Artificial intelligence has created an uncomfortable question for companies whose businesses depend on selling information: What happens when AI can find, summarize, and synthesize enormous amounts of data almost instantly?
Bill Ackman seems to believe investors are asking the wrong question. The billionaire’s Pershing Square added ICE (Intercontinental Exchange), the owner of the New York Stock Exchange, to its portfolio, which also included Netflix, Visa, Mastercard, Alcon, and S&P Global.
The ICE investment is especially intriguing, since Ackman is not just counting on additional stock market transactions.
Pershing’s premise is that artificial intelligence may add value to ICE’s exclusive financial data, since most of that data cannot be scraped off the internet and recreated by a chatbot.
ICE CEO Jeff Sprecher has made a very similar case, converting what looks like a legacy financial infrastructure investment into an unanticipated AI bet.
Bill Ackman sees an AI advantage investors may be missing
While ICE is perhaps best known for owning the New York Stock Exchange, it does much more than that.
It runs futures exchanges and clearinghouses and sells fixed income data, analytics, connectivity services, and mortgage technology. That combination is important as financial institutions embrace AI.
AI models can analyze huge volumes of publicly accessible data. But pro investors still require trusted pricing, reference data, and other licensed information that can be tracked back to respectable sources.
This gives rise to a possible scarcity premium around private datasets.
According to a report shared with TheStreet, Sprecher described ICE’s information as data that “cannot be scraped or synthesized.”
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ICE is already developing technology to make that data usable in AI applications, including a Model Context Protocol server that can surface regulated ICE information into customers’ AI processes with the proper rights and audit trails.
The inference is counterintuitive.
AI might commodify information, making it available to everybody. But it might increase the value of private and regulated financial information that is difficult to duplicate.
ICE’s numbers strengthen Ackman’s argument
The underlying company already has the type of recurrent revenue Ackman normally likes.
ICE reported $2.7 billion in second-quarter net revenue, up 5% year over year. Adjusted diluted earnings per share reached $1.90, up 5%.
More importantly for the AI thesis, recurring revenue grew 8% to $1.35 billion.
Fixed Income and Data Services earned $645 million in sales, up 8%, while recurring revenue within the business grew 10% to $531 million. Fixed Income Data and Analytics sales grew 9% itself.
ICE then upped its full-year recurring revenue growth outlook for Fixed Income and Data Services to a range of 7% to 8%.
Meanwhile, the business produced $3.3 billion of operational cash flow through June and $2.6 billion of adjusted free cash flow.
Its board recently raised ICE’s share-repurchase authority to $4 billion starting July 1.
AI could strengthen more than ICE’s data business
There’s another dimension to Ackman’s wager.
AI is also changing how people consume financial information. Financial exchanges may monetize the new marketplaces they are generating.
In July, ICE said it was planning futures with NATIVX linked to GPU compute, treating processing capability as an asset with a price that corporations may want to hedge against.
The contracts would follow tokenized energy-normalized GPU compute pricing, ICE claimed.
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This raises the intriguing possibility that ICE may profit both from the use of AI by financial businesses and from the economic instability that AI technology itself would produce.
The company has also expanded physical infrastructure for automated markets. As demand for low-latency connectivity and computing capacity has increased, ICE has more than doubled colocation capacity at its Mahwah, N.J., data center since 2020.
Ackman’s ICE bet comes with one important risk
But Ackman’s logic doesn’t entail that AI inevitably makes ICE more valuable.
Financial institutions might push prices on data providers. Competing data sets could emerge. And ICE’s mortgage-technology sector has its own issues, apart from artificial intelligence.
The stock also competes with exchange owners CME Group and Nasdaq Inc.
But ICE has something that makes this bet different from many of Wall Street’s more visible AI bets.
You don’t have to build the biggest, most advanced language model. You don’t have to spend tens of billions on GPUs. It owns infrastructure and information that AI systems may increasingly need to access.
That helps explain Ackman’s willingness to purchase when ICE’s value dropped.
Pershing Square has always looked for enduring firms with pricing power, substantial obstacles to entry, and reliable cash creation. ICE’s rising recurring income and proprietary data sets fit within that structure, and AI may possibly add another layer to the moat.
The market has spent a lot of time trying to figure out which firms the AI boom will disrupt.
Ackman’s purchase in ICE poses the opposite question. If AI drives down the cost of easily accessible information, what happens to the cost of information that cannot be simply copied by machines?
The solution might convert what seems to be a defensive financial-data firm into one of Ackman’s most unorthodox bets on AI for the owner of the New York Stock Exchange.
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