ChatGPT writing BuzzFeed articles may reduce some costs for the media firm but it won't be as profitable as investors think, Bank of America says

• Getting ChatGPT to write BuzzFeed articles won't be as profitable as investors think, Bank of America said in a note.
• The media company has said it would use the AI tech to help produce content, causing its stock to soar 200% last week .
• BofA maintained its underperform rating on the stock with a price target of $2, around 4% below its current price.

Getting ChatGPT to write BuzzFeed articles may reduce some costs for the struggling media firm, but it won't be as profitable as investors think, Bank of America warned in a note on Wednesday.

Analysts pointed to the media company's recent announcement it would employ OpenAI's artificial intelligence technology to produce content for its website.

That announcement, along with a recent $10 billion deal with Meta to bring more creators to Facebook and Instagram, caused BuzzFeed stock to soar 200% last week.

But while AI technology could help BuzzFeed trim down some of its costs, it isn't the saving grace that investors may think, analysts said of the recent move.

"While we are not surprised to see shares appreciate on these two press reports, the magnitude of the increase is surprising to us. We do not project the Facebook partnership represents an incremental revenue opportunity for '23 … and BZFD is only in the early days of experimenting with AI, which could take time before it becomes a material driver of engagement/monetization," the note said.

ChatGPT has set off an investor frenzy in recent weeks, as the hyped bot has shown it can spit out relatively sophisticated prose for an AI tool.

Meanwhile, BuzzFeed has struggled financially in recent years, and saw shares drop 80% in 2022 amid high inflation, rising interest rates, and other macroeconomic headwinds. The firm was among a wave of companies that slashed their workforce in light of economic uncertainty, as it laid off 12% of its staff in December.

While analysts believed the recent announcements have been a "positive validator" of BuzzFeed's place in the market, they maintained their underperform rating on the stock with a price target of $2, around 4% below its current price.