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AI to Significantly Boost Productivity and Profits Over the Next Decade

More specifically, “ Over the next 10 years, AI could increase productivity by 1.5% per year and that could increase S&P 500 profits by 30 % or more ” according to Ben Snider, a senior strategist at the investment bank Goldman Sachs. Snider also indicated the clear winners of the recent AI tech boom, headlined by the surging popularity of chatbots like OpenAI’s ChatGPT and Google’s Bard, are in the tech sector for now, but “ The real question for investors is – who are going to be winners down the road ? ”

“ In 1999 or 2000, during the tech bubble, it would be very hard to envision Facebook or Uber changing the way we live. ” he said and noting AI is set to forever change many industries and also create opportunities for investors and forward-looking organizations across many industries.

In recent research, Snider details the basis of his increasing optimism for AI in enterprises, calling it the “ Biggest potential long-term support for profit margins.”  He also noted that since 1990, S&P 500 profit margins have risen from 5 % to 12 %, with every major sector in the index experiencing a jump. This margin expansion alone accounted for more than 40 % of stocks’ gains over that period. Over the next decade, it is expected AI will help lift corporate profit margins by another 4 % as productivity further increases.  Additional evidence of this is from MIT economists Shakked Noy and Whitney Zhang who found in a March working paper that ChatGPT “ substantially raises average productivity ” for professional writers, enabling them to complete many tasks in half the normal time. And University of Virginia economics professor Anton Korinek found that large language models can increase economists’ productivity “significantly” in a study of 25 use cases published in a February National Bureau of Economic Research working paper

However, Snider also noted that as with all new technology “ uncertainty around both the eventual economic impact of AI and the regulatory response it may elicit is high ”.  In a March report, Goldman’s economists warned that AI tech could replace 300 million jobs globally over the next 10 years – while also creating many new jobs and opportunities, enabling greater operational efficiencies and cutting costs for organizations – as well as boosting productivity and improving the bottom line.

May 23, 2023   CAIL Innovation commentary          905-940-9000