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LivestreamMenuThe success of the artificial intelligence boom ultimately hinges on productivity gains from automation that will turn investments in computing power into higher corporate profits. Those gains have yet to materialize in force at the enterprise level, as the AI buildout is still mostly in its infrastructure phase, but strategists at Goldman Sachs have come up with a way to identify companies that stand to benefit the most from AI productivity increases. They looked at the share of a company’s wage bill that’s exposed to AI automation and compared that with the company’s labor costs as a percentage of sales. The resulting mix of companies’ labor intensity and AI sensitivity yields a list of productivity beneficiaries within the Russell 1000. “The recent acceleration in enterprise AI spending suggests that the earnings impact of AI adoption should become clearer in coming quarters,” Ben Snider, chief U.S. equity strategist at Goldman, wrote in a Friday research note to clients. Goldman’s list includes real estate data company CoStar Group , discount consumer retailer Dollar Tree , and e-commerce website eBay . Commercial sectors with the highest labor intensity and AI sensitivity include software, professional services, finance and biotech. The AI boom, if measured from the launch of ChatGPT in November 2022, is nearly four years old, but it’s still more about hardware and infrastructure capacity than application-level software implementation, Goldman strategists said. “Investors have rewarded companies involved in the AI infrastructure boom due to the large and visible near-term earnings impact of that spending. In contrast … investors want to avoid speculating about which companies will be most effective at implementing AI and where long-term profit gains will accrue,” Snider at Goldman wrote. However, there have been some eye-popping exceptions to this hesitancy in recent weeks as productivity gains have come out of the blue and surprised to the upside. For example, shares of medical platform Doximity exploded earlier this month when CEO Jeffrey Tangney said that the company’s AI search product is pulling in revenues-per-search that are 10 times what the tool costs to run. In a 2023 paper , Goldman Sachs economists predicted that AI could increase productivity growth by 1.5 percentage points over the subsequent decade. Consultancy McKinsey put those gains as high as 3.4 percentage points through 2040, while researchers at MIT have more modest estimates, with productivity increases of 0.53% through 2034. The MIT researchers cautioned that consolidation of AI into the hands of just a few companies could limit its potential in terms of productivity. “If generative AI tools become monopolized in the hands of a few companies, this might further slow down their adoption by small and medium-sized firms,” economist Daron Acemoglu at MIT wrote in 2024 . “The true numbers could be much smaller.”Read More
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