Source: Wall Street See
So far, AI technology has produced almost no economic benefits. Faced with the huge gap between burning and earning money with AI, the market's patience for technology stocks is gradually disappearing.
There is no doubt that AI is a money-burning business, with technology companies expected to increase their AI-related spending by over $1 trillion in the coming years. However, how much substantial return AI can bring to these enterprises remains an undecided question.
According to the latest report from technology media The Information, despite Microsoft's huge customer base of Office 365 software and claiming that 60% of Fortune 500 companies are paying for the intelligent assistant Copilot service, this market advantage has not yet been reflected in the company's performance reports. In fact, from the fourth quarter of 2023 to the first quarter of 2024, the enterprise sales growth rate of Office applications slowed down by 2 percentage points. $Microsoft (MSFT.US)$According to The Economist, well-known companies such as Microsoft and the other four tech giants are expected to invest about $400 billion in AI capital expenditures by 2024. Investors' optimistic expectations for the future earnings of these companies have increased the market value of these five giants by $2 trillion. According to The Economist's estimates, these five giants will add $300 billion to $400 billion in revenue each year, roughly equivalent to Apple's annual sales. However, these tech giants still have a long way to go to achieve such fruitful results. Even optimistic analysts believe that Microsoft can only earn about $10 billion from AI this year.
AI has almost produced no economic benefits yet, according to the article in The Economist.
The article points out that, like Microsoft, the five major tech giants are expected to invest about $400 billion in AI capital expenditures by 2024. Investors' optimistic expectations for the future earnings of these companies have increased the market value of these five giants by $2 trillion. $Alphabet-A (GOOGL.US)$/$Alphabet-C (GOOG.US)$, $Amazon (AMZN.US)$, $Apple (AAPL.US)$, $Meta Platforms (META.US)$Goldman Sachs has constructed a stock market index to track companies that are expected to achieve the greatest potential return on investment by improving productivity through AI. However, since the end of 2022, the stock prices of these companies have not outperformed the market, indicating investors do not see the prospect of additional profits.
This means the market's patience with tech stocks is disappearing as the gap between AI's money-burning and money-making ability widens, according to an earlier report from Goldman Sachs. Even optimistic analysts believe that Microsoft can only earn about $10 billion from AI this year.
AI's ability to make money is not reflected in the stock market either.
Goldman Sachs has constructed a stock market index to track companies that are expected to achieve the greatest potential return on investment by improving productivity through AI.
However, since the end of 2022, the stock prices of these companies have not outperformed the market, indicating investors do not see the prospect of additional profits.
This means the market's patience with tech stocks is disappearing as the gap between AI's money-burning and money-making ability widens, according to an earlier report from Goldman Sachs. $S&P 500 Index (.SPX.US)$However, since the end of 2022, the stock prices of these companies have not outperformed the market, indicating investors do not see the prospect of additional profits.
This means the market's patience with tech stocks is disappearing as the gap between AI's money-burning and money-making ability widens, according to an earlier report from Goldman Sachs.
An earlier report from Goldman Sachs showed that some analysts predict AI will only increase U.S. productivity by 0.5% in the next ten years, contributing only 0.9% to GDP growth.
They believe that the development of AI technology may not be as rapid as expected, and its cost-effectiveness may not be as attractive as imagined.
The Economist also mentioned an interesting phenomenon: AI does not seem to severely affect the labor market as many people feared.
On the contrary, the unemployment rate in developed countries is below 5%, close to the historical low, and wage growth remains strong, especially for white-collar workers who are considered more vulnerable to AI impact, whose employment share is higher than before the pandemic by one percentage point.
In addition, macroeconomic data shows almost no evidence of productivity surges.
According to the latest estimates based on official data from The Economist, the median real output per worker in wealthy countries has not increased at all. In the United States, the center of global AI, hourly output is still below the trend before 2020.
AI is far less popular than people imagined.
Two surveys from enterprises show that American businesses seem to have fully embraced artificial intelligence technology.
A recent McKinsey survey found that nearly two-thirds of respondents said their company 'frequently uses' AI technology, twice the proportion from last year. A report from Microsoft and LinkedIn also found that 75% of 'knowledge workers' (people who sit in front of a computer) around the world use AI applications.
However, the reality is not so, and the integration of AI in business processes remains a niche pursuit.
A recent survey by the US Census Bureau (which covers a much wider range than McKinsey and Microsoft) shows that only 5% of businesses have used AI technology in the past two weeks. Even in San Francisco, where Silicon Valley is located, many techies admit they won't spend $20 a month to buy ChatGPT Plus.
It's not just the United States, other countries are also very similar.
Official data shows that only 6% of Canadian companies have used artificial intelligence to manufacture products and provide services in the past 12 months.
In the United Kingdom, the adoption rate of AI in enterprises is higher and reached 20% in March, but compared with the data from September last year, there is little change, and the popularization of AI is difficult.
The reason why the popularization of AI is slow is mainly because artificial intelligence may not be intelligent enough.
Previously, a report from Wall Street mentioned that the fast food giantmcdonald's (MCD.US) recently canceled its AI order-free onboarding pilot project with IBM. It is reported that this AI ordering system frequently made mistakes, such as adding $222 worth of chicken nuggets to a diner's bill, which caused great dissatisfaction among customers.
In addition, issues such as data security and algorithmic bias make some companies hesitant about AI applications.
Currently, enterprises mainly use AI for narrow task ranges, such as automating responses to customer questions and providing personalized services. This limited scope of application, coupled with a lack of broader productivity improvements, has led investors to question the economic potential of AI technology.
Editor / jayden