AI vs. Value Creation

Tech giants and other major companies are poised to spend over $1 trillion on AI-related capital expenditures in the coming years, despite having little to show for it so far. This raises the question: Will this massive investment ever pay off?

MIT’s Daron Acemoglu and Goldman Sachs’ Jim Covello remain skeptical. Acemoglu predicts only modest economic benefits from AI in the U.S. over the next decade, while Covello argues that the technology isn’t equipped to address the complex problems necessary to justify these costs, which may not decrease as expected.

However, other experts from Goldman Sachs, including Joseph Briggs, Kash Rangan, and Eric Sheridan, are more optimistic about AI’s economic potential and its ability to generate returns beyond the current "picks and shovels" phase, even though the industry has yet to discover AI's "killer application."

The article also delves into whether AI growth could be hindered by the ongoing chip shortage, discussed with Goldman Sachs' Toshiya Hari, or by an impending power shortage, highlighted by Cloverleaf Infrastructure’s Brian Janous. Despite these challenges, there’s still potential for the AI theme to continue gaining traction, either through the technology eventually fulfilling its promise or due to the enduring nature of speculative bubbles.