The story is a simple one on the surface. Rightmove is a market leader, a digital giant in the property space. To stay ahead, its CEO, Johan Svanstrom, declared that AI is becoming “absolutely central to the running of the business.” To back this up, the company earmarked a cool £60 million for tech spending on AI over the next three years. A bold, forward-looking move, right? Wrong. The very same announcement included a rather painful gut punch for investors: next year’s operating profit growth forecast was being slashed from a respectable 9% down to a range of 3-5%. The market’s reaction was swift and brutal. The share price plummeted 28% at the open before stabilising to a 12.5% loss, wiping hundreds of millions off its valuation in a few hours.
The Siren Call of the AI Gold Rush
So, what’s going on here? Why is every company, from property websites to sausage makers, suddenly desperate to pour money into AI? The pressure is immense. There’s a palpable fear of being left behind, of becoming the next Blockbuster in a world of Netflixes. A solid corporate strategy today seemingly must have an “AI” chapter. It’s about more than just efficiency; it’s about future-proofing, about unlocking new revenue streams, and, let’s be honest, about looking like you know what you’re doing in front of competitors and shareholders.
This isn’t just about tinkering with chatbots. Companies are looking at AI to personalise customer experiences on a massive scale, optimise incredibly complex supply chains, and accelerate research and development. The promise is a business that is smarter, faster, and more profitable. The problem, as Rightmove discovered, is the chasm between that promise and the immediate, cold, hard numbers. You can’t just sprinkle some AI dust and expect profits to magically appear. It requires foundational, often expensive, change.
Rightmove’s £60 Million Headache
Let’s break down Rightmove’s predicament, because it’s a masterclass in the tension between long-term vision and short-term reality.
The Immediate Financial Blowback
The decision to invest £60 million is significant, but it’s the consequence of that spending that spooked the horses. Slashing a profit forecast by more than half is a red flag for any investor. It signals a period of pain. Think of it like deciding to build a major extension on your house. You know that in two years, you’ll have a stunning, spacious home that’s worth far more. But right now? Right now, your garden is a mud pit, you’re bleeding cash to builders, and the noise is giving you a migraine. Investors looked at Rightmove’s announcement and saw only the mud pit and the mounting bills. The stock impact was a direct result of the market pricing in that immediate pain.
Investor Scepticism: Is This a Strategy or a Splurge?
The negative reaction wasn’t just about a single year’s profit. It was rooted in a deeper scepticism. As the BBC reported, analysts and investors are questioning the scale of the spending. Is this a well-defined project with clear returns, or is it a case of “technology bandwagon-jumping”? This is the ultimate risk. While CEO Johan Svanstrom is confident, projecting revenue growth of over 10% by 2028, the market is asking for proof.
This is the tightrope every public company CEO has to walk. You must invest for the future, but you are judged on the present. Svanstrom is selling a vision of a future, AI-supercharged Rightmove. The market, however, is buying and selling shares based on next year’s profit-and-loss statement. When those two things diverge so sharply, you get the kind of market chaos we saw.
Understanding the Anatomy of AI Investment Risks
Rightmove’s situation isn’t unique; it’s just a very public example of a private struggle happening in businesses everywhere. What are the core risks they are all grappling with?
The War Between Now and Later
At its heart, this is a conflict of timelines. True AI integration isn’t a quick software update; it’s a fundamental overhaul of data infrastructure, workflows, and even company culture. It’s a multi-year project with a pay-off that is often difficult to quantify and even harder to time. The benefits of improved customer satisfaction or long-term efficiency gains don’t show up neatly in next quarter’s earnings report. This creates a classic AI investment risk: you are guaranteed the short-term cost, but the long-term benefit remains a forecast, a story you have to persuade investors to believe in.
The Danger of AI FOMO (Fear of Missing Out)
The second major risk is spending for spending’s sake. When a technology becomes as hyped as AI, there’s a danger that the corporate strategy becomes “we need an AI strategy” rather than “here is a business problem that AI can uniquely solve.” This leads to vanity projects, bloated budgets, and investments in technology that the organisation isn’t culturally or structurally ready to adopt. The result is a massive spend with no discernible return on investment, which destroys shareholder value and credibility. A key question for Rightmove is whether their £60 million plan is a precise surgical tool or a beautifully crafted, very expensive hammer looking for a nail.
The Ripple Effect on Stocks and Strategy
The Rightmove saga offers crucial lessons for any company considering a major AI investment and for any investor evaluating those companies.
How AI Ambitions Hit the Ticker
The direct stock impact of an AI spending announcement is becoming a fascinating field of study. For a handful of tech darlings like NVIDIA, any mention of AI sends the stock soaring. But for most other businesses—the “normal” companies—it’s far more complex. A poorly explained or unexpectedly large investment can be perceived as a risk, not an opportunity. Investors will demand to know the ‘why’. Why this amount? What will it do? When will we see a return? Without convincing answers, the market will assume the worst: that it’s a desperate, expensive gamble.
AI Is Not an IT Project
The most successful companies will be those that understand AI is not just a line item in the tech spending budget. It has to be woven into the fabric of the business. This means the CEO, not just the CIO, must champion it. It requires retraining staff, rethinking core processes, and, crucially, managing shareholder expectations with crystal-clear communication. Svanstrom’s message about AI being “central” is the right one, but it must be backed by a detailed, convincing roadmap that justifies the short-term financial hit.
Ultimately, Rightmove has made its bet. They believe that this £60 million investment will create a moat around their business that competitors cannot cross, justifying their long-term goal of over 10% annual revenue growth. They are playing the long game. The market, for now, is fixated on the short-term cost. The coming years will reveal whether this was a visionary move that secured another decade of dominance or an expensive miscalculation. The answer will provide a valuable lesson for every other company standing on the edge of its own AI investment cliff.
What do you think? If you were a Rightmove shareholder, would you hold your nerve and trust the CEO’s long-term vision, or would you run for the exit, spooked by the immediate profit crunch?
