AI at The Trade Desk: Risk or Opportunity?

Key Points

• Customer adoption of its Kokai system is gaining steam.

• AI search poses real risks for the digital advertising specialist.

• However, CTV and retail media offer some insulation.

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The Trade Desk (NASDAQ: TTD) has long positioned itself as the independent alternative to Meta Platforms and Alphabet's Google in digital advertising. With connected TV (CTV) and retail media reshaping how brands spend their budgets, the company has become a go-to demand-side platform (DSP) for marketers who want transparency, control, and performance.

Now, artificial intelligence (AI) is emerging as both a tailwind and a potential risk for The Trade Desk. On the one hand, the company has invested heavily in AI to enhance its platform. On the other hand, AI-powered search and content shifts could shrink the very pool of ad inventory that The Trade Desk depends on.

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For investors, the key question is whether AI ultimately tilts toward being an opportunity or a threat.

Image source: Getty Images.

The opportunity: AI as a "copilot" for advertisers

In June 2023, The Trade Desk launched Kokai, its most ambitious AI initiative to date. Building on its earlier Koa system, Kokai distributes deep learning across every layer of programmatic buying -- from bid optimization to impression scoring and budget allocation. The system processes more than 13 million ad impressions per second, applying thousands of signals in real time.

The philosophy behind Kokai is not to replace marketers, but to serve as a "copilot." Advertisers set campaign goals and strategies, while the AI handles optimization and execution with greater precision than humans alone could achieve. Features like Koa Audiences dynamically adjust audience segments based on performance. At the same time, measurement tools such as the TV Quality Index and Retail Sales Index provide transparency across previously opaque channels like CTV and retail media.

By early 2025, roughly two-thirds of clients had already migrated to Kokai, with full adoption expected by year-end. That rapid uptake suggests that AI is not just a buzzword for The Trade Desk -- it's a practical tool that advertisers are integrating into their day-to-day decision-making.

On the creative side, The Trade Desk has also begun experimenting with generative AI. Its Rembrand tool enables virtual product placements in video content, making ads feel more native and immersive. Other integrations, like Spaceback and Bunny Studio, allow for automated creative generation in multiple formats and languages. If these tools scale, they could help The Trade Desk capture more of the creative value chain, not just the media-buying side.

The risk: AI search disrupting the open web

While The Trade Desk is embedding AI across its platform, broader AI adoption could disrupt the very ad ecosystem it relies on.

AI-powered search engines like Google's AI Overviews, Microsoft Copilot, and Perplexity are changing how users get information. Instead of clicking through to a publisher's website, many users now get their answers directly within the AI interface. That shift is already denting referral traffic. CNN's web traffic dropped about 30% year over year, while outlets like Business Insider and HuffPost saw declines closer to 40%. When AI summaries appear in Google, click-through rates fall to just 8%, roughly half the historical average.

For The Trade Desk, that matters because fewer clicks mean fewer ad-supported impressions across the open web. As supply shrinks, competition for quality inventory could increase, potentially driving up costs for advertisers and narrowing campaign reach.

At the same time, AI-driven platforms are beginning to host ads themselves. Microsoft is already testing ads inside Copilot, and Google plans to expand ads within its AI Overviews. If user attention consolidates around these AI ecosystems, advertisers may choose to spend more inside walled gardens, reducing the flow of money through independent DSPs like The Trade Desk.

How The Trade Desk is positioning itself

This is why The Trade Desk is leaning aggressively into channels less exposed to AI-driven search disruption. Its curated supply initiatives -- including the "Sellers and Publishers 500+" list--emphasize access to premium, brand-safe inventory that advertisers will continue to value, regardless of search traffic patterns.

The company is also prioritizing CTV and retail media, two of the fastest-growing segments of digital advertising. These formats don't rely on referral traffic from search engines, which insulates them from some of AI's collateral effects.

By making AI a core part of its platform while simultaneously pushing into channels where AI search has limited influence, The Trade Desk is attempting to turn disruption into an opportunity.

What does it mean for investors?

AI is clearly a double-edged sword for The Trade Desk.

On the positive side, Kokai strengthens its platform, improves campaign outcomes, and deepens client stickiness. On the negative side, the rise of AI search could compress the supply of open web inventory and redirect ad budgets toward the very walled gardens The Trade Desk seeks to differentiate against.

The company's long-term thesis hinges on its ability to execute in areas where AI disruption is less pronounced, like CTV and retail media. If it succeeds, AI could be a catalyst for growth, rather than a headwind.

But investors should watch closely how the balance between opportunity and risk evolves as AI continues to reshape the digital advertising landscape.

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Lawrence Nga has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Alphabet, Meta Platforms, Microsoft, and The Trade Desk. The Motley Fool recommends the following options: long January 2026 $395 calls on Microsoft and short January 2026 $405 calls on Microsoft. The Motley Fool has a disclosure policy.