Goldman Sachs Economics Research has forecast artificial intelligence (AI) to reach $200billion globally by 2025.
With investment in AI ramping up quickly, it could have an impact bigger than the investment booms of electricity and personal computers in the US GDP, claimed the report, published on Tuesday, 1 August.
Goldman Sachs economists Joseph Briggs and Devesh Kodnani acknowledged generative AI’s enormous economic potential which could boost global labour productivity by more than 1 percentage point a year in the decade following widespread usage.
However, for a large-scale transformation to take place, businesses will need to make significant upfront investment in physical, digital, and human capital. According to the report, these investments (around $200bn globally by 2025) will probably happen before adoption and efficiency gains start driving major gains in productivity.
They believe the US to be positioned well to become a market leader in AI technology as American companies will likely be its early adopters. The investment has been predicted to hit $100bn in the US in 2025.
Other AI leaders, like China, will also take up this trend simultaneously. However, the investment impact will likely be smaller and more delayed here.
If Goldman Sachs Research’s AI growth projections are fully realised, the report also made a long-term prediction of the AI-related investment peaking as high as 2.5 to 4% of GDP in the US and 1.5 to 2.5% of GDP in other major AI leaders.
According to business surveys, the investment impact of AI would be evident in the second half of the current decade. While it will take time for AI to boost productivity, the report also stated how market interest in the same has already increased rapidly.
More than 16% of companies in the Russell 3000 mentioned the novel technology on earnings calls. This figure has gone up from less than just 1% of those firms in 2016. The release of ChatGPT in the fourth quarter of 2022 was one of the major reasons for this spike.
Since investment so far has been focused on model development, a “substantially larger hardware and software push will be required for generative AI to scale”, wrote Briggs and Kodnani. They further said: “Despite this extremely fast growth, the near-term GDP impact is likely to be fairly modest given that AI-related investment currently accounts for a very low share of U.S. and global GDP.”
According to the American Business survey, only 4% of US firms reported using AI in their business processes in 2021. The Fortune 500 CEO survey also suggested a slow adoption of the technology at first and widespread adoption in the second half of decade. By this time, companies would expect AI to lower their labour needs over the next one to three years.
However, a significant majority expect to have adopted AI over a three-to 10-year horizon. The report ended saying that if these timelines are correct, AI adoption would likely start having a meaningful impact on the US economy some time between 2025 and 2030.
