TIME TO SOBER UP ON AI – BARCLAYS <\/p>\n
OpenAI CEO Sam Altman said earlier this year that artificial intelligence will create a world of “incredible material abundance” but Barclays economists have issued a more sobering outlook what the new technology will contribute to the global economy and markets. <\/p>\n
AI-related spending added about a percentage point to U.S. growth in the first half of this year, yet Barclays reckon frequent discussion of this eye catching statistic are overstating what it means for the future. <\/p>\n
“Most of the impetus to aggregate demand growth from this spending is already behind us,” the Barclays team led by Jonathan Millar write: <\/p>\n
“Permanently boosting productivity growth by 1 pp would require the entire future trajectory of business fixed investment to be lifted by about 20%.” <\/p>\n
Barclays also points out that while growth in spending on AI infrastructure could rise by 30% by 2027 this is a big slowdown from the near-tripling of investment by the largest so-called hyperscalers of the last two years. <\/p>\n
They add: <\/p>\n
“If the growth in capex for the overall AI industry resembles this group \u2014 which strikes us as a reasonable assumption \u2014 then deceleration lies ahead.” <\/p>\n
And while many companies’ share prices are getting a boost from the idea that AI will improve labour productivity by replacing costly economic inputs, like finance workers, Barclays isn’t so sure here either. <\/p>\n
However…<\/p>\n
“The historical record suggests that it is difficult to summon such (productivity) gains, even when innovation seems to be at a high rate.” <\/p>\n
Barclays recalls the 1980s, when productivity growth remained weak despite huge investments in computing.<\/p>\n
For balance, we asked ChatGPT for comment. It told us that if we do experience another productivity paradox that will be our own fault. <\/p>\n
“Broad productivity gains could take time until firms rework workflows, skills, and incentives \u2014 then benefits may show up in the macro data.”<\/p>\n
(Naomi Rovnick) <\/p>\n
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