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Tech

Generative AI has the potential to change the global economy in the coming decades (Clint Patterson/Unsplash)

By Tyler Hummel Leaders Staff

Tyler Hummel

Tyler Hummel

Tyler Hummel is a news writer for Leaders Media. He was the Fall 2021 College Fix Fellow and Health Care...

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Jul 26, 2023

A.I. Has the Potential To Change the Global Economy—Eventually 

Artificial intelligence (AI) has already revolutionized technology worldwide, but investors are itching for it to revolutionize the global economy. 

Key Details

  • An April report from Goldman Sachs suggests that generative A.I. could rally global GDP by 7% or $7 trillion in the next decade. 
  • McKinsey similarly predicted last month that generative AI could add $2.6 to $4.4 trillion to the global economy in the coming decades, most affecting the banking, tech, and life sciences sectors.
  • However, these predictions may have to wait for the technology to catch up, as Microsoft’s finance chief Amy Hood warned on Wednesday that revenue benefits might not be seen before next year. 
  • Microsoft posted quarterly revenue guidance on Tuesday that revealed revenue below expectations and 8% year-over-year growth, causing a 4% valuation dip in the stock market.

Why It’s Important 

The world changed forever on November 30, 2022, when OpenAI released ChatGPT to the world—kicking off a revolution in AI research and development. Microsoft quickly licensed the popular chatbot to use as a feature in search engines, cloud computing, productivity software, and customer service. Dozens of corporations and startups have subsequently rushed to push the first and best AI solutions to market to get ahead of the ongoing revolution. 

Microsoft currently maintains the market edge, but the full effects of the AI revolution have yet to come into focus, with many watchdogs and critics arguing that the technology will be disruptive and dangerous. McKinsey predicts that generative AI could partially or fully automate 60% to 70% of employee working hours in the coming decades, although most researchers argue that AI will operate in conjunction with human workers rather than fully replacing them. 

The Problem

For Microsoft, the benefits of the rapid adoption of AI have yet to bear financial fruit. It was able to quickly adapt ChatGPT as a feature for its Bing search engine, but the feature has drawn mixed reception from the public. Generative text technology is not a replacement for a search engine and lacks the ability to generate technically accurate or recent information. 

In the short-term, investors are fretting that high spending on research and development is curing into gross margins and that it will not likely produce revenue growth until sometime in 2024—even with recent product launches such as the Copilot assistant subscription service for Microsoft 365. 

Notable Quotes 

“Overall, while it will take some additional time for the revenue to materialize, we expect MSFT, with its increasingly unique set of AI-infused Cloud services, is well positioned take share across its numerous operating segments in the coming years,” writes Stifel analyst Brad Reback. 

“While the contribution may not come as quickly as hoped as AI-enabled products are tested, deployed, and eventually used at scale, MSFT’s position as an AI leader remains unblemished by today’s report,” writes Raymond James’ analysts Andrew Marok and Mauricio Munoz.

“Despite significant uncertainty around the potential for generative AI, its ability to generate content that is indistinguishable from the human-created output and to break down communication barriers between humans and machines reflects a major advancement with potentially large macroeconomic effects,” writes Goldman Sachs economists Joseph Briggs and Devesh Kodnani. 

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