It has been a bitterly disappointing day of trade for the Appen Ltd (ASX: APX) share price.
At the time of writing, the artificial intelligence (AI) data services company's shares are down 21% to $11.67.
This means the Appen share price has now lost over half of its value since the start of the year.
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Why is the Appen share price crashing 21% lower?
Investors have been heading to the exits in their droves on Thursday after Appen released a presentation ahead of its appearance at the Macquarie Group Ltd (ASX: MQG) conference.
While there were many positives in the presentation, judging by the Appen share price performance, investors have chosen to focus entirely on the negatives.
What were the negatives?
Comments by Appen's CEO, Mark Brayan, relating to the uncertainty and impacts of an advertising downturn and regulatory factors on customers' spending and investment priorities appear to have spooked investors.
Mr Brayan revealed that COVID-19 has led to changes in the behaviour of many of its customers.
He explained: "COVID interrupted many businesses last year and that in turn reduced their digital ad spend for a period. This impacted our major customers' sources of revenue, and although digital ad spend has bounced back nicely, that experience is driving them to invest in new AI products that are less reliant on advertising."
In addition to this, the chief executive revealed that data privacy and anti-trust concerns are impacting developments, possibly with unfavourable consequences for Appen.
"Our customers are developing new AI products in response to COVID's impact on online advertising last year and regulatory pressures such as anti-trust and data privacy. This dictates the data they need for product development and impacts their engineering resource allocations and the volumes and types of data they need from us."
"As stated before, machine learning is an iterative process, and our customers are switching resources between development projects as they pursue new break-out products. This in turn has impacted a handful of our larger programs," Mr Brayan said.
However, this isn't new information. In response to an ASX query this afternoon, Appen reminded the market the messaging in the address today is consistent with what was said with its FY 2020 results.
What about the positives?
You may not believe it when looking at the Appen share price, but there were positives in the address.
The main one being that there have been no systemic changes to demand for relevance data. This is a major positive as the Relevance segment is easily Appen's most important segment, accounting for upwards of 90% of revenue.
Management also revealed that its industry-leading position has been maintained and pricing remains solid.
Mr Brayan said: "The competitive environment for relevance is unchanged with us and Lionbridge AI the key providers. We don't see unusual pressure on pricing. Our customers want a good deal and they negotiate well, but they will pay for quality and reliability and our reputation is strong in these areas."
Nor does the company see any fundamental changes in the way that AI is developed.
"We don't see meaningful changes in AI development techniques. AI models have and will continue to rely on a range of techniques to operate properly in the real world and hence high-quality labelled training data will continue to be a requirement for AI development. Unsupervised and self-supervised machine learning techniques are complementary to other techniques including supervised learning and using pre-trained models via transfer learning," the chief executive explained.
Where next for the Appen share price?
The Appen share price is now down 54% since the start of the year. This means its shares are trading at 17x estimated FY 2022 earnings based on a recent Macquarie note.
Though, the broker has yet to respond to this presentation and it isn't inconceivable that downgrades to estimates will be made.
In light of this, investors may want to keep their eyes peeled for broker updates in the coming days.
