Can OpenAI-led Conversational Commerce Drive TGT's Next Growth Wave?

OpenAI is emerging as a key strength in Target Corporation’s TGT next phase of digital transformation, as the retailer leans heavily on conversational commerce to reaccelerate growth. In third-quarter fiscal 2025, TGT reported 2.4% digital comps growth and more than 35% expansion in same-day services, reinforcing that guests increasingly expect intuitive, fast and digitally assisted shopping experiences. TGT’s partnership with OpenAI represents a timely leap forward in how consumers discover and purchase products online.

At the core of this initiative is the ability for guests to shop directly through natural-language conversations. By describing what they need — whether a gift idea, a household item or products tied to a specific budget — shoppers receive curated recommendations without navigating menus or search bars. This AI-driven approach aims to replicate the feel of a personalized in-store experience, while streamlining the digital journey from discovery to checkout.

The partnership will also integrate tightly with TGT’s fulfillment ecosystem. Guests will be able to complete multi-item purchases, select Drive Up or pickup options and even shop for fresh foods — all within an OpenAI-powered chat interface. With two-day delivery available to 99% of U.S. households and next-day capabilities now covering more than half the country, TGT is uniquely positioned to operationalize this conversational demand at scale.

Supporting these innovations is a robust AI backbone already reshaping internal operations. Tools like Target Trend Brain and synthetic audiences help identify trends early and test consumer response before launch. On-shelf availability for key items improved more than 150 basis points year over year across TGT’s top 5,000 items.

While discretionary softness remains a headwind, OpenAI-led conversational commerce could provide TGT with a new demand engine. If early traction in marketplace GMV and Roundel ad growth continues, this shift toward AI-powered shopping may meaningfully advance TGT’s digital-led trajectory heading into 2026.

WMT & BBY Advance AI Efforts While TGT Upgrades Its Platform

Walmart Inc. WMT advanced its AI initiatives to deliver more personalized, multi-modal and contextual app experiences in the third quarter of fiscal 2026. The company is also using AI to improve software development, where more than 40% of new code is now AI-generated or AI-assisted, and to help associates build skills through OpenAI certifications and ChatGPT Enterprise access.

Moreover, Walmart is leveraging a partnership with OpenAI so customers can purchase items directly through ChatGPT, making shopping more seamless and connected across channels.

Best Buy Co., Inc. BBY continued to deepen its AI-led digital transformation in the third quarter of fiscal 2026, embedding advanced intelligence across customer engagement and operations. Best Buy leveraged AI to streamline customer support, driving a 17% reduction in customer contacts while improving satisfaction scores. AI is also enhancing product search, recommendations, personalized marketing and content enrichment across digital channels. 

Additionally, Best Buy is advancing conversational AI and agentic commerce initiatives to simplify discovery, checkout and fulfillment, reinforcing its position as a technology-enabled omnichannel leader.

Target’s Price Performance, Valuation & Estimates

The TGT stock has gained 0.9% in the past six months compared with the industry’s growth of 2.8%.

Target’s forward 12-month price-to-earnings ratio of 12.95 reflects a lower valuation than the industry’s average of 29.92. TGT has a Value Score of C.

The Zacks Consensus Estimate for TGT’s fiscal 2025 earnings implies a year-over-year decline of 17.7%, while the same for fiscal 2026 indicates growth of 6%. Earnings estimates for fiscal 2025 and 2026 have been southbound by 1 cent and 2 cents per share, respectively, in the past 30 days.

Target currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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This article originally published on Zacks Investment Research (zacks.com).

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