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#25: Open AI Hack, Where's the AI revenue and will the Trillion dollar AI gamble pay off?

#25: Latest edition of One More Thing in AI Newsletter.

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Edition #25: Open AI Hack, Where's the AI revenue, and will the trillion-dollar AI gamble pay off?

Date: 11-July-2024

Hey AI curious reader,

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This is specially curated for Startup founders and Business Leaders like you who want to get smarter about AI in less than 5 minutes. It is a snapshot of what I read and learned about AI in the last two weeks.

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I hope you enjoy reading this edition. Keep learning and applying AI.

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Renjit Philip

In this edition:

Will AI's $1 Trillion Gamble Pay Off or Fizzle Out? Goldman Sachs Experts Weigh In

Goldman Sachs has released a report (link here >>) on the massive spending on artificial intelligence (AI). They explore whether this huge investment will pay off. Tech companies are set to spend over $1 trillion on AI in the next few years. The report includes views from experts who are both hopeful and doubtful about AI's economic potential.

Key Insights and Arguments

1. Doubts About AI’s Economic Impact

  • Daron Acemoglu (MIT) thinks the benefits from AI will be smaller than expected. He predicts only a 0.5% increase in productivity and a 1% increase in GDP over the next ten years. He believes AI won't bring significant changes quickly and doubts it will be cost-effective in automating many tasks soon.

  • Jim Covello (Goldman Sachs) says AI needs to solve very complex problems to justify its high costs. He is skeptical that AI will ever be cheap enough to replace many tasks affordably.

2. Hopes for AI’s Potential

  • Joseph Briggs (Goldman Sachs) is more optimistic. He predicts AI could automate 25% of all work tasks, leading to a 9% increase in US productivity and a 6.1% GDP growth over the next decade. He believes the cost savings and the trend of technology becoming cheaper support a positive long-term impact of AI.

  • Kash Rangan and Eric Sheridan (Goldman Sachs) are excited about AI’s potential, even though there hasn't been a clear "killer application" yet. They believe current spending on AI infrastructure is reasonable and expect long-term benefits as AI becomes more integrated into different industries.

3. Challenges and Constraints

  • Chip Shortages: Analysts warn that chip shortages, especially in High-Bandwidth Memory technology, will limit AI growth in the near future.

  • Power Supply Issues: Analysts highlight that the rise in power demand from AI and data centers could strain the US power grid, potentially limiting AI’s growth.

4. Market Implications

  • AI Bubble Concerns: Despite doubts about AI’s fundamental value, some experts caution that the AI bubble could last for a while, benefiting infrastructure providers. Utilities might be the next big winners.

  • Long-Term Equity Returns: Only the most favorable AI scenarios, where AI boosts growth and profitability without increasing inflation, will result in above-average long-term returns for the S&P 500.

Takeaway

The report presents a balanced view, acknowledging both AI investments' potential and challenges. While there is hope for AI’s transformative power and long-term benefits, there are concerns about immediate economic impacts, technological constraints, and market sustainability. This analysis shows the complexity and uncertainty of AI’s future economic contributions. It's worth a read for business leaders!

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