18/04/2024
The potential of generative Artificial Intelligence (AI)
We are beginning to see the potential of generative artificial intelligence (AI) beyond the "Magnificent 7" and the tech sector
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27%
Projected annual growth of the generative AI market in the 10 years to 2032
Source: Precedence Research, Dec. 2022. Compound annual growth rate = 27.02% from 2023 to 2032 -
USD 15.7 trillion
Contribution of AI to global GDP in 2030, which is more than the combined GDP of China and India in 2022
Source: PwC’s Global Artificial Intelligence Study: Exploiting the AI Revolution”, PricewaterhouseCoopers, in USD, by 2030. June 2017 -
45%
Of global revenues in 2030 will come from productivity gains and spending stimulated by the use of AI
Source: PwC: https://www.pwc.com/gx/en/issues/data-and-analytics/publications/artificial-intelligence-study.html
The recent emergence of generative artificial intelligence (AI) is a clear example of the massive, rapid adoption of a technological innovation that is having a major impact on society and all sectors of the economy1.
ChatGPT is a generative AI tool that has catalysed this revolution by offering easy access to this disruptive technology, although there are other applications based on this technology that enable computers to generate and process not only the written word, but also voice, image and video.
Unlike previous innovation cycles, this time the technology giants are the initial beneficiaries. Specifically, the returns are being concentrated mostly in the "Magnificent 7", seven large-cap tech and media companies, largely because of their exposure to generative AI. In 2023, artificial intelligence-related indices appreciated by an average of 34%, compared with 21.77% by the MSCI World index and 24.23% by S&P 500 index2.
Why is generative AI important?
Generative AI applications can help reinvent most customer experiences and applications, create unprecedented new applications, and help customers reach new levels of productivity.
According to Goldman Sachs3, generative AI could increase the global gross domestic product (GDP) by 7% (i.e. nearly USD 7 trillion). They also project that it could increase productivity growth by 1.5 percentage points over 10 years.
What is generative AI?
Generative AI is an umbrella term for a form of machine learning (ML) called "deep learning". It can create new content such as text, images, music, audio and videos. This type of AI has recently made a huge leap forward in the way it learns. Most of the early ML models involved supervised learning, where humans were needed to classify the data.
Rapid adoption of generative AI
Generative AI is one of the most rapidly adopted technological innovations ever, having aroused the interest of the majority of businesspeople: people from all regions, industries and generations are using generative AI in the workplace.
Benefits of generative AI
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Cost cuts
On average, 42% of respondents reported cost reductions of 10% or greater due to adopting AI
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Improved offering
The main goal of generative AI is to increase the value of offerings by integrating AI-based features or insights
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Higher profits
59% of respondents reported a more than 5% increase in profit due to AI
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Higher productivity
Generative AI is expected to increase productivity in knowledge work
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New revenue sources
23% of the top performers in AI cite creating new business or revenue streams as the primary goal of using generative AI
Source: McKinsey, August 2023: ‘The state of AI in 2023: Generative AI’s breakout year’. Survey conducted in mid-April 2023. McKinsey's annual survey examines the current state of AI, focusing this year on the rise of generative AI. The report provides information on the level adoption, impacts and outlook based on a survey of 1,684 respondents around the world in sectors including technology, financial services, healthcare, consumer goods, and energy.
Projections for the future of generative AI
It's hard to predict how generative AI will play out, but it is likely to evolve rapidly and we believe it can become a key part of AI-driven transformation and innovation.
We believe that research and stock picking are essential to harness the potential of AI across different sectors in the coming years.
1 Source: McKinsey, August 2023: ‘The state of AI in 2023: Generative AI’s breakout year.
2 Source Bloomberg. Profitability 2023. Indices used to measure average appreciation of AI: Nasdaq Artificial Intelligence Index, Solactive Artificial IntelligenceIndexand NYSE AI Index.
3 Source: Goldman Sachs research: Generative IA, Apr. 2023: https://www.goldmansachs.com/intelligence/pages/generative-ai-could-raise-global-gdp-by-7-percent.html
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