AI Is Hot, But Not Making Profits: What Will This Mean For Workers
You're probably feeling it. Things are changing quickly. It looks like artificial intelligence will be deployed into nearly everything, vastly changing the complexion of the workplace.
It’s understandable for you to wonder whether or not your job will be impacted by AI. The hype machine led by the tech sector makes it seem like you may not have a job in the future, or if you do hold a job, it will be degraded to save the company money. Before you panic, keep in mind, nothing has been finalized.
Top-tier investment bank Goldman Sachs pointed out that the AI beast may be in for a comeuppance, as it may have a money-crunch issue. Goldman and others are concerned that the billions of dollars spent on the technology may not be recuperated. If that happens, there will be big changes ahead.
Major global bank Barclays reported that Wall Street analysts anticipate Big Tech firms will invest nearly $60 billion annually in AI development through 2026, but expect to generate only about $20 billion in AI-related revenue per year by that time.
Here’s What’s Going On
The rapid development and adoption of AI in the workplace has led to massive investments, with companies pouring billions of dollars into research, development and implementation. However, the current costs of AI development seem to outweigh the immediate revenue generated, creating an uncomfortable complex situation for both companies and workers.
This imbalance between significant investments and meagher, if any, returns raises red flags and concerns about the near-term profitability of AI initiatives. While the potential for long-term gains remains over-the-top optimistic, with estimates suggesting AI could add trillions of dollars in value to the global economy, the immediate financial benefits are dubious.
It's likely that it will take years for many companies to see substantial profits from their massive AI investments, as the technology continues to evolve and find its place in various industries.
Prepare For Layoffs And Consolidations
The pressure to keep up with AI advancements, coupled with the high costs and uncertain short-term returns, may lead to difficult decisions for companies. There's a risk that some businesses, especially those heavily invested in AI, might resort to cost-cutting measures to offset their expenses, as there is no light at the tunnel for short or medium-term profitability.
Unfortunately, the accountants and financial folks will need to do something to stem the burning of billions of dollars. The answer, which is almost always the case, is workforce reductions and hiring freezes will be put into place. Of course, the employees will bear the brunt of these financial pressures. A survey revealed that 41% of managers are hoping to replace workers with cheaper AI tools in 2024, indicating a potential trend toward downsizing to save on labor costs.
Goldman predicted that up to 300 million jobs could be lost or diminished by AI in the coming years. Some industries and job types are more susceptible to AI automation than others. Office administrative support, legal, engineering, financial operations, management, sales, healthcare and art and design are among the sectors likely to be impacted.
An MIT study indicated that only about 23% to 25% of vision-related tasks and jobs are likely to be displaced by AI in the near term due to high implementation costs. This suggests a substantial, but gradual, impact rather than sudden, massive job losses.
On the positive side, there's a possibility of the "Uber effect," where AI enables less skilled workers to take on higher-level tasks, potentially expanding certain professional fields.
If AI-related startups and companies struggle to achieve profitability while continuing to invest heavily in AI projects, we may see a consolidation in the industry. Smaller companies might be absorbed by larger, well-funded organizations, as seen with Inflection AI's acquisition by Microsoft.
This consolidation could lead to a concentration of AI capabilities among a few major players, potentially raising concerns about monopolization and the responsible development and deployment of AI technologies.
It’s A Mixed Bag
The impact of AI on the workplace is not solely negative. While some jobs may be at risk, AI is also expected to create new roles and enhance productivity in many sectors. The key challenge will be managing the transition and supporting workers in acquiring new skills.
The future of AI in the workplace will depend on how companies navigate the current challenges, balance their investments with sustainable growth and address the ethical and societal implications of widespread AI adoption.
While the path to profitability may be longer than initially anticipated, the transformative potential of AI suggests that those who successfully weather the current challenges could reap significant rewards in the long term.
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