wave with regards to the travel industry could be to buy and scale Sabre.
Given the insights shared above, the question arises: What's the true worth of Sabre?
As the AI landscape continues to evolve, data-rich entities like Sabre are emerging as the true giants, wielding the potential to transform industries and shape our lives. Sabre's position as a linchpin in the travel sector, coupled with its colossal reservoir of data, positions it as a prime contender to harness the power of AI for the benefit of travellers worldwide. The journey from booking flights to planning personalised itineraries is becoming increasingly seamless, all thanks to Sabre's forward-looking initiatives. With its foothold in both data and technology at this scale, Sabre is perfectly positioned as a formidable player in the AI arena.