Welcome to The AI Diplomat in its first instalment of our three-part series examining the economic, social, and business implications of the AI revolution. We'll explore the discourse between AI sceptics and proponents, analysing the long-term benefits versus claims of overhype and potential bubble, and the global economic dependency on AI.
The Sceptics: Concerns About AI's Sustainability
This week, we're diving into the heated debate surrounding the potential AI bubble. Opinions and analyses are pouring in from across the globe, with everyone from Wall Street investment bankers to technologists and technocrats weighing in. Is AI just another overhyped bubble, or is it a transformative force reshaping society and business?
If you've been active in AI discussions recently, particularly on platforms like X (formerly Twitter), you've probably encountered discussions about the latest Goldman Sachs report. Ed Zitron's newsletter captures the scepticism well: "Goldman Sachs is calling BS on generative AI. It's unreliable, unsustainable, requires a complete overhaul of America's power grid, and is far from being the future." Zitron isn't alone; Roger McNamee echoes these sentiments, citing a Sequoia report to argue that there's a bubble brewing, especially when discussions are narrowly focused on discretionary CapEx.
At the heart of this debate is the Goldman Sachs Global Macro Research Report, Issue 129, titled "Gen AI: Too Much Spend, Too Little Benefit?" The report highlights that tech giants and other companies are projected to spend over $1 trillion on AI CapEx in the coming years, yet the returns on this investment remain uncertain. The report's executive summary sets a cautious tone: despite significant investments in AI infrastructure, including data centres, chips, and the power grid, tangible benefits have been limited to efficiency gains among developers. Even NVIDIA, a major beneficiary of the AI boom, has seen its stock price corrected sharply.
Key voices in the report, like MIT's Professor Darren Osamoglu, argue that transformative changes from generative AI won't materialise quickly, with significant impacts unlikely within the next decade. Osamoglu estimates that only a quarter of AI-exposed tasks will be cost-effective to automate in the next ten years, impacting less than 5% of all tasks. He predicts that AI will boost U.S. productivity by just 0.5% and GDP growth by only 0.9% cumulatively over the next decade.
Goldman Sachs' Jim Cabello takes this scepticism further, questioning whether AI can deliver adequate returns on the massive investments. He points out that truly revolutionary technologies like the internet offered low-cost solutions from the start, disrupting high-cost solutions early on. In contrast, AI's high initial costs and the complexity of critical inputs like GPU chips may hinder competition and keep costs high, limiting widespread adoption.
The Optimists: Patience and Long-Term Potential
However, not everyone agrees with the sceptical outlook. Rohi, a prominent voice in the AI community, argues, "I know it's trendy to dismiss generative AI as a bubble, but let's not forget that GPT-4 was released just a year ago. We're still in the early stages, and there's a lot more to unfold." His call for patience underscores the broader debate about AI's long-term potential versus short-term scepticism.
The Goldman Sachs report also features experts who offer a more optimistic outlook, particularly in health and scientific fields,, though these views are often overshadowed by the prevailing skepticism. It's crucial to distinguish the ROI discussions for AI infrastructure builders like Microsoft and Google from those for businesses utilizing AI. The latter face distinct benefits and challenges that are frequently conflated in public discourse.
From the AI Diplomat editorial room, it's clear that the discourse on AI is enormous and complex, shaped by varying perspectives, biases, and timeframes. While scepticism about AI's immediate returns is valid, dismissing its long-term potential might be premature. The ongoing debate underscores the importance of a nuanced understanding of AI's evolving landscape, balancing immediate challenges with future possibilities. Stay tuned to the AI Diplomat Insight Series for more in-depth analysis and discussions on the latest developments in AI.
