To help you understand how AI and other new technologies are affecting energy consumption, trends in this space and what we expect to happen in the future, our highly experienced Kiplinger Letter team will keep you abreast of the latest developments and forecasts. (Get a free issue of The Kiplinger Letter or subscribe). You'll get all the latest news first by subscribing, but we will publish many (but not all) of the forecasts a few days afterward online. Here’s the latest…
Emerging artificial intelligence technology has set off a frenzy of competition among tech giants. The resulting avalanche of tech spending has led to soaring revenue at AI suppliers, especially Nvidia (NVDA), which makes must-have AI chips.
There’s a problem, though: Growing concerns that generative AI will take too long to pay off. “Tech giants and beyond are set to spend over $1 trillion on AI capex in coming years, with so far little to show for it,” reads the opening of a recent Goldman Sachs publication, “Gen AI: Too Much Spend, Too Little Benefit?” The report cobbles together analysis from interviews with Goldman Sachs analysts and outside experts.
From just $107.88 $24.99 for Kiplinger Personal Finance
Become a smarter, better informed investor. Subscribe from just $107.88 $24.99, plus get up to 4 Special Issues
Sign up for Kiplinger’s Free Newsletters
Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail.
Profit and prosper with the best of expert advice - straight to your e-mail.
It underscores an emerging skepticism, even from AI backers, as pressure builds for real products and real profits. Facebook owner Meta (META), for example, will spend up to $40 billion on capital expenditures this year. Alphabet (GOOG), Amazon (AMZN), Apple (AAPL) and Microsoft (MSFT) are spending huge sums on Nvidia chips and related tech infrastructure. Other tech and nontech companies are investing heavily, too.
The supercharged AI chatbots from ChatGPT and others can create text, images, video, data analysis and much more. The tech can assist in medical discovery and legal research or generate computer code and flag security threats. Users interact with the chatbots in plain English, much like an online search engine, so no special technical know-how is necessary. That means, in theory, that millions of consumers and workers can adopt the tech rapidly, especially as tech giants push hard to integrate it into their products and services.
But previous new technology platforms have taken a decade or more to garner mass adoption and yield widespread productivity gains. And the new crop of AI has the distinctive challenge, at least right now, of being an extremely high-cost technology to build that isn’t quickly replacing or disrupting anything. It’s still early and costs will go down, but as more money gets poured into the tech, the return on investment will have to be that much bigger to justify the cost.
If there is a bubble in AI spending, there’s good reason to think it won’t burst soon, say some Goldman Sachs analysts. That’s not exactly a comforting thought, but note some stark differences between today’s AI mania and the 1990s dot-com debacle. Today’s tech giants are flush with cash and have huge customer bases. The level of spending is not that different from other huge technology shifts in the consumer and business market. Also, Wall Street is paying closer attention to return on investment now and is quicker to penalize companies that come up short. On top of that, today’s AI systems truly are amazing innovations with serious long-term potential.
What's next for Generative AI?
With lots of questions about the future, here are four forecasts for making sense of what’s next for generative AI.
Don’t hold your breath for a single breakthrough dominated by one event, app or company, as generative AI spreads. The tech is being integrated, sometimes seamlessly, into consumer and business products and services, such as work collaboration tools, e-mail, word processing, photo editing and online search. For example, Adobe (ADBE) Photoshop already uses AI to create images or transform photos, and LinkedIn uses it to help write user posts. For its part, Meta says its AI investment is helping improve personalized recommendations and ads.
Direct revenue will remain hard to come by. Getting consumers and businesses to fork over extra money for premium AI services won’t be easy, especially for start-ups. But look for early signs of moneymaking potential at Microsoft and Alphabet. Both are charging for their AI tools. Microsoft’s AI assistant CoPilot runs $30 per month per user. Alphabet is charging $20 per month per user for its Google Gemini service. The companies will be eager to highlight any positive signs of rising revenue from AI.
Business adoption will be a bumpy ride. Companies have to contend with cybersecurity risks and inaccurate responses generated by AI chatbots. However, they can look forward to new AI in coming updates of the software they use, which could lead to productivity wins. Surveys show that executives lack a clear plan and are worried about how to prove any benefits. That’s true even if many of their workers are already using generative AI tools, often on the down-low, for work tasks.
Expect a shakeout of sorts in the next year or so. That time horizon is when analysts are looking for hit products and services that gain mass adoption. Expect a harsher assessment of leading AI companies by Wall Street if they aren’t showing clear signs of growing AI adoption, new hit services and increasing sales. In a couple of years, don’t be surprised if big tech and other companies start reassessing their AI spending, perhaps reining in some outlays while prioritizing more focused strategies.
This forecast first appeared in The Kiplinger Letter, which has been running since 1923 and is a collection of concise weekly forecasts on business and economic trends, as well as what to expect from Washington, to help you understand what’s coming up to make the most of your investments and your money. Subscribe to The Kiplinger Letter.
Related Content
- How AI Could Have Positive and Negative Effects on Cybersecurity
- Can Stocks Picked by Artificial Intelligence Beat the Market?
- Best AI Stocks to Buy
- We Don’t Have to Let AI Win
- Tech Heavy Hitters Join Forces to Form AI Alliance
-
5 Types of Gifts the IRS Won’t Tax: Even If They’re BigGift Tax Several categories of gifts don’t count toward annual gift tax limits. Here's what you need to know.
-
The 'Scrooge' Strategy: How to Turn Your Old Junk Into a Tax DeductionTax Deductions We break down the IRS rules for non-cash charitable contributions. Plus, here's a handy checklist before you donate to charity this year.
-
IRS Says You Made a Tax Return Mistake? A New Law Could Help You Fight BackTax Law Updated taxpayer protections change what the IRS must explain on error notices and how long you have to respond.
-
What to expect from the global economy in 2026The Kiplinger Letter Economic growth across the globe will be highly uneven, with some major economies accelerating while others hit the brakes.
-
The AI Boom Will Lift IT Spending Next YearThe Kiplinger Letter 2026 will be one of strongest years for the IT industry since the PC boom and early days of the Web in the mid-1990s.
-
Amid Mounting Uncertainty: Five Forecasts About AIThe Kiplinger Letter With the risk of overspending on AI data centers hotly debated, here are some forecasts about AI that we can make with some confidence.
-
Worried About an AI Bubble? Here’s What You Need to KnowThe Kiplinger Letter Though AI is a transformative technology, it’s worth paying attention to the rising economic and financial risks. Here’s some guidance to navigate AI’s future.
-
Will AI Videos Disrupt Social Media?The Kiplinger Letter With the introduction of OpenAI’s new AI social media app, Sora, the internet is about to be flooded with startling AI-generated videos.
-
What Services Are Open During the Government Shutdown?The Kiplinger Letter As the shutdown drags on, many basic federal services will increasingly be affected.
-
The Economy on a Knife's EdgeThe Letter GDP is growing, but employers have all but stopped hiring as they watch how the trade war plays out.
-
Banks Are Sounding the Alarm About StablecoinsThe Kiplinger Letter The banking industry says stablecoins could have a negative impact on lending.
