Sauron's Gaze: AI is Reshaping Logistics

Howdy Folks,

It’s been a while!

My focus has been more on the business operations side with Rocket for the past 6 months, but I came back up for air recently and plan to start writing this newsletter again.

Why?

2 Reasons really: 1. I love the branding and marketing side of the business. 2. AI is just so dang interesting to me. So, I am shifting the theme of this Newsletter to focus primarily on AI in Logistics.

No better story to start with than what went down the last couple of weeks with Algorhythm holdings!

I have been following this crazy story all week and wanted to put together a full, no-fluff research piece so we can all understand exactly what happened (or at least try to). I pulled everything from the original company releases, news articles on CNBC, FreightWaves, Yahoo Finance, Seeking Alpha, Barron’s, and analyst notes from Baird and Barclays. Every number and claim below comes straight from those sources. (TBH I had Grok do most of the research).

I have to be honest with you right up front. My take on this whole thing is that AI is going to reshape the logistics industry a lot faster than most people think.

Logistics has always been one of those slow-moving sectors that doesn’t exactly adopt new technology very well. For the past 30 years, the big freight brokers and the giant enterprise shippers have basically set the ‘speed limit’ on how fast anything changes.

But AI is different. This time around, the brokers and shippers will not be able to enforce any speed limits..I believe this time the pace is going to be set by the big AI Labs: OpenAI, Google, Anthropic, Meta, and xAI. Those AI labs are like Sauron’s eye from Lord of the Rings. Even though they have not really fixed their gaze on freight yet, they already have the massive scale and the raw technology to completely upend how freight gets moved around the world.

I will weave that thinking into the facts as we go because I think it helps explain why this little announcement from a micro-cap company could shake the whole sector so hard. Here is the full story:

1. First, the big picture and the players involved

The company that started all the noise is Algorhythm Holdings, ticker RIME on NASDAQ. It is based in Fort Lauderdale, Florida. A few years ago it was a tiny karaoke hardware company called The Singing Machine. Now it has completely shifted to AI software for logistics. Their main product is called SemiCab. It is an AI platform that helps match freight, cut empty miles, and let companies handle way more volume without adding staff (or at least that is the claim!).

The worldwide truckload market is worth about three trillion dollars every year. One of the biggest problems has always been that 30 to 35 percent of all freight miles are driven with nothing on the truck. In India the numbers are even worse. Empty miles can hit 40 percent, and trucks sit idle a lot more than they do in the United States or China.

Right now their revenue is still small, around ten million dollars a year, and most of that comes from India. They do have real customers there like Kellanova (Kellogg’s India), Procter & Gamble India, Asian Paints, Apollo Tyres, and Bajaj Electricals. The platform works by using a privacy-protected graph optimizer, predictive matching, real-time capacity data, and automated workflows that learn from every load. It connects easily with existing TMS and ELD systems (apparently).

This tiny company across the world, dropped a couple of white papers and got a few press releases that ended up triggering some bot trading… which led to some real VOLUME of trades and abracadabra, Billions of dollars of value was erased from the US Logistics industry in one afternoon.

The stocks that got hit hard on February 12 and 13 were the big names everyone knows in freight brokerage and logistics:

• C.H. Robinson Worldwide (ticker CHRW) – the largest freight broker in the U.S.
• RXO – the asset-light brokerage that spun out of XPO a few years ago
• J.B. Hunt (JBHT) – a major player in intermodal and trucking
• Others that dropped included Expeditors, Landstar, XPO, and a few more.

2. Exactly what the company released (February 9 and 12)

They put out two updates just a few days apart, both based on live customer deployments, mostly in India.

On February 9 they released the empty-miles paper. The headline was that SemiCab had shown more than a 70 percent reduction in empty trucking miles across active customer networks. They said the empty-mile rate dropped below 10 percent in some cases (compared with the normal 30 to 40 percent in India). Loaded miles went above 90 percent. They also claimed this kind of technology could eventually wipe out up to 700 billion dollars of global empty-mile waste. The CEO of SemiCab, Ajesh Kapoor, said that when freight is handled as one coordinated network instead of separate deals, everything changes.

Then on February 12 they followed up with the productivity paper. This one said customers using the platform scaled their freight volume by 300 to 400 percent without adding any extra operations staff. Individual people were handling more than 2,000 loads a year instead of the usual 500 that a typical freight broker manages. They described it as turning a manual, people-heavy job into a smart, automated system. Gary Atkinson, CEO of Algorhythm Holdings, said the old limit in logistics was always how many people you could hire. SemiCab removes that limit.

The actual white papers were linked in the press releases on GlobeNewswire, but a lot of people reported the direct PDF links were not working right away. All the numbers came from live networks (one report mentioned data from about 140 trucks). There was no third-party audit mentioned in any of the releases.

Ok… now I got the hype part of this article out of the way. Are any of Algorhythm’s claims true? Probably some of them. Are the numbers inflated and was this white paper released simply to cause a ‘stock shock’? Probably… and it worked very well (at least for a week so far)

Let’s take a look at how much damage this white paper did to the big boys on the Stock Market: CH Robinson, JB Hunt, RXO and Landstar were among the hardest hit.

3. What happened to the stock prices on February 12 and 13

The day the second release came out, Thursday February 12, the logistics stocks got crushed. Everyone from CNBC to Barron’s to FreightWaves said the drop was clearly tied to fears that AI could disrupt the whole brokerage model.

Here is exactly what the stocks did that day (closed prices, pulled from CNBC, MarketWatch, and Yahoo Finance reporting):

The whole transport sector felt it. Billions of dollars in market value disappeared in just a few hours. By Friday the 13th some of the losses started to come back. C.H. Robinson was up 3.4 percent and RXO up 2.8 percent (from the low of the dip).

Analysts called it part of the bigger “AI fear trade” that had already hit software stocks and office buildings earlier in the month. To me that panic selling was the first clear signal that the market senses the change coming faster than the old guard wants to admit. Which is not a very bold claim considering most of the Logistics industry is predicting AI to make a real impact in about 5-7 years… instead of 1-2 years!

This is exactly where my take kicks in. Even though the big brokers and shippers have controlled tech adoption for decades, the real drivers now are the giant AI labs. Think about it, current FreightTech companies like SemiCab (and many dozens of others) are already building on top of OpenAI, Google, Anthropic, Meta, and xAI’s APIs.

Based on most of the AI companies T’s + C’s, that means the labs are quietly collecting the data and their models are already training on supply chain data. Sauron’s eye is already getting the feed it needs. When it finally turns fully toward this trillion-dollar industry, things are going to move faster than anyone expects.

4. How the big companies pushed back

C.H. Robinson put out a statement the same day, which is unusual for them. They did not name Algorhythm or SemiCab, but they made it very clear they have been using AI for years (they call it Lean AI). They pointed to eight straight quarters of beating the market, a strong balance sheet, an investment-grade credit rating, 27 years of dividend increases, and ongoing stock buybacks. They said AI will only make their lead bigger.

Analysts from Baird and Barclays both kept their positive ratings. Baird said the selloff was mostly in the asset-light brokers and that big players already have huge data and network advantages. They also mentioned other possible reasons for the move like open-source AI tools and changing freight rates. Barclays called the drop “disproportionate to the real risks” and said it looked like a buying opportunity.

My take? This was simply a canary in a coal mine. It won’t amount to much this time around… but I would bet that OpenAI, Anthropic, and Google noticed.

For now, the FreightTech that exists with an AI native platform is mostly wrapped on top of OpenAI and Anthropic. If that stays the case, AI adoption will slowly melt up in the industry and the large players (both shippers and brokers) will invest a portion of their budget in AI to appease stockholders.

But if I’m right, and OpenAI, Anthropic, Google or AMAZON decide to throw their hats in the ring and build out AI native transportation technology…then buckle up!

Those companies have the ability to make AI affordable and easily accessible. Anthropic already has their sights set on Enterprise business solutions with Claude. They are already angling for ERP solutions… TMS and WMS are just a stone’s throw away.

5. I could be wrong because..

A few reasons that my hot take could really just be flaming garbage:

• The Industry is FRAGMENTED and all of the history shows that new technology doesn’t get adopted easily
• API has been around for well over a decade, many of the largest players are still actively developing and maintaining EDI connections.. Goes to show that even great tech can get left to the wayside to avoid ‘change’.
• The big brokers have decades of lane data, long-term carrier relationships, and service reliability that pure software might not replace quickly. AKA Humans move freight and AI cannot replicate Human relationships.
• Questions remain about integrating with old systems, getting everyone to share data safely, and handling regulations in the U.S. and elsewhere.
• There are plenty of amazing TMS systems in the market. But there has never been a successful logistics ‘marketplace’ where the industry's data can actually be pooled to fill empty trucks (many have tried and many have failed or are actively failing today).

Those are fair points, but I keep coming back to my core belief. Because the AI labs are providing the core models, implementation will not require the same massive tech budgets or slow rollouts we saw with EDI and API. It can spread fast. I’d go as far as to say traditional APIs themselves will start to fade into the background.

AI Agents will simply bypass the old integration layers entirely, and the whole game of connecting systems will become something completely different. In the near future, Shippers likely won’t even need to interact with the UI layer of a TMS. It will be a chat interface or something similar.

Just as a refresher, our industry is huge. There are Trillions of dollars at play here. I know the AI Labs primarily have focused on building LLM’s that can code and that has impacted the Software industry much more than Logistics… but our time is coming. It’s RIPE for AI.

I would venture to guess that most of the industry would agree moving freight is a nearly perfect use case for AI automation (repetitive tasks, DATA, disparate systems, fragmented workflows, pricing pressure, labor turnover, difficult training and onboarding, tribal knowledge, etc.).

I just don’t think people realize one simple fact: The AI Labs ALREADY have the ability to build the next wave of supply chain. They just haven’t turned their gaze our way yet.

Oh, and just in case you were wondering how those logistics stocks are doing after February 12th, here is a brief recap (through Feb 18th)

See ya next week!

6. Quick Update – Where the Stocks Stand as of Yesterday (February 18 Close)

The initial freak-out on February 12 has calmed down quite a bit over the past few trading days. The big brokers pushed back hard, analysts called the drop “disproportionate,” and the market started to breathe again.

Here is exactly where things landed yesterday (all closing prices from Yahoo Finance and MarketWatch data):