AI: Navigating the Buzz into 2024
The buzz around Artificial Intelligence (AI) has been one of the defining trends of 2023, captivating investors and creating market euphoria. According to FactSet data, 152 S&P 500 companies mentioned "AI" in their third-quarter earnings calls, the second-highest number in the last decade, trailing only the preceding quarter with 180 citations. Reflecting this enthusiasm, Nvidia, a chipmaker with a significant focus on AI, emerged as the highest-performing US stock in 2023, boasting a remarkable 235% increase.
As 2023 approaches, the question on many minds is whether this AI buzz will persist into 2024. "Before the Bell" sat down with Marco Argenti, Chief Information Officer at Goldman Sachs, a tech visionary with a history at Amazon Web Services, to explore the macro trends and predictions for AI in the upcoming year.
Emergence of Hybrid AI:
Argenti's first prediction revolves around the concept of "hybrid AI." He anticipates a shift towards a collaborative approach between larger foundational AI models, such as ChatGPT and Gemini, and smaller, fine-tuned AI models. The synergy between these models allows for leveraging the extraordinary reasoning capabilities of larger models and the efficiency of smaller models in constrained infrastructure environments, leading to what Argenti terms "hybrid AI."
Industries Benefiting from Refined AI Models:
Argenti highlights financial services as a sector poised to benefit significantly from this shift. Specialised and complex use cases, such as interpreting legal documents behind derivative contracts, can be addressed by fine-tuned AI models. These models can translate intricate financial language into a machine-readable format, facilitating the utilisation of larger AI models for broader tasks like optimal portfolio calculations or analysis of corporate filings.
Safe Execution of AI in 2024:
Looking ahead, Argenti's second prediction centres on the transition from the potential of AI to its actual execution in a safe manner. He anticipates that 2024 will witness the realisation of proof-of-concept AI projects, delivering tangible returns on investment. This shift is expected to enhance developer and operational productivity, improve customer support, streamline operations, and strongly emphasise safety and governance, crucial factors often less stressed during technology testing phases.
Regulation and Fear-Mongering:
Discussing the regulatory landscape, Argenti anticipates a balanced approach in 2024. While acknowledging the need for security measures, he emphasises the importance of fostering an environment that enables innovation without creating restrictive barriers that could disadvantage countries like the United States. With AI already impacting lives, the 2024 elections are predicted to prioritise discussions around intellectual property protection and the broader societal implications of AI.
Shift in Venture Capital Fund Allocation:
Argenti's final prediction revolves around a prospective venture capital fund allocation shift within the AI space. He envisions a move from foundational AI models, which are capital-intensive, towards funding applications at the business-to-business and vertical levels. As the industry matures, there is expected to be a significant market opportunity in these areas.
As the AI landscape continues to evolve, the predictions provided by Goldman Sachs' CIO offer insights into potential directions for the industry in 2024. Investors and industry stakeholders will closely monitor these trends to navigate the dynamic AI landscape in the coming year.