AI Requires a Breakthrough Application to Demonstrate Its LongTerm Value Say Goldman Sachs and MIT

Goldman Sachs and MIT analysts have recently delved into the generative artificial intelligence (AI) market to evaluate its prospects for investors, both in the short and long term.
The main question at the heart of their investigation was whether the current AI market is on the verge of a bubble ready to burst, or if it’s at the initial stage of the next big thing for technology and industry, comparable to the “pickaxes and shovels” era.
Unfortunately, the report suggests that the answer is not straightforward. The differences in the marketplace when a bubble is about to burst, as experienced during the dot-com bubble, and when a killer application is poised to ignite a technology, as seen with the invention of cryptocurrency by Satoshi Nakamoto et al., can be too subtle to discern until it’s too late.
The report includes insights from four Goldman Sachs economists and an MIT economics professor. Their predictions were divided, with three Goldman Sachs economists anticipating the arrival of AI’s killer app and the remaining Goldman Sachs economist and the MIT professor expressing more skepticism, particularly in the short term.
According to MIT professor Daron Acemoglu:
The opposing view suggests that current investments and corporate spending are not as radical as those seen in previous technology market cycles.
While the specific killer application for AI remains uncertain, preliminary progress has led some analysts to believe that the current growth trajectory can be sustained.
This is significant as the report indicates that analysts anticipate “tech giants and beyond” to invest over $1 trillion in AI capital expenditure in the coming years.
Given the substantial level of investment, much of which is in infrastructure, the resulting products and services must be sufficiently robust to support and maintain current and future funding.
According to Goldman Sachs US software equity research analyst Kash Rangan, the outlook remains positive despite the scale of current investments:
Goldman Sachs U.S. internet equity research analyst Eric Sheridan shared similar sentiments in their interview, stating that “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.”
Realizing that potential, however, may hinge on whether generative AI experiences an iPhone moment of mass adoption anytime soon.
Related:
Microsoft has discovered an AI ‘Skeleton Key’ attack that could expose personal and financial data.