AI: Is it all based on excessive hype and pie-in-the-sky expectations?

But now a report by Goldman Sachs – a leading global investment banking, securities and investment management firm – is suggesting that AI is being over-hyped and may be a bubble that will burst at some point, not unlike the infamous dot-com bubble that burst in March 2000.

The Goldman Sachs warnings are finding support from various other experts, among them Professor Daron Acemoglu of the Massachusetts Institute of Technology (MIT), Silicon Valley pioneer and investor Roger McNamee, and prominent technology venture capital firm Sequoia Capital.

Jim Covello, head of global equity research at Goldman Sachs and the lead author of the report titled ‘Gen AI: too much spend, too little benefit?’, believes the main question is whether the US$1-trillion likely to be spent on artificial intelligence in the next few years will earn an appropriate return on investment for everyone involved.

“What trillion-dollar problem will Al solve?” he asks, observing that “replacing low-wage jobs with tremendously costly technology is basically the polar opposite of the prior technology transitions I’ve witnessed in my 30 years of closely following the tech industry.”

Covello notes that AI “must be able to solve complex problems, which it isn’t designed to do” and is too costly to effectively replace humans with machine learning.

Doing the job at six times the cost

“We’ve found that AI can update historical data in our company models more quickly than doing so manually, but at six times the cost,” he says, adding that costs would have to come down dramatically to make automating tasks with AI affordable.

As part of his report, Covello interviewed Professor Acemoglu, who is also of the opinion that the productivity gains from AI are likely to be minimal.

Acemoglu believes that AI will affect less than 5% of all tasks in the next 10 years, because only a quarter of those that could be done by artificial intelligence will be cost-effective. He disagrees with some arguments that the technology will become less expensive over time and argues that AI model advances likely won’t by game changers.

“The largest impacts of the technology in the coming years will most likely revolve around pure mental tasks, which are non-trivial in number and size, but not huge either,” he told Covello.

“I question whether AI technology can achieve superintelligence over even longer horizons because it is very difficult to imagine that an LLM (large-language model) will have the same cognitive capabilities as humans to pose questions, develop solutions, then test those solutions and adopt them to new circumstances,” Acemoglu said.

But Covello doesn’t think AI research and development is suddenly going to stop. “This is not the first time a tech-hype cycle has resulted in spending on technologies that don’t pan out in the end; virtual reality, the metaverse, and blockchain are prime examples of technologies that saw substantial spend but have few – if any – real world applications today,” he states.

Comments the marketing industry publication The Drum: “The recent report by Goldman Sachs has not exactly popped the AI bubble, but has certainly given it a few troublesome punctures as experts claim the huge investment in developing AI may never be returned.”

You can access the Goldman Sachs report here.