4,000 CEOs Say No Impact From AI: Study Spurs Huge Selloff

A US study of close to 6,000 company executives in four countries has found surprisingly little impact or benefit from their use of artificial intelligence – so far.

The study, by the National Bureau of Economic Research, involved a survey of almost 6,000 chief financial officers, chief executives and other executives from stratified firm samples across the United States, Britain, Germany and Australia.

Findings of the survey, revealed this month, were a factor in a huge market selloff of AI-linked technology shares. As of mid-February, over $1 trillion in market value had been wiped from major tech companies, such as Amazon, Microsoft, Nvidia and Alphabet, driven by fears that high AI capital expenditure was not yielding immediate returns.

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The downturn, dubbed ‘software-mageddon’, saw Amazon shares drop by over 18% over a nine-day period after major investment announcements. Microsoft shares have lost a similar amount since beginning of the year, while Alphabet has fallen about 11% from recent highs.

Chipmaker AMD has also seen its shares plunge by over 17% after it forecast revenue that was lower than expected.

Authors of the study said there were four key findings:

“First, around 70% of firms actively use AI, particularly younger, more productive firms.
“Second, while over two-thirds of top executives regularly use AI, their average use is only 1.5 hours a week, with one-quarter reporting no AI use.
“Third, firms report little impact of AI over the last three years, with over 80% of firms reporting no impact on either employment or productivity.
“Fourth, firms predict sizable impacts over the next three years, forecasting [that] AI will boost productivity by 1.4%, increase output by 0.8% and cut employment by 0.7%.”
They also surveyed individual employees, who predicted “a 0.5% increase in employment in the next three years as a result of AI,” it said.

Productivity paradox

So, the results weren’t all bad. Indeed, economists have noted that a similar “productivity paradox” also occurred in the IT age during the 1970s and ’80s.

Economist and Nobel laureate Robert Solow noted in 1987 that the arrival of computers, transistors, micro-processors and integrated circuits during the ‘Information Age’ initially caused productivity growth to slow from the late 1940s to the early 1970s, before productivity began to climb in later decades.

On February 14, Apollo chief economist Torsten Slok said: “The same can be said today: ‘AI is everywhere except in the incoming macroeconomic data’.”

“Today, you don’t see AI in the employment data, productivity data, or inflation data. Similarly, for the S&P 493 (all bar the ‘Magnificent Seven’), there are no signs of AI in profit margins or earnings expectations.

“Maybe there is a J‑curve effect for AI, where it takes time for AI to show up in the macro data. Maybe not.”

Slok said the value creation of AI models may stem from “how generative AI is used and implemented in different sectors in the economy,” as academic literature is still inconclusive about the potential macro effects of AI.

And three years since ChatGPT, “it looks like AI will likely be labour-enhancing in some sectors rather than labour-replacing in all sectors.”