S&P Global Believes That Investments In AI Startups Can Reach Nearly $1 Trillion By 2027, Yet Goldman Sachs Asks Where Are The Benefits?

Investors are convinced that generative AI is the next big gold rush, with trillions of dollars in new funding all set to materialize over the next few years. In this Tulip mania-like frenzy, Goldman Sachs has chosen to step back and ask the monumentally important question: where are the benefits from the gargantuan CapEx on everything AI-related?

South Korea Leads The World In AI Patents; S&P Global Believes That AI Startups Will Attract Nearly $1 Trillion In Investments By 2027

AI startups attracted around $50 billion in investments in 2023, based on the premise that generative AI will turn out to be as revolutionary as the internet.

This trend of unbridled growth in CapEx is all set to continue for the foreseeable future, judging by a new report from S&P Global, which now believes that AI startups will attract between $800 billion and $900 billion in investments by 2027.

Of course, no where is this ongoing AI-related gold rush as apparent as in the case of NVIDIA, where despite the upcoming launch of the GB200 GPUs in H2 2024, the demand for older H100 graphic cards remains quite robust, as per KeyBanc's channel checks. Apparently, AI-focused enterprises are so desperate to get their hands on AI-enabling GPUs that they simply do not care about the relative obsolescence of NVIDIA's older offerings.

This unchecked growth in CapEx is resulting in mushrooming AI-related patents, with South Korea and the US leading the world in terms of the number of patents granted per 100,000 people, as per a tabulation of 2022 data by Deutsche Bank.

Goldman Sachs: Too Much Spend, Too Little Benefit?

Against this euphoric investment background, Goldman Sachs has chosen to ask a tough yet pertinent question: where are the benefits from unbridled growth in AI-related CapEx?

In a new report, Goldman cites Daron Acemoglu, a professor at MIT, to note:

"He estimates that only a quarter of AI exposed tasks will be cost-effective to automate within the next 10 years, implying that AI will impact less than 5% of all
tasks."

Over the next decade, Acemoglu estimates that AI will increase "US productivity by only 0.5% and GDP growth by only 0.9%."

As per Goldman Sachs' base case, AI adoption will increase labor productivity in the US by 1.5 percent over the next ten years. Even in the most optimistic scenario, Goldman contends that labor productivity will only increase by 2.9 percent. This contrasts sharply with the much rosier outlook of artificial intelligence enthusiasts quoted in the report. For instance, Goldman Sachs senior global economist Joseph Briggs believes that AI adoption will increase US productivity by a whopping 9 percent!

Much of this disparity boils down to two basic assumptions: how many tasks can artificial intelligence eventually automate and how much cost savings can this automation yield? Will AI simply allow existing employees to perform their tasks more efficiently or will it lead to worker reallocation and displacement?

Goldman Sachs also notes that despite rising adoption, "little evidence of net labor
displacement from AI exists so far."

Jim Covello, Goldman Sachs' head of global equity research notes:

"The starting point for costs is also so high that even if costs decline, they would have to do so dramatically to make automating tasks with AI affordable. People point to the enormous cost decline in servers within a few years of their inception in the late 1990s, but the number of $64,000 Sun Microsystems servers required to power the internet technology transition in the late 1990s pales in comparison to the number of expensive chips required to power the AI transition today, even without including the replacement of the power grid and other costs necessary to support this transition that on their own are enormously expensive."

Our readers can go through the entire report here.

About the author: Writing is my one incontrovertible passion. Over the past six years, he has authored over 2,200 distinct articles on financial and tech-related topics, spanning nearly 1 million words. And he has been a member of Wcctech mobile team since 2025. As an alumnus of the University of Toronto, Rotman Commerce Program, I bring nuance, in-depth knowledge, and a unique perspective to every topic that I cover. When I'm not writing, I'm traveling the world, exploring hidden confectionaries and restaurants as an aspiring food connoisseur.

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