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From Goldman Sachs' "Gen AI: Too Much Spend, Too Little Benefit?"

www.goldmansachs.com/images/migra...
Allison Nathan: You haven’t bought into the current generative AI enthusiasm nearly as much as many others. Why is that? Jim Covello: My main concern is that the substantial cost to develop and run AI technology means that AI applications must solve extremely complex and important problems for enterprises to earn an appropriate return on investment (ROI). We estimate that the AI infrastructure buildout will cost over $1tn in the next several years alone, which includes spending on data centers, utilities, and applications. So, the crucial question is: What $1tn problem will AI solve? Replacing lowwage jobs with tremendously costly technology is basically the polar opposite of the prior technology transitions I’ve witnessed in my thirty years of closely following the tech industry. Many people attempt to compare AI today to the early days of the internet. But even in its infancy, the internet was a low-cost technology solution that enabled e-commerce to replace costly incumbent solutions. Amazon could sell books at a lower cost than Barnes & Noble because it didn’t have to maintain costly brick-and-mortar locations. Fast forward three decades, and Web 2.0 is still providing cheaper solutions that are disrupting more expensive solutions, such as Uber displacing limousine services. While the question of whether AI technology will ever deliver on the promise many people are excited about today is certainly debatable, the less debatable point is that AI technology is exceptionally expensive, and to justify those costs, the technology must be able to solve complex problems, which it isn’t designed to do.
February 25, 2025 at 7:59 PM