Shopify (SHOP): AI Could Power the Next Phase of Growth
When investors think about artificial intelligence, semiconductor companies often come to mind first. We believe Shopify (SHOP) offers a different way to capitalize on the AI boom by bringing AI directly into the future of online commerce.
Shopify already holds a leading position in e-commerce software, with its merchants accounting for nearly 15% of all U.S. e-commerce sales. That makes it the second-largest player in the industry behind Amazon, giving the company a strong foundation as AI reshapes how consumers shop.
The next growth driver is what many are calling agentic commerce, where AI assistants handle everything from researching products to completing purchases on behalf of consumers. Shopify appears to be positioning itself at the center of that shift.
The company co-developed the Universal Commerce Protocol with Google, an open standard designed to connect merchant catalogs across AI shopping platforms. Shopify is also the only commerce platform currently enabling product discovery and purchasing directly through OpenAI’s ChatGPT, Microsoft’s Copilot and Google’s Gemini.
Those investments are already producing measurable results. During the first quarter, AI-generated traffic to Shopify merchant storefronts increased eightfold, while orders originating from AI-powered searches jumped 13 times. Management described those early trends as highly encouraging, and the broader opportunity could be substantial. According to Grand View Research, agentic commerce is projected to grow at a 36% annual rate through 2033.
The company’s core business continues to perform well alongside its AI initiatives. First-quarter gross merchandise volume increased 35%, driven by strength beyond its traditional retail business. Wholesale gross merchandise volume climbed 80%, while international gross merchandise volume grew 45%. Those gains helped lift revenue 31% to $3.1 billion, while adjusted net income rose 44% to $0.36 per diluted share.
Shopify is also using AI internally to improve efficiency. More than half of the company’s coding is now handled by AI tools, allowing Shopify to launch more than 300 new products last year without increasing headcount. Over time, those productivity gains could support expanding profitability.
The stock trades around $127 per share. While the valuation remains elevated, the shares are still approximately 36% below their previous high, potentially creating a more attractive entry point for long-term investors.
Wall Street continues to expect strong growth, with consensus estimates calling for adjusted earnings to increase at an average annual rate of 31% through 2028. The median analyst price target stands at $150, implying roughly 32% upside from recent levels. Morgan Stanley is even more optimistic, assigning a bull-case price target of $287, which would represent approximately 150% upside if revenue growth accelerates through stronger adoption of products such as Shopify Payments and Shopify Audiences.
With leadership in e-commerce, accelerating AI adoption, expanding merchant services and multiple long-term growth opportunities, we believe Shopify is well positioned to benefit as AI transforms the way consumers and businesses interact online.
