Netflix (NASDAQ:NFLX) stock has been gaining a ton of ground over the past two years, thanks in part to smart moves (ad-based tier and the freeloader shakedown) and its strong content pipeline. Though Netflix seems overdue for another pullback over the medium term, it’s my opinion that generative AI innovations like OpenAI Sora — a text-to-video generator that’s every bit as impressive as it is frightening — have the potential to excite investors over the virtually limitless possibilities.
For now, I’m staying bullish on Netflix as it continues to prove that it’s back on track, not just from a content creation perspective but in terms of adopting new technologies.
Undoubtedly, Sora gives us a glimpse of what the future could hold for video. Only time will tell which steamers choose to go down the pathway of AI-enhanced video. But one can’t help but be enthused by what such products could bring to the table for the world’s biggest video content producers.
At this juncture, I don’t expect that Netflix will come up with any sort of announcement that it’s going to start producing a pipeline of AI content. However, in a few years, when more guidelines are put into place to protect the masses from the potential pitfalls of various generative AI technologies, I would not be surprised in the slightest if Netflix were to explore the possibility of dipping more than just a toe in the AI waters.
How Will Netflix Fare as We Move Further Into the Generative AI Age?
It’s not a mystery that Netflix has harnessed the power of AI to give personalized recommendations to its cherished users. As to how much more AI has to offer to the streaming behemoth remains the big question that’s sure to be on the minds of investors over the coming years. In any case, it’s clear that Netflix, alongside its big-tech rivals, stands to benefit, in many ways, from the AI boom.
The disruptive potential of video generators like Sora will be impossible to ignore for the big content creators out there. Whether or not video streamers contemplate incorporating similar technologies as a part of their content strategies remains to be seen.
Ultimately, it’s the customer who will dictate whether or not AI content (video, text, or audio) will be successful.
In that regard, I do think there will always be a place for human stories, no matter how good AI content gets from here. As such, any potential AI videos to come seem likelier to be complimentary short-form videos, at best. In short, generative AI is experimental and ought to be viewed by the streamers more as an appetizer than a main course.
Personally, I think there would be too much backlash from customers if AI were to have too disruptive of an impact on Hollywood and content creators at large. As impressive as Sora appears, don’t count on humans to be replaced anytime soon, or ever, regardless of how profound AI products of the present and future become.
At the end of the day, nobody wants to see their favorite video-streaming platform be filled with low-cost AI-generated content, at least in my opinion. While I don’t think any streamer (Netflix included) is headed down the path of providing primarily AI content, I believe AI represents a potential opportunity for the firm to trim away at its various behind-the-scenes costs without hurting the human creativity factor. Think of the pre- or post-production phase whereby generative AI tools can help enhance, optimize, and accelerate various aspects, like editing.
In many ways, AI could augment human creativity, lower costs of production, and decrease the number of days it takes to create an episode of the next big hit show. In my humble opinion, I think that’s where we’re headed when it comes to streamers and AI, rather than a dystopian scenario that has one person typing prompts into a text field to create the next episode of something severely lacking in humanity.
AI Is Getting Smarter, but Human Creativity Preservation Is Paramount
For now, generative AI seems to be in a “wild west” stage, with few, if any, standout regulations in place put forth by the federal government. Only time will tell what the fate of Sora and AI innovations like it will be. Either way, there’s no denying that videos generated by Sora are beyond incredible, perhaps representing the most profound leap in the realm of AI since OpenAI ChatGPT awed us just over a year ago. Indeed, AI-generated video has come such a long way in just one year.
Just a year ago, AI-created video wouldn’t fool anyone. Nowadays, we seem to be entering an era where it’s becoming difficult to determine the authenticity of video footage. That just goes to show how fast AI seems to be advancing, not at a linear rate that many of us humans are familiar with, but at an exponential rate.
In the meantime, don’t expect streamers (Netflix or the rest of the pack) to jump aboard the Sora bandwagon. For now, such innovations are merely food for thought on how the future of video could go and whether it’s a future that we, as content consumers, care for.
Is NFLX Stock a Buy, According to Analysts?
On TipRanks, NFLX stock comes in as a Strong Buy. Out of 41 analyst ratings, there are 27 Buys, three Holds, and one Sell recommendation. The average NFLX stock price target is $573.12, implying that shares are fairly valued. Analyst price targets range from a low of $375.00 per share to a high of $700.00 per share.
The Bottom Line
With corporate caution and likely looming regulations to hit rapidly advancing generative AI, don’t expect Netflix or any streamer to make too large a splash into the realm just yet. Further, it’s the job of regulators and top content creators to ensure the creative human spirit is not entirely destroyed at the hands of AI technology.
For the most part, I expect that AI innovations will play more of a background role, augmenting the ability of human creators rather than taking away their jobs and destroying the human creative spirit as we know it. For Netflix, arming its creators with AI may be enough to help its stock break into the Magnificent Seven cohort.
