Goldman Sachs, a leading financial institution, has recently published a research paper that raises doubts about the long-term feasibility and economic investment in generative AI.
Titled “Gen AI: too much spend, too little benefit?”, the paper questions whether the enormous expenditures on AI infrastructure will ever yield the expected benefits and returns.
Tech giants have touted AI as a transformative technology and are prepared to spend over $1 trillion on AI capex in coming years, from Nvidia to Microsoft to Amazon. However, despite this hype, Goldman Sachs’ research indicates that the financial returns on AI investments may be lacking. The report suggests that, although investors may gain profits, the actual benefits of AI remain uncertain, with many experts expressing doubts on the potential revolutionary impact of artificial intelligence in the short term.
AI technology is exceptionally expensive, and to justify those costs, the technology must be able to solve complex problems, which it isn’t designed to do.
– Jim Covello
Goldman Sachs has also warned that stock gains are premature and based on anticipated productivity improvements that have still not materialized. For example, for the S&P 500 to achieve above-average returns over the next decade, a very favorable AI scenario is required, which does not seem realistic. Thus, there is a discrepancy between the hype and actual performance of generative AI.
Several experts have echoed this skepticism. MIT professor Daron Acemoglu, who contributed to this paper, highlighted how the scaling of AI’s training data might not resolve the technology’s growing pains. Acemoglu emphasized how doubling the data, like adding more content from Reddit, may enhance informal conversational abilities but won’t necessarily improve functional tasks like customer service.
However, a few other experts are comparatively more optimistic about AI’s economic potential and ability to generate returns beyond what they term its current ” “picks and shovels” phase.
Overall, Goldman Sachs’ report reflects a growing wariness among financial institutions about the actual benefits of generative AI. While the technology holds potential, the current investments and expectations may be overblown, leading to questions about the long-term viability and impact of generative AI.
“But despite these concerns and constraints, we still see room for the AI theme to run, either because AI starts to deliver on its promise, or because bubbles take a long time to burst,” the report concluded.
Read the report here.
