United States: Goldman Sachs reports $1trn spends on utility upgrades with little to show for it

Jul 09, 2024 | Posted by Abdul-Rahman Oladimeji

A research newsletter from Goldman Sachs has warned that large tech companies have ramped up capital expenditure to fuel generative AI development which will ramp up to around $1 trillion will be spent over the next few years, but have yet to show sustainable business models.

"So, the crucial question is: What $1tn problem will AI solve? Replacing low-wage 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," Goldman Sachs' head of global equity research, Jim Covello, said. "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."

MIT economist Daron Acemoglu said that “only a quarter of AI-exposed tasks will be cost-effective to automate within the next 10 years, implying that AI will impact less than five percent of all tasks.”

"How long investors will remain satisfied with the mantra that 'if you build it, they will come' remains an open question,” Goldman’s Covello continued. “The more time that passes without significant AI applications, the more challenging the AI story will become.