Hedge funds increase bets against call centre companies over AI fears

In short: More hedge funds are betting that call centre and outsourcing companies will lose value as AI handles more customer service work.

What's going on

Hedge funds are increasing “short” bets against companies that provide call centres, telemarketing, and other outsourced customer support. A short bet is when an investor makes money if a company’s share price falls, like betting that a car’s resale value will drop.

Teleperformance, the world’s largest customer service company, has become one of the most shorted stocks in Europe. Data cited by the Financial Times shows total short interest in Teleperformance rising from about 4 percent at the start of the year to 17.2 percent this month. The company’s shares are down by about a quarter over the past year.

Investors are also betting against the company’s debt. Bank of America estimates that about 11 percent of Teleperformance’s 2030 bond and 7.8 percent of its 2028 bond are being shorted. Other firms have also been hit, including Concentrix and TTEC Holdings, whose shares have both fallen by around one third this year.

Some privately owned and smaller providers are feeling pressure too. Foundever’s bonds due in 2028 have traded at around 50 cents on the dollar, after being near full value in early 2024. Ratings agency S&P Global downgraded Foundever’s credit rating in December, citing weaker cash conditions.

What to watch

A key question is whether these companies can use AI themselves, instead of being replaced by it. Teleperformance and others are rolling out tools that mix human agents with automated “voice systems” and digital agents (computer programs that talk and act like a support worker). Investors will be watching for proof that these tools bring in new business, not just cost cuts.

Source: Financial Times