DraftKings Could Benefit from AI Productivity Gains

One of the primary selling points of artificial intelligence (AI) at the corporate level is that the disruptive technology can boost productivity, potentially leading to higher profitability. DraftKings (NASDAQ: DKNG) is a prime example of a gaming operator that can benefit from that trend.

Following Morgan Stanley’s 2024 Technology, Media & Telecom Conference, strategist Edward Stanley said many participating firms are still just tinkering with AI.

But early AI adopters could glean a benefit from the technology via “customer support gains and github integrated into research and development processes. The margin expansion in these names should be meaningful over the second half of 2024 and into 2025.”

DraftKings and Sportradar are in good company. Other members of the Morgan Stanley AI productivity winners list include Amazon (NASDAQ: AMZN), Blackstone (NYSE: BX), Home Depot (NYSE: HD), Microsoft (NASDAQ: MSFT), and Facebook parent Meta Platforms (NASDAQ: META).

AI Already Present in Sports Betting Space

In various forms, AI is already being deployed across various sports betting frontiers, including fraud detection and identification of suspicious activity. Likewise, AI is increasingly prominent for firms such as Sportradar and rival Genius Sports (NYSE: GENI) that compress thousands of data points to help sportsbook clients offer more profitable wagers.

The data and technology provided by  Sportradar and Genius are crucial in advancing the domestic sports wagering industry. They can be viewed as essential at a time when more operators are leveraging exotic wagers to entice clients.

For DraftKings, increasing AI adoption could be material on multiple fronts. That includes the shift of consumers to experiences over goods and the operator’s ability to integrate media and streaming into its betting platforms.

“We’ve seen leading streaming companies increase their investment in live content, particularly live sports, which is uniquely powerful and driving customer acquisition and attracting advertising dollars,” noted Benjamin Swinburne, who covers the media and entertainment, advertising, and cable and satellite industries at Morgan Stanley.

DraftKings Indeed an Early AI Adopter

As Morgan Stanley pointed out, many companies are currently experimenting with AI. But DraftKings has a long-running commitment to the technology. AI and machine learning are crucial in processing correlations and data points tied to increasingly popular same-game parlays offered by the operator.

In fact, Boston-based DraftKings has been using some form of machine learning with its daily fantasy sports (DFS) contests for roughly a decade.

Regarding enhanced productivity, DraftKings leverages the technology to more effectively target ads and specific wagers to customers. It is also used to more rapidly identify and fix problematic computers, among other uses.