Global AI Investments to Reach $200B by 2025, Driving Economic Transformation, says Goldman Sachs
Global artificial intelligence (AI) investments are projected to reach $200 billion by 2025, according to a study by Goldman Sachs. The study reveals that AI investments will take a few years to have a major impact on the economy but could potentially have a larger impact on gross domestic product (GDP). In order for AI to trigger large-scale transformation, businesses need to make significant upfront investments in physical, digital, and human capital to acquire and implement new technologies and reshape business processes.
Goldman Sachs economists Joseph Briggs and Devesh Kodnani wrote in the study that these investments, which could amount to around $200 billion globally by 2025, will likely happen before adoption and efficiency gains start driving major productivity gains. The long-term potential of AI-related investments could peak at 2.5% to 4% of GDP in the US and 1.5% to 2.5% in other leading countries if the growth projections of the research are fully realized.
The study also highlights the US as the market leader in AI technology, with American companies likely being early adopters. While other AI leaders like China may also experience similar effects, the investment impact is expected to be smaller and more delayed. Generative AI, in particular, is noted for its enormous economic potential. Goldman Sachs had previously stated that generative AI could boost global labor productivity by more than 1% annually during the decade following widespread usage.
However, surveys of US chief executives reveal that less than a quarter of them expect generative AI to affect their company or lower their labor needs in the next one to three years. Nonetheless, a significant majority of them anticipate adopting AI over a three to ten-year timeframe. Goldman Sachs suggests that if these timelines are accurate, AI adoption would likely start having a meaningful impact on the US economy sometime between 2025 and 2030.
The rise of generative AI has contributed to the increasing interest and investment in the technology. Investors have put over $4.2 billion into generative AI start-ups between 2021 and 2022 through 215 deals, following a surge in interest since 2019. Market interest in AI has been growing rapidly, with over 16% of companies in the US Russell 3000 index mentioning the technology in their earnings calls, up from less than 1% in 2016. The release of Microsoft-backed OpenAI’s ChatGPT in November 2022 led to a significant portion of that increase, according to Goldman Sachs.
The economic benefits of generative AI investments are also being recognized in other regional economies. GCC countries, for example, are expected to reap approximately $23.5 billion in economic benefits by 2030 as investments in generative AI continue to grow, as reported by PwC unit Strategy& Middle East.
Goldman Sachs expects AI investments to largely come from hardware investments for training AI models and running AI queries, as well as increased spending on AI-enabled software. These investments are projected to be concentrated in four key business segments: companies that train and develop AI models, those that supply the infrastructure to run AI applications, companies that develop software for AI-enabled applications, and enterprise end users that pay for the software and cloud infrastructure services.
While the timing of the AI investment cycle is difficult to predict, business surveys suggest that it is likely to start having an investment impact in the second half of this decade, with larger firms in information and professional, scientific, and technical services adopting AI earlier. Goldman Sachs advises businesses to be prepared for the transformative effects of AI and make the necessary investments to stay competitive in the evolving landscape.
