The analysts were divided on whether today's investments in AI will pay off in the next decade. Analysts from Goldman Sachs and MIT recently delved deeply into the market for generative artificial intelligence (AI) to determine its short- and long-term profitability for investors.
The core question was whether the current AI market represents an expanding bubble that will burst, or if it signifies the next stage for technology and industry.
Unfortunately, the answer is not straightforward, according to the report. The market differences that occur when a bubble is about to burst, like during the dot-com bubble implosion, and when a strong application makes a technology popular, like the invention of cryptocurrency by Satoshi Nakamoto and others, can be too subtle to recognize in time.
Is AI a Bubble? 💭
The report includes interviews with four economists from Goldman Sachs and an economics professor from MIT. Their forecasts are divided. Three Goldman Sachs economists predict that the AI killer app will arrive soon enough. However, the remaining Goldman Sachs economist and the MIT professor are more skeptical, especially in the short term.
MIT Professor Daron Acemoglu said:
"Given the focus and architecture of today’s generative AI technology, truly transformative changes will not occur quickly. And few, if any, are likely to happen within the next 10 years."
Will the AI Killer App Arrive? 🔍
The counterargument is that current investments and corporate spending are not as radical compared to previous technology market cycles.
It's unclear what exactly this killer app for AI will be. However, current advancements have convinced some analysts that the present growth can continue.
This is significant because analysts in the report predict that "tech giants and beyond will spend more than $1 trillion on AI investments in the coming years."
With such high investments, much of it in infrastructure, the products and services derived from these investments need to be strong enough to support and sustain current and future funding.
According to Kash Rangan, an analyst at Goldman Sachs, the outlook is positive despite the scale of current investments:
"Spending is certainly high in absolute dollar terms today. But this investment cycle appears more promising than previous ones."
Goldman Sachs U.S. Internet Equity Research Analyst Eric Sheridan expressed a similar view in the interview: "It is impossible to follow demonstrations of generative AI capabilities at company events or developer conferences without being excited about their long-term potential."
Tapping into this potential, however, might depend on whether generative AI will have its iPhone moment of mass adoption in the near future. 📱🚀
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