Yelp's Hidden AI Trove: Why Cramer's Skepticism Misses the Bigger Picture

In May 2024, Jim Cramer dismissed Yelp Inc. (YELP) as an AI play, declaring it belonged to the “not category” due to its lack of earnings momentum. Fast-forward to June 2025, and the stock's 1.99% year-to-date gain has validated his skepticism—on the surface. But beneath the underperformance lies a paradox: Yelp sits on one of the most valuable untapped AI data assets in local commerce. Cramer's focus on short-term earnings and market volatility has obscured a compelling long-term narrative. Here's why investors should think twice before dismissing Yelp's AI potential—and why now could be the time to buy.

The Cramer Contradiction: Skepticism vs. Data Reality

Cramer's dismissal of Yelp stemmed from two key arguments:1. No Earnings Momentum: He argued Yelp lacked the financial traction to capitalize on AI trends, unlike companies like NVIDIA or Apple.2. Overhyped AI Narrative: In the context of the 2025 AI selloff, he emphasized investor fears of overvalued AI stocks and questioned the ROI of infrastructure investments.

Yet Cramer's critique overlooked a critical factor: Yelp's unique user-generated content (UGC) trove. The platform's 200 million reviews, 25 million photos, and 10 million videos are a goldmine for training AI models in local commerce. This data isn't just about sentiment analysis—it's a living map of consumer preferences, service quality, and hyperlocal demand. Competitors like Google or Facebook may have more data in aggregate, but Yelp's niche focus on local businesses gives it an edge in vertical-specific AI applications.

Yelp's AI Play: From “Not” to “Now”

While Cramer focused on Yelp's stock price, the company has quietly rolled out AI initiatives that could redefine its value proposition:

1. AI-Driven Lead Quality

• Yelp Assistant with Photo Recognition: Users can now upload images (e.g., a broken appliance) to automatically generate detailed service requests. This reduces friction for consumers and improves lead relevance for businesses.
• Response Quality Badges: Yelp's AI evaluates service professionals' replies for helpfulness, incentivizing better customer interactions. Businesses with “Excellent” badges see a 20% higher lead conversion rate (per Q1 2025 internal metrics).

2. Closing the “Missing Call” Gap

• AI-Powered Call Answering: In beta since Q2 2025, this tool captures missed calls by qualifying leads via automated conversations. For service professionals, this could recover 30% of lost opportunities (per Yelp's estimates).
• Zapier Integration: Yelp's API now connects with 800+ CRM tools, enabling multi-location businesses to automate lead distribution. This reduces operational costs and improves scalability.

3. Untapped Monetization Levers

• API Partnerships: Yelp's conversational AI could be licensed to third-party platforms (e.g., chatbots, voice assistants), unlocking a new revenue stream.
• Vertical Expansion: The Yelp Assistant's success in services (plumbing, auto repair) could be replicated in hospitality, dining, and retail—categories where Yelp's UGC is equally robust but underutilized.

The Market's Blind Spot: Why AI Infrastructure Matters

Cramer's skepticism aligns with the market's short-term focus on earnings volatility, but it ignores two critical trends:1. AI Infrastructure Valuation Shift: Companies like NVIDIA (NVDA) and Alphabet (GOOGL) are rewarded for long-term AI bets, even amid short-term underperformance. Yelp's UGC-driven AI tools are infrastructure for the local commerce metaverse—yet its valuation lags behind peers.2. Consumer Behavior Shift: The pandemic accelerated demand for localized services, and Yelp's AI tools are uniquely positioned to capitalize on this. For instance, its “Guaranteed Seating” feature (using AI to match diners to restaurants) has a 40% higher booking rate than traditional listings.

Investment Case: Re-Evaluate Yelp as an AI “Deep Value” Play

• Valuation: At a P/E of 12x (vs. 25x for Amazon's local services segment), Yelp trades at a discount to its AI potential. Its $2.7B market cap is half its 2021 peak, despite stronger AI fundamentals.
• Catalysts:
• Q2 2025 Earnings: Look for signs of margin expansion from AI-driven efficiency (e.g., lower paid search spend).
• Product Rollouts: The full launch of AI call answering and API partnerships could drive enterprise revenue growth.
• Risk Factors:
• Macroeconomic Risks: Services demand could soften if consumer spending declines.
• Execution: Competitors like Houzz or Angie's List may replicate AI features faster.

Conclusion: The AI Infrastructure Play the Market Overlooks

Jim Cramer's skepticism reflects a valid short-term caution, but Yelp's AI roadmap suggests a compelling long-term opportunity. With its UGC trove and AI-driven tools, Yelp is building infrastructure for the next wave of local commerce—just as Amazon did for retail in the 2000s. Investors who focus on valuation multiples and ignore the strategic AI assets risk missing a turnaround story. Consider initiating a position at current levels, with a 12-month price target of $45–$50 (up from $32 as of June 2025), driven by AI monetization and margin improvements.

Actionable Advice: Buy YELP on dips below $30, with a stop-loss at $25. Monitor Q2 earnings for AI adoption metrics and enterprise partnerships. This is a “hold for the long game” bet on undervalued AI infrastructure—a sector Cramer's short-term lens might still underappreciate.