Article by Jason Koebler: “Investment giant Goldman Sachs published a research paper about the economic viability of generative AI which notes that there is “little to show for” the huge amount of spending on generative AI infrastructure and questions “whether this large spend will ever pay off in terms of AI benefits and returns.”
The paper, called “Gen AI: too much spend, too little benefit?” is based on a series of interviews with Goldman Sachs economists and researchers, MIT professor Daron Acemoglu, and infrastructure experts. The paper ultimately questions whether generative AI will ever become the transformative technology that Silicon Valley and large portions of the stock market are currently betting on, but says investors may continue to get rich anyway. “Despite these concerns and constraints, we still see room for the AI theme to run, either because AI starts to deliver on its promise, or because bubbles take a long time to burst,” the paper notes.
Goldman Sachs researchers also say that AI optimism is driving large growth in stocks like Nvidia and other S&P 500 companies (the largest companies in the stock market), but say that the stock price gains we’ve seen are based on the assumption that generative AI is going to lead to higher productivity (which necessarily means automation, layoffs, lower labor costs, and higher efficiency). These stock gains are already baked in, Goldman Sachs argues in the paper: “Although the productivity pick-up that AI promises could benefit equities via higher profit growth, we find that stocks often anticipate higher productivity growth before it materializes, raising the risk of overpaying. And using our new long-term return forecasting framework, we find that a very favorable AI scenario may be required for the S&P 500 to deliver above-average returns in the coming decade.”…(More)“