Unfortunate Lack of Profitability Despite Intellectual Acumen
In the rapidly evolving world of technology, artificial intelligence (AI) continues to be a major focus for investors and tech giants alike. Companies like Nvidia, Microsoft, Alphabet, Amazon, and Meta have market values exceeding three times Germany's annual economic output, demonstrating the faith investors have in AI's potential success.
Despite significant investments, the reality is that 95 percent of companies investing in AI have yet to see a return. This is evident in the case of AI's continued struggle with issues such as 'hallucinations,' which hinder its implementation in sectors like healthcare and legal analysis.
However, the potential for AI to increase productivity and drive significant growth remains high. This is reflected in the recent doubling of AI investments by Amazon to $31 billion, and Microsoft's investment of $24 billion in AI in the last quarter. Google's parent company, Alphabet, plans to spend $85 billion on AI for the whole year.
The leading Western AI companies are currently generating approximately $50 billion in revenues per year from AI technology. The tech giants - Microsoft, Amazon, Google's parent company Alphabet, and Meta - collectively plan to spend over $344 billion on AI by 2025.
AI is not just a domestic phenomenon. It is being used in the military, such as by the Israeli military for target selection, and is expected to revolutionize various sectors, including production, mobility, offices, science, and more.
The US bank Morgan Stanley predicts that 2900 billion dollars will be spent worldwide on new data centers between 2025 and 2028, not including energy costs. This investment boom in the US accounted for almost the entire US economic growth in the first half of the year.
The expectations for AI are already priced into stock markets at trillions of dollars, making it crucial for workers to ensure that higher productivity also boosts profitability. However, the subscription models of AI services, such as ChatGPT, are unable to cover either the exorbitant research costs or the ongoing costs for the use of the models by customers.
As of now, AI may primarily increase individual productivity rather than profits. Only five percent of integrated AI pilot projects have achieved a value of several million, while the majority remain without measurable effects on the income statement. A cheaper variant of AI, demonstrated by the Chinese company DeepSeek, could potentially render the investment billions of Western corporations for nothing.
Despite these challenges, AI continues to capture the imagination and investment of the tech industry. More than 700 million people use ChatGPT every week, and the economic effects of AI are still not fully realized. As AI continues to evolve, it will be interesting to see how it shapes the future of various industries and economies.
