According to recent research, economists believe that generative artificial intelligence (AI) has the potential to transform the global economy. However, despite this optimistic outlook, there is little evidence of a significant increase in investment in AI technologies.
In the years leading up to the pandemic, capital expenditure by businesses, also known as “capex,” was relatively weak. It wasn’t until after the pandemic that there was a slight increase in capex as lockdowns lifted. However, this growth was short-lived and slowed down due to factors such as geopolitical uncertainty and higher interest rates. Currently, global capex spending is only growing at a rate of about 3%, which is considerably lower than anticipated.
While some companies, like Microsoft and Nvidia, are ramping up capex for AI investments, many others have more modest plans. Exclude these AI revolution drivers, and firms in the S&P 500 are only planning to increase capex by around 2.5% in 2024, which is largely in line with inflation. Across the entire economy, capex spending is falling by 4% year on year, according to an American capex “tracker” produced by Goldman Sachs.
Contrary to expectations, investment in information-processing equipment and software is also not soaring. In fact, American firms’ investment in these areas fell by 0.4% year on year in the third quarter of 2023. Similar trends are observed globally, with investment spending growing more slowly than in the pre-pandemic years.
However, these modest investment trends should not be taken as indications that generative AI is set to fail. It is important to note that the adoption of new general-purpose technologies often takes time. Reflecting on the example of the personal computer, it was not until the late 1990s that American firms significantly increased their spending on software, despite Microsoft releasing a groundbreaking operating system in 1995.
While only a small percentage of chief executives currently expect AI to have a significant impact on their business within the next one to two years, a majority of them anticipate its impact within the next three to five years. This suggests that although the initial investment in AI may be slow, the technology is likely to change the economy in the future.
In conclusion, while there is currently a lack of widespread investment in AI technologies, it is not an indication that generative AI will fail. The adoption of new technologies takes time, and the same can be expected for AI. Despite the slow start, economists and experts continue to believe in the transformative potential of AI for the global economy.
The source of the article is from the blog bitperfect.pe