Consumers and financial analysts have some cautionary words for genAI’s plans of world domination: Not so fast.
A whopping 72% of consumers say they don’t use generative AI services, according to a fresh survey, and the standard bearer of the movement, OpenAI, is flirting with a steep money crunch, based on new reporting from The Information. The company could lose as much as $5 billion this year, says the publication.
Deepening the malaise, Microsoft Corp. late Tuesday reported disappointing revenue growth in its cloud business, the latest proof that sizable AI investments have yet to materialize. The news sent shares of Microsoft tumbling 5%.
The triple dose of ominous news — not to mention ongoing concerns about blistering burn rates, scant revenue, the spread of disinformation, and a raft of strangling legislation — dovetails with some healthy skepticism about the immediate payoff of Silicon Valley’s, and tech’s, hottest segment.
“The technology is nowhere near where it needs to be in order to be useful,” Jim Covello, chief global equity researcher at Goldman Sachs, said in a newsletter in June. “If AI technology ends up having fewer use cases and lower adoption than consensus currently expects, it’s hard to imagine that won’t be problematic for many companies spending on the technology today.”
Covello’s hesitancy is echoed by David Cahn, a partner at Sequoia Capital. In a blog post in June, he bemoaned a “speculative frenzy” that has fomented a “delusion” in Silicon Valley that “we’re all going to get rich quick.”
And yet, tech companies and many investors remain doggedly bullish on AI. Tech companies intend to spend $1 trillion on AI infrastructure the next several years, according to Goldman Sachs. Meanwhile, investors have poured more than $24 billion into genAI, says consulting giant EY.
Enterprise companies plan to increase genAI investments nearly 10 times, to $140 billion by 2027, according to an IDC white paper sponsored by Salesforce Inc.
“Today is like 1998 was for the internet,” Salesforce Chief AI Officer Clara Shih said in a briefing with reporters on Monday, acknowledging genAI is stuck in a “hype cycle.” More than three-fourths (77%) of business executives fear they are missing out on the advantages of genAI, she said, citing an internal company report.
One hindrance is hesitancy among security experts to implement AI-driven risk-management programs, says Gary Phipps, vice president of strategy at ProcessUnity.
“It’s about avoiding risk, and not knowing the devil in the details,” said Phipps, a risk and compliance leader who has advised Fortune 50 financial institutions as well as the Department of Defense. “It comes down to the change agent in an organization to find use cases where efficiency gains are so obvious they can’t be ignored any more.”
“People are gun shy. They are terrified that something is going to happen,” Phipps said in an interview. “The FUD that AI will expose data, or a hallucination will lead to bad solutions. That isn’t helping. The longer you avoid AI is the faster you become to being irrelevant.”
Case in point: One forecast projects a net gain of more than $2 trillion in new business revenues by 2028 from Salesforce and its network of partners alone.