Rightmove’s AI gamble is a cautionary tale for UK investors

This report is taken from this week’s CNBC UK Stock Exchange newsletter. Like what you see? You can subscribe here.

Mission

Last Friday brought investors Correct movement A new and unwelcome experience – a violent correction in stock prices.

Shares of the UK’s largest real estate portal, which reached a record high in late July, It fell 28% at one point before finishing down 12.5%generating approximately £634 million ($833.4 million) from Rightmove’s stock market valuation.

The sell-off followed a trading update in which the former stock market firm, which accounts for more than 70% of total consumer time spent on UK property portals, pledged to increase spending on AI at the expense of short-term profit growth.

In 2026, core operating profit growth is expected to slow to between 3% and 5% – down from the 9% forecast for this year – as investment accelerates, it said.

“AI is now absolutely central to how we run our business and plan for the future,” said Johan Svanström, CEO of Rightmove.

“We are already working on a wide range of exciting AI-powered innovations for the benefit of our partners and consumers, and we see huge potential using our leading reach and connected data,” he added.

The share price reaction highlights a significant difference between British and US investors. The latter, as has often shown recently, welcomes news of intensified investment in artificial intelligence. By contrast, British investors tend to be wary of anything resembling “tomorrow’s jam”.

This is not a new phenomenon. As long ago as August 2004, shares in Britain’s Sky Broadcasting suffered a 19% drop in a single day after James Murdoch, its then chief executive, announced that the satellite broadcaster would invest hundreds of millions of pounds in technology and infrastructure at the expense of short-term profitability.

It is worth noting that since Friday’s sell-off, Rightmove shares have risen after a series of broker notes suggesting they were oversold gave the investment a warmer reception.

But the initial market reaction raises questions about how other UK companies that need to invest more in AI will announce this in the future.

So far, there has been little caution on this front. Most UK companies recognize the need to embrace AI and references to it have increased in company trading updates over the past year.

An analysis of 700 FTSE-100 annual reports published by education and skills provider Multiverse in March found that 49% of FTSE-100 companies and 48% of UK companies this year mentioned AI as part of their strategy.

However, this is not necessarily coupled with sufficient investments.

Matt Clifford, author of the British government’s AI Opportunities Action Plan and a former adviser to Prime Minister Keir Starmer, warned in September that British companies were falling behind international competitors in their adoption of AI.

He told the Royal Television Society conference: “We are kidding ourselves that the UK is good at technology. We are good at creative technology but we are the worst adopters of technology in the G7.”

“This could create a perfect storm as financial services are transformed by AI, along with life sciences, but our companies are slower to adopt AI than their international competitors, and are losing share over time,” Clifford said.

He said UK business leaders are “overwhelmed with anxiety” about AI adoption, with most implementation currently “bottom-up”, coming from individual users and engineers.

He added: “AI is a bit like teenage sex – everyone is talking about it but far fewer are actually doing it. And the people who flaunt it the most usually do the least.”

Initial investments

It seems likely that SMEs (small and medium-sized enterprises) will be the most lagging behind in AI implementation due to lack of financial resources.

But the Race for ROI report, published by IBM two weeks ago, suggests that the UK’s larger companies are slowing down. It found that nearly two-thirds of organizations have yet to exploit the full potential of AI – with most using it primarily to improve productivity or reduce costs rather than, for example, enhancing customer experience as Rightmove hopes. However, it has noted that the financial services, energy and utilities sectors are making some progress on this front.

High initial investment costs appear to be a major factor. The Value of AI in the UK report, a report published by SAP last month, found that the average British company will invest £15.94 million in AI this year, behind £27.46 million for the average US company and £31.59 million for the average Chinese company. This comes despite ordinary UK business leaders forecasting that AI spending will deliver a 17% return on investment in 2025.

Aside from investment costs, lack of skills or experience appears to hinder AI implementation, perhaps due to lack of training.

Multiverse’s analysis found that only 34% of FTSE 100 companies and 18% of UK companies made broader reference to AI training in their reporting, which it noted “appears low for the technology most companies are seeking to adopt”.

However, look hard enough, and you’ll find that some companies are doing it right.

The first is the FTSE-100 online car market autotraderwhich last year launched Co-Driver, a suite of AI-powered tools aimed at improving the experience of both car retailers and car buyers by, for example, supporting retailers to create high-quality ads more efficiently and reducing the amount of time it takes to advertise their cars.

CEO Nathan Koo revealed last week that the product has already been used by 10,000 customers to create more than a million ads.

Autotrader is also launching a new AI-powered product, Buying Signals, which uses existing consumer data to inform a retailer how likely a customer is to buy a car, how local the buyer is and what type of car they are interested in.

This is a good example of using AI to expand costs rather than just reduce them. If it can successfully emulate Autotrader – which dominates the UK’s online used car market, just as online property firm Rightmove does – the latter’s shareholders should ultimately be happy.

Disclosure: Comcast is the parent company of British Sky Broadcasting and NBCUniversal, which owns CNBC. Versant will become the new parent company of CNBC based on Comcast’s planned spin-off of Versant.

Top TV picks on CNBC

James Reed, Chairman and CEO of Reed, discusses the impact of AI on the British job market.

Bank of England Governor Andrew Bailey indicated to CNBC that interest rate cuts are coming, and said he will be monitoring inflation and labor market data to be released before the last monetary policy meeting of the year, on December 18.

The BBC has confirmed that it is in preliminary talks with Sky over the potential sale of its media and entertainment business for £1.6bn.

– Holly Eliatt

Need to know

Weak jobs data weighs on UK assets. The country Unemployment rate rises to 5%Higher than expected in the three months to September. Yields on British government bonds – known as government bonds – fell and the pound weakened against the US dollar.

The Bank of England keeps interest rates steady. Although a narrow majority of members at the Bank of England’s meeting on Thursday voted to keep interest rates at 4%, Governor Andrew Bailey signaled to CNBC that rate cuts are coming, saying: “We have passed the peak of restriction.“

‘I have to change my destiny’: Dame Jo Malone on reinvention. In a Frank conversation With CNBC Steve Sedgwick on “Executive decisionspodcast, Malone shared how her early struggles shaped the entrepreneurial drive and resilience that would define her career.

—Yu Boon Ping, Holly Eliat

Quote of the week

In the markets

London FTSE 100 index The index hit a new record high on Tuesday, with the index temporarily closing at around 9,900 points.

“The FTSE 100 is about to hit 10,000 and it may only be a few days or hours before it reaches that triumphant level,” Dan Coatsworth of AJ Bell said in a note on Tuesday. “Chancellor Rachel Reeves hopes the FTSE 100 reaches the magic level of 10,000 before the Budget, so she can use this achievement to help support her campaign to attract more people to invest in UK assets.”

Meanwhile, British government bonds – known as government bonds – were volatile on Tuesday, with yields falling across the curve after the crisis. The UK unemployment rate rose more than expected. Market watchers told CNBC that the numbers make a Bank of England rate cut in December more likely, while adding additional pressure on Reeves ahead of the crucial fall budget.

By the end of the European trade, the return on the index 10 gilded years It was slightly higher, reversing course from a previous decline that saw yields fall by nearly 8 basis points.

sterling It also saw volatile trading earlier in the day, falling against the US dollar and the euro after the release of labor market data. By 5pm in London, the British currency was flat against the US dollar, but still down 0.4% against the euro.

– Chloe Taylor

Coming

November 13: UK GDP data for the third quarter
November 19: UK inflation data for October
November 21: GfK consumer confidence data for November

– Holly Eliatt