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Emerging artificial intelligence technology has set off a frenzy of competition among tech giants. The resulting avalanche of tech spending has led to soaring revenue at AI suppliers, especially Nvidia (NVDA), which makes must-have AI chips.
There’s a problem, though: Growing concerns that generative AI will take too long to pay off. “Tech giants and beyond are set to spend over $1 trillion on AI capex in coming years, with so far little to show for it,” reads the opening of a recent Goldman Sachs publication, “Gen AI: Too Much Spend, Too Little Benefit?” The report cobbles together analysis from interviews with Goldman Sachs analysts and outside experts.
What’s next for Generative AI?
With lots of questions about the future, here are four forecasts for making sense of what’s next for generative AI.
Don’t hold your breath for a single breakthrough dominated by one event, app or company, as generative AI spreads. The tech is being integrated, sometimes seamlessly, into consumer and business products and services, such as work collaboration tools, e-mail, word processing, photo editing and online search. For example, Adobe (ADBE) Photoshop already uses AI to create images or transform photos, and LinkedIn uses it to help write user posts.
Direct revenue will remain hard to come by. Getting consumers and businesses to fork over extra money for premium AI services won’t be easy, especially for start-ups. But look for early signs of moneymaking potential at Microsoft and Alphabet. Both are charging for their AI tools. Microsoft’s AI assistant CoPilot runs $30 per month per user. Alphabet is charging $20 per month per user for its Google Gemini service.
Business adoption will be a bumpy ride. Companies have to contend with cybersecurity risks and inaccurate responses generated by AI chatbots. However, they can look forward to new AI in coming updates of the software they use, which could lead to productivity wins.
Expect a shakeout of sorts in the next year or so. Analysts are looking for hit products and services that gain mass adoption. Expect a harsher assessment of leading AI companies by Wall Street if they aren’t showing clear signs of growing AI adoption, new hit services and increasing sales.
This forecast first appeared in The Kiplinger Letter, which has been running since 1923 and is a collection of concise weekly forecasts on business and economic trends, as well as what to expect from Washington, to help you understand what’s coming up to make the most of your investments and your money. Subscribe to The Kiplinger Letter.
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