Switch off the editor’s digest free of charge
Roula Khalaf, editor of the FT, selects her favorite stories in this weekly newsletter.
A year ago, the generative AI mania through the Silicon Valley and Wall Street looked like a serious reality check.
In a widespread noteJim Covello, head of Goldman Sachs’ stock research, asked whether the companies were planning to pour $ 1 into the structure of generative AI, would ever see a return of money. A partner of the Venture Capital company Sequoia, meanwhile, meanwhile estimated These technology companies only had to generate 600 billion US dollars for additional income to justify their additional capital expenditure in 2024 – about six more than they would probably produce.
The warnings have contributed to triggering the first real test for the investment mood since the start of Chatgpt that electrified the industry. The income of the end customers who should benefit from this new technology were negligible. Where were the “Killer -Apps from Generative AI? It led to a summer of fear for Tech investors.
A year later, the leading AI shares have just undergone another volatile swing. Shake the worries that began with the inexpensive AI models created by Chinas Deepseek, Nvidia recovered In order to achieve a new record high this week, a profit of about 1.5 m long is worth the market value compared to April. Microsoft has also registered a market capitalization of 1 $ 1 in less than three months.
However, it is noteworthy how little in the broader income prospects of generative AI has changed little since the warnings of a year ago. Hope (and the hype) is as powerful as always, but it is still difficult to see where the returns will come from to justify the huge capital expenditure for AI at least at short notice.
The effects of Ai Mania are all too obvious on the cost side. The four tech companies that cited the indictment of Alphabet, Amazon, Meta and Microsoft in 2024 by almost two thirds or $ 95 billion. When it was able to do this year, they were going. plan to increase Capex for another 75 billion USD.
Another escalation in the rest of the decade is integrated into expectations. Bank of America Securities predicts that the expenses for data centers for the entire tech industry last year from USD 333 billion to around $ 1 $ 1. At the end of the period, 83 percent of the money will be entered into AI-related investments.
In the meantime, some of the equation of the equation begin a large percentage increase in business in business processing – but the additional income is counted in ten billion and not in hundreds.
At the beginning of this year, Microsoft said that his annualized sales rate of AI had increased by 175 percent and reached $ 13 billion. That is still only about 5 percent of the total turnover that is expected this year. Openais sales rate from subscriptions, its main source of income, I just exceeded $ 10 billiondoubles from the end of last year. The rise rates are remarkable, but the absolute numbers still fade compared to investments.
For a year now there have also been signs of an explosion in the chat bot and became an unlikely consumer technology company almost overnight. But while a large number of people are now using AI chatbots, the business remains small. According to a survey of 5,000 American adults of Menlo Ventures, only about 3 percent pay for the AI service that they use and achieve annual sales of around $ 12 billion.
In the meantime, the business world is still looking for the use of generative AI that would justify serious editions. The technology has at least fueled A new generation Of high-quality software start-ups, especially in coding, the first area of ”knowledge work”, which is to be seriously interrupted. However, it has not yet caused a bow to the largest software companies that are best positioned to bring AI into the business world in the form of a new generation of AI-powered apps.
The first wave of AI-CO pilots and assistants undertook little to change working life. The hope Has shifted now On agents – tools that can automate individual tasks or even entire work processes. According to McKinsey agents Promise to create Serious business value through automation of complex and important processes. However, the consultants also warn that this requires rethinking for entire business processes.
The conviction of its customers to go beyond the many Genai pilot projects that contaminate the company world will be a severe buoyancy for the Tech industry. This does not mean that generative AI has no chance in the long term to bring about the type of transformation in working life that claims their booster. But for the time being, the abyss between capital expenditure and income has shown little signs of narrowing.
Richard.waters@ft.com
