This Small-Cap Growth Stock Has Been Hit Hard By the Rise of Artificial Intelligence. But It Could Turn Into a Vibe Coding Giant.

Artificial intelligence has the power to disrupt many industries. Software companies, in particular, have seen investors turn against them, as powerful AI tools such as Anthropic's Claude Code threaten to render many other software solutions unnecessary.

One company that's seen its stock plummet on that fear is Wix (NASDAQ: WIX), the leading software-as-a-service (SaaS) solution for website builders. But as the saying goes, "If you can't beat 'em, join 'em." Wix has made several AI-powered enhancements to its products over the last few years, and a major acquisition could push it into entirely new territory for the business based around vibe coding, or AI-powered programming. And investors can buy the stock on the cheap right now.

Image source: Getty Images.

Moving beyond simple websites

Wix got its start in the mid-2000s helping individuals and small businesses set up simple websites. It became the largest SaaS website builder thanks to its marketing prowess. Its ability to scale the software business more than offsets the added cost of marketing, especially if it maintains high net retention rates (and it does).

The company introduced more powerful tools for website creators, called Wix Studio, in 2023, targeting agencies and freelancers who build websites for businesses. That's driven strong growth in Wix's partners segment, which climbed 24% year over year last quarter. Partners are also a driving force behind the adoption of business solutions, including payments.

The next evolution for Wix is its push into vibe coding for websites and apps. Vibe coding is the practice of using an AI agent to generate code from natural-language prompts. Last June, Wix acquired Base44, an AI company specializing in vibe coding apps. It quickly put its marketing expertise to work and successfully grew active users more than sevenfold to 2 million by November.

Wix is incurring high operating and scaling costs for the AI service. However, the addressable market is massive, and it expands the company's operations beyond simple websites. If it can execute its playbook, it should see strong revenue growth, and its operating margin should rise over the long run as it offers more high-end services.

While Claude Code and other AI agents pose a challenge for Wix, the company has a proven track record of carving out significant market share in large markets through strong marketing performance and customer retention. We're already seeing that play out in the professional website design market, and it could repeat itself in the app development market, which is set to explode with advancements in vibe coding.

What makes the opportunity even more attractive is Wix's stock price. At just 13 times forward earnings expectations, the stock is an absolute bargain.

Adam Levy has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Wix.com. The Motley Fool has a disclosure policy.