Will AI Really Change the World?

The stock market’s recent surge on artificial intelligence (AI) euphoria may soon come to an end as upstarts like DeepSeek, a Chinese company, threaten the dominance of well-established US-based firms in the field. The implications for investors are profound, with trillions of dollars pouring into AI development over the next few years.

But before investing in this sector, there are several questions to ponder: Who will develop AI? Where is the killer app? How smart will AI get? Who will derive the benefits from AI? And what impact will it have on economic growth?

The answer to who will develop AI may not be US-based companies as investors had assumed. Chinese upstarts like DeepSeek are already making waves with impressively smart chatbots developed at lower costs than comparable US products.

While chatbots like ChatGPT offer impressive results, they don’t generate cash or save huge amounts of money. Jim Covello estimates that US companies will pour a trillion dollars into AI development over the next few years, but there is no obvious trillion-dollar problem that AI solves.

AI models tend to shine in areas where they can brute-force problems by running repeated attempts at an answer and seeing which one works best. However, British economist Dan Davies doubts that AI models will develop human-like generalized intelligence anytime soon.

Davies also questions whether AI will immediately transform work, pointing out that the robots will get in each other’s way just like humans do. He notes that only a quarter of AI-exposed tasks are expected to be cost-effective to automate within the next 10 years.

In conclusion, investors should keep these questions in mind before betting on a glorious AI-powered future. The impact of AI on economic growth may not be as significant as anticipated, and it’s essential to have a nuanced understanding of this rapidly evolving field.

Source: https://www.theglobeandmail.com/investing/markets/inside-the-market/article-as-euphoria-over-artificial-intelligence-drives-the-bull-market