Generative AI set to boost global labour productivity in next decade

Investment in technology could reach up to 4% of GDP in the US and up to 2.5% in other key AI markets, Goldman Sachs report shows

Generative AI has been made popular by ChatGPT, created by Microsoft-backed OpenAI. AP
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Generative artificial intelligence has “enormous” economic potential and could raise global labour productivity growth by more than one percentage point per year in the next decade, Goldman Sachs says.

The largest growth is likely to come from straightforward labour and time savings that enable higher production, suggesting that AI be an “economically significant” driver of tech investment as adoption increases, the US investment bank said in a report on Thursday.

In the long-term, AI-related investment could reach 4 per cent of gross domestic product in the US and 2.5 per cent of GDP in other AI-leading countries in the next 10 years, it said.

In the short-term, AI investment could grow quickly in the next couple of years, approaching $100 billion in the US and $200 billion globally by 2025, the report showed.

“In the near-term, heightened market interest and strong revenue projections for AI hyper-scalers suggest that AI investment is growing rapidly. However, given a relatively low starting point, AI-related investment is unlikely to have a major impact on GDP in the next couple of years,” it said.

“Over the longer run, AI-related investment could contribute more to GDP.”

Successful AI adoption could directly boost the level of global GDP by 7 per cent, although the effect on global GDP could be closer to 13 per cent “if very few workers are permanently displaced and the capital stock increases to match the increase in labour productivity”, Goldman Sachs previously said.

AI has long been used by businesses in their operations, but it has gained further momentum with the advent of generative AI.

The technology – made popular by ChatGPT, created by Microsoft-backed OpenAI – can produce various kinds of data, including audio, code, images, text, simulations, 3D objects and videos.

With investors ploughing billions into generative AI start-ups in 2021 and 2022, this has prompted countries to tap into the technology's potential.

AI-related investment globally will largely come from hardware investment to train AI models and run queries, and from higher spending on software, the Goldman Sachs report showed.

AI software investment could increase steadily over time as adoption by end users increases if the development of capabilities is concentrated among a few companies, the report said.

Investment in AI-enabled software could even eventually overtake investment in hardware.

“While the timing of the AI investment cycle is hard to predict, business surveys suggest that AI is likely to start having an investment impact in the second half of this decade, with earlier adoption by larger firms in information and professional, scientific and technical services,” Goldman Sachs said.

Regionally, GCC countries are likely to reap about $23.5 billion in economic benefits from generative AI by 2030 as investments in the technology continue to grow, PwC unit Strategy& Middle East said in a separate report last week.

Saudi Arabia and the UAE, the Arab world's biggest economies, have introduced several initiatives to promote the use of technology and are set to benefit the most from the growth in generative AI.

The region could realise about $9.9 of economic growth for every $1 invested into the technology, the pace of which could unlock $23.5 billion per year by 2030, Strategy& said.

The kingdom, which has been heavily investing in its technology ecosystem, is projected to reap more than half of that amount, or $12.2 billion.

The UAE has the next biggest potential with $5.3 billion, the report found.

Updated: July 21, 2023, 3:00 AM