Visa's Akamai AI Partnership Reinforces Strategy Amid Valuation Overhang

What happened

Visa has partnered with Akamai to develop security solutions for AI-driven agentic commerce, aiming to authenticate shopping agents and separate legitimate activity from fraud. This aligns with Visa's strategic focus on expanding value-added services, which grew 24% YoY to $10.9B in FY25, as noted in the DeepValue report. However, the report highlights that Visa trades at a 33% premium to its DCF intrinsic value, with significant regulatory risks from ongoing DOJ antitrust cases and interchange litigation. Beyond the positive spin, this partnership is a minor initiative that does not address core threats like fee compression or potential structural remedies from legal challenges. Consequently, while Visa continues to innovate, the investment narrative remains clouded by overvaluation and persistent regulatory headwinds.

Implication

The collaboration with Akamai enhances Visa's AI security capabilities, potentially boosting its value-added services segment and aligning with its 'network of networks' vision. However, value-added services still represent a small portion of total revenue, with core interchange and processing fees driving most earnings. Regulatory overhangs, such as the DOJ debit antitrust suit and interchange caps, pose more substantial risks to margins and could lead to fee compression. At a P/E of 31x and a 33% premium to intrinsic value, the stock lacks a margin of safety, making it vulnerable to negative legal or economic developments. Investors should view this news as incremental and prioritize monitoring legal outcomes and volume growth over such partnerships.

Thesis delta

The partnership with Akamai reinforces Visa's ongoing investments in AI and value-added services, as mentioned in the report's discussion of generative AI and stablecoin initiatives. However, it does not mitigate the key risks of regulatory scrutiny and high valuation that underpin the 'WAIT' stance. Therefore, the core investment thesis remains unchanged, emphasizing caution until regulatory clarity emerges or the stock pulls back to a more attractive entry point.