The GenAI hype check is great news for artificial intelligence
Is Generative AI worth the money? Tech leaders like Microsoft chief technology officer Kevin Scott says costs will come down and capabilities improve, but as Wall Street heads toward correction territory— Nvidia and Microsoft, two stocks that have ridden the AI wave, are down more than 15% and 8% respectively since 10 July—enterprises are grappling with a deeper problem: How do they put AI to use and measure the return on that investment? Confusion over the answer has led to discomfort, sparked by bearish reports from Goldman Sachs and Sequoia Capital questioning whether GenAI will make as much money as the market seems to think. AI capital expenditure will reach between $600 billion and $1 trillion in the coming years, the reports estimate, and spending on infotech will rise 8% this year, according to Gartner. If investors are taking a breather, that’s good.
As my colleague John Authers recently argued about Big Tech stocks, corrections can be healthy when a market position has been extreme. The AI-driven market boom and jump in capital spending at companies like Alphabet and Tesla has happened far too quickly, benefiting those who didn’t always deserve the rally. A senior AI executive at a large tech company recently told me point blank that artificial intelligence had become overblown in the market.
He’d lived through several hype cycles before, he added, and this one was no different. There are differences from the dotcom boom and bust. Businesses are looking at tangible outcomes more than they were in the early 2000s, when the focus was more speculative and based on market potential.
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