“Over the next decade, no industry will be spared the disruption brought about by AI.”
This was the verdict of Alibaba's senior management team in its recent annual letter to shareholders.
In common with the chief executives of other major technology companies, the group has promised that artificial intelligence will “change and accelerate” its business, while warning of the significant competitive threats should Alibaba fail to keep up.
In the same week, the Economist warned that AI had become an arms race.
It pointed to the $200bn (£1.6bn) that Alphabet, Amazon, Meta and Microsoft have committed to AI spending this year, up 45 per cent on last year.
Many of those same companies have admitted that it may be years before they see a return on this investment.
No one really doubts that AI will have a transformative effect on the world. The seminal Goldman Sachs study suggested generative AI could boost global GDP by 7 per cent and lift productivity growth by 1.5 percentage points over a 10-year period. However, there are questions over the shape and timing of that transformation.
A more recent update from Goldman Sachs says: “Investment in generative AI has boomed, but it will take time for the technology to filter into the overall economy. Until we’ve seen more significant uptake in the actual application of AI, in the regular work production process, I don’t think that we’re going to see as big of an impact on productivity.”
A dose of realism
This may be the start of a more realistic appraisal of the opportunities and risks in AI. Certainly, there are signs that the market is being more discriminating.
While Nvidia's recent 262 per cent rise in revenues cheered the market, Apple and Tesla have had a far tougher time as results have disappointed. The market appears to be separating into winners and losers.
Alec Cutler, manager of the Orbis Global Balanced fund, says it is important to get AI in perspective: “They used to call it machine learning, and Google has been using it for its search engine for 10 years. It is not a new thing.
"The catalysts were Nvidia saying earnings were likely to be considerably higher than expectations and Microsoft announcing its deal with ChatGPT. We looked at the pure plays on AI. We figured out that there is a gold rush element to it, but there is also an existential risk to it.
“Right now, the market is looking at it as a positive for the primary players – Microsoft, Alphabet, Meta, Amazon, Apple. It is being framed as a new revenue generator for them.
"These companies need something to sustain their $3trn market cap. But when asked, 'What does it do?', they say, ‘It does everything... anything you can think of’. It makes people more productive. Or it replaces all the workers?
