Goldman Sachs believes AI could help drive S&P 500 profits in the next 10 years, increasing productivity by 1.5 percent per year. Artificial intelligence has investors, who are eager for a fresh driver of profit growth, excited of its potential as it promises to drive efficiency benefits.
Ben Snider, senior strategist at Goldman Sachs, estimates AI could boost net margins in the S&P 500 index +1.19 percent by about 4 percentage points over a decade. “A lot of favorable factors that led to that expansion of S&P 500 earnings seem to be reversing. But the real source of optimism now is productivity enhancements through AI.”
Snider said investors have realized that the immediate winners are in the technology. “The real question for investors is who are going to be winners down the road.” The strategist highlighted the tech bubble in 1999 or 2000 – an era when it was hard to envision Facebook or Uber changing the way we live our lives. He believes investors should spread their U.S. equity investments in cyclical and defensive sectors, with energy and the health-care sectors being attractive.
Uses of AI in Various Sectors
AI is expected to become more advanced by 2030 and specialized in various applications, like health-care, finance, transportation and manufacturing among others. It will likely lead to increased efficiency and cost savings, as well as improved products and services. Experts tout AI can help companies stay ahead of the curve and develop new products and services that meet the evolving needs of their customers. AI can be used in the retail industry to analyze consumer buying patterns and predict which products will be popular in the future.
It can analyze patient data and predict which patients are at risk of certain diseases, and help health-care providers take a proactive approach to care and improve patient outcomes. Experts say AI in the financial industry can analyze market data and predict which investments are likely to be successful in the future, help make informed investment decisions, eventually leading to profits and reduced risks.
Government Policy
Strategists also highlighted the government’s take on artificial intelligence is unclear. They said the uncertainty around the eventual impact of AI on economic activity, the potential response of government policy to the widespread adoption of AI means the net long-term effect on corporate profits is difficult to predict.
On May 17, the CEO of OpenAI, which is renowned for ChatGPT, Sam Altman told legislators in the U.S. that government regulation of AI is critical because of the potential risks it poses to humanity. He urged Congress to impose new rules on big tech. Altman believes the tech can go “quite wrong”. “OpenAI was founded on the belief that artificial intelligence has the potential to improve nearly every aspect of our lives, but also that it creates serious risks. But given concerns about disinformation, job security and other dangers, we think that regulatory intervention by governments will be critical to mitigate the risks of increasingly powerful models.”
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Altman recommended for the formation of a U.S. or global agency that would license the most powerful AI systems and have the authority to take that license away and ensure compliance with safety standards.