As the AI panic wave crushes sector after sector, it's long past time to cut through the noise and figure out which companies are best positioned to see their businesses, profits, and, by logical extension, stocks improve through smart application of AI and its offshoots.
The answer is right in front of us, dominating for the last year and kicking the crap out of the other *major* players in its space; the Bentonville Behemoths themselves, Walmart.
While the rest of retail has seen the online experience improve dramatically over the last five years (what specialty chain doesn't have a kick-ass app at this point?), discount has remained largely the same. You type a product in the search bar, and Amazon or Walmart kicks back 50,000 different options. It's overwhelming, inefficient, and baffling. Walmart and Amazon carry over a million products online and offline. At this point, I've had Amazon spy software (Alexa speakers) in my house for nearly a decade. |
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If a company has tech that can find my lost dog, why can't it reliably suggest something like a simple lightbulb for my desk lamp without giving me 10,000 options?
That's about to change. Walmart is leading the charge to revamp the entire discount shopping experience. If they do it right, and Wall St seems to think they will, it's going to change the way people shop and improve Walmart operations from the back end to the checkout.
When you move $700b in product a year, a little margin improvement goes a long way.
In other words, there's a reason Walmart shares are more expensive than Amazons for the first time in memory… Walmart is a better tech company than Amazon at the moment.
Let's break it down. As the AI panic wave crushes sector after sector, it is time to cut through the noise and identify which companies are best positioned to see their businesses, profits, and, by logical extension, stocks improve through the smart application of AI.
The answer is the discount retail leader dominating the sector: Walmart.
While the rest of retail has seen the online experience improve dramatically over the last five years, the deep discount experience has remained largely the same. A simple product search on Amazon or Walmart kicks back tens of thousands of options—a process that is overwhelming, inefficient, and baffling. With over a million products carried on and offline, the simple reality is: If a company has tech that can find my lost dog, why can't it reliably suggest a simple lightbulb for my desk lamp without giving me 10,000 options?
That inefficiency is about to change. Walmart is leading the charge to revamp the entire discount shopping experience. If they execute correctly, it will change the way people shop and significantly improve Walmart's operations from the back end to the checkout. |
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The 100-Basis Point Lever: Why Walmart is an AI Stock in Disguise
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In the world of retail, a 1% shift is usually considered a rounding error. But at Walmart's scale—with revenues marching toward $700 billion—that single percentage point (100 basis points) is a financial sledgehammer. As of February 2026, Walmart is no longer just a "big box" play; it has evolved into a case study for operating leverage fueled by two distinct AI engines: Agentic Commerce on the front end and a Self-Healing Supply Chain on the back.
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For an asset manager, the Walmart thesis is simple math. As we move through Q1 2026, Walmart is trading at a premium P/E ratio of roughly 46x. Investors are paying up because they finally see the path to higher net margins. Historically, Walmart lived in the 2% range. Today, it has pushed past 3.3%, with sights set on 3.5% or higher.
If Walmart captures just 100 basis points (1%) of additional net margin through AI-driven efficiencies, it adds roughly $7 billion to the bottom line. Against its ~8 billion shares, that is an extra $0.88 in Earnings Per Share (EPS). In a stock currently projected to earn around $2.60 per share, a $0.88 boost represents a 34% growth explosion. When you apply a 40x multiple to that extra dollar of earnings, you aren't just looking at a better retailer; you're looking at a massive stock price rerating. |
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Jeff Macke | The Macke Portfolio |
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Monday, February 16, 2026 |
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