My inbox of stories is super heavy on AI, so let’s start our week there.
Let’s start with why there’s so much chatter – money. In a new report from Crunchbase, one in four investment dollars this year has gone to startups using AI, with AI’s share of funding dollars averaging around 12% between 2018 and 2022 before rocketing up to 26% in 2023. The report also suggests that AI may become a given in the tech industry.
Technology analysts are optimistic about the impact of generative AI on the future of the enterprise, with McKinsey estimating that it could add trillions of dollars annually across various use cases. However, there are concerns around data security, ethics, and bias, with 81% of customers wanting a human to review and validate generative AI outputs, as only 37% of customers trust the output. Gartner predicts that generative AI will increasingly impact enterprises over the next five years, with 40% of enterprise applications having embedded conversational AI by 2024 and generative design AI automating 60% of the design effort for new websites and mobile apps by 2026.
Forrester says generative AI will influence more jobs than it replaces, with jobs that are harder to automate being augmented rather than replaced. However, job losses to AI are still expected to climb from 9.3% to 30.4% by 2030, with office and administrative positions making up nearly half of all job losses.
Companies that mentioned AI in earnings saw their stocks rise 4.6% on average, while those that didn’t saw gains of nearly half that. The number of AI mentions in S&P 500 earnings calls has skyrocketed, with a 366% increase in Q2 2023 compared to the start of the year. Adobe saw the largest stock price gain of 38.2% following a mention of AI. Nvidia also saw a 26.3% jump in share price, but veteran investor Rob Arnott called it a “textbook story of a Big Market Delusion.”
But… let’s make it more interesting. A study by Northeastern University’s School of Business found that sometimes executives acting like AI during earnings calls can be good. The study compared executives’ responses to those of AI chatbots and found that when executives gave less robotic answers with more new information, the effect on the company’s stock was more dramatic. However, when there was no new information, the AI’s responses were similar to those of the executives. The study suggests that companies should have AI do the earnings call when earnings are bad, but when earnings are good, executives should give more detailed answers.
Oh, and the cherry on top there – Business Insider has a piece arguing that AI can replace the CEO, as they’re not that useful anyway. There is more. The article argues that CEOs are overpaid and often operate as figureheads with little responsibility or accountability. An AI model could give quicker answers, be in a continual state of self-improvement, take feedback instantly, and deliver the same kind of “operational efficiency” for which the current CEOs are paid millions of dollars a year.
Why do we care?
There’s a delightful irony that AI could replace the CEO’s job. I agree with Forrester that it’s more about influence – that CEO quip is really about how that influence would work, particularly as you consider earnings calls.
The money flows into this space, which should tell us all something – there’s at least the projection and guess that it will be valuable. The connection on stock value shows both the hype and the potential value.
I’m an optimist here… but now we need to make it practical, right? I have that for you next.
