Recently, Goldman Sachs and MIT analysts conducted a thorough analysis of the generative artificial intelligence (AI) market to assess investment viability both in the short and long term. Their research was plagued by the question of whether the AI market today is a bubble that is about to burst or if it is just the “pickaxes and shovels” stage of the next frontier in technology and industry. Unfortunately, the analysis indicates that the solution is more nuanced than that. When a killer application is poised to turbocharge a technology, as was the case when Satoshi Nakamoto et al. invented cryptocurrencies, or when a bubble is about to burst, as was the case with the dot-com boom, the marketplace differences that result can be too subtle to notice until it’s too late.
Four Goldman Sachs economists and an MIT economics professor were interviewed for the paper. Three Goldman Sachs economists predicted that AI will have a game-changing app very soon, whereas the other Goldman Sachs economist and the MIT professor were less optimistic, at least not in the near future.
Professor Daron Acemoglu of MIT states: The current focus and architecture of generative AI technology means that few, if any, truly transformational breakthroughs will likely emerge in the next ten years.
The counterargument seems to be that, in comparison to other market cycles for technologies, the investments and corporate spending of today aren’t all that dramatic. Even while it’s unknown exactly what AI’s game-changing application will be, some analysts think the present growth line can continue given the technology’s current advancements. Analysts expect that “tech giants and beyond are set to spend over $1 trillion on AI capital expenditure in coming years,” which makes this noteworthy, according to the article. With this kind of investment, which is primarily focused on infrastructure, the end products and services must be robust enough to maintain funding both now and in the future.
Despite the magnitude of current investments, Kash Rangan, a US software equity research analyst at Goldman Sachs, believes that the prognosis is favorable: “Total spending in terms of dollars is undoubtedly high nowadays. But compared to earlier capital expenditure cycles, this one appears more hopeful. According to Eric Sheridan, an internet equity research analyst at Goldman Sachs in the United States, “it’s impossible to sit through demonstrations of generative AI’s capabilities at company events or developer conferences and not come away excited about its long-term potential.” Sheridan’s comments were in line with this sentiment. But whether or not generative AI has its iPhone moment of widespread acceptance anytime soon may determine whether or not that potential is realized.