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Chris Hyzy
Chief Investment Officer,
Merrill and Bank of America Private Bank
[Chris Hyzy speaking]
Hello, everyone. Artificial intelligence has been in the news every day for just about the past 16 or so months. And we know it's been around and in development for a much longer period before that.
Already, it's begun to reshape industries across the board and could soon touch almost every aspect of our lives.
Where could this technology take us next? And how should investors think about the potential opportunities, and the risks, that AI represents?
On-screen copy:
Haim Israel
Head of Global Thematic Investing,
BofA Global Research
Joining me today is Haim Israel, head of Global Thematic Investing for BofA Global Research, who can answer these and other questions, and help us better understand what the artificial intelligence revolution could mean from an economic, markets and social perspective.
On-screen disclosure:
Please read important information at the end of this program. Recorded on 5/29/2024.
[Chris Hyzy speaking]
Haim, thanks for joining me today.
[Haim Israel speaking]
Pleasure to be here, Chris.
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[Chris Hyzy speaking]
Let's talk about artificial intelligence. Where we are now in its evolution?
[Haim Israel speaking]
Chris, this is the biggest revolution humanity have seen. The first revolution of AI was back in 1958, that's how far this technology is, but what happened in last 18 months, everything blew up. For the first time, artificial intelligence can actually understand us, do everything, process information in the way that we are used to process information. Up until now, if you wanted to use artificial intelligence, you had to be a data scientist. Now, it's an app.
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Generative AI: Artificial intelligence that is
able to generate new text, images, videos and
other forms of data, based on prior data inputs.
Hundreds of millions of people are using Generative AI every day. Never, ever, a technology was adopted so fast because it's so easy to use. Your kids can use it, your parents, everybody around — which leads me to what I think is the most important point... processing power is doubling every 18 to 24 months. And the rate of acceleration just goes up faster and faster all the time.
[Chris Hyzy speaking]
What happens to the computing power of all of this and electricity generation and everything?
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Massive upgrades needed
- Computing power
- Data centers
- Telecom equipment
- Fiber optics
- Energy supply
[Haim Israel speaking]
We need a lot of computing power; way more than we ever imagined it will need. Same thing with infrastructure. We'll need data centers. We'll need telecom equipment. We'll need fiberization. We'll need all of that to change. And we have a massive shortage of all of that.
Energy is a great example. I think that the world is going to be very surprised in the next couple of months understanding how much energy the world is about to consume. And it's going to be up to us to understand how we are supplying our energy, how we are changing our infrastructure at the same time. We will need so many more resources. And as a result, we're going to see massive growth in GDP because it has amazing applications across everything, across the economy, across our societies, across everything.
[Chris Hyzy speaking]
When we get an innovation like this, this has widespread implications across a lot of sectors. Let's talk about the ones that you see the application of Generative Artificial Intelligence hitting at the most, and is it a revenue story or is it a revenue and a cost efficiency story?
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In every industry, there will likely be
two kinds of companies:
Those that use Gen AI — and
those that cease to exist.
[Haim Israel speaking]
In the next couple of years, there are going to be two kinds of companies. The companies that are going to start using Generative AI and the companies that will not exist anymore. I'm talking about every industry out there.
To come up with a new material, that's something that would take years and years. Now, it's taking minutes.
To develop a drug in the past — 10 years, five to six billion dollars, success rate of 0.01 percent, one out of 10,000 molecules became a drug. Now, you have the ability to take all those databases, all the different molecules, and use Generative AI to cut down the cost of production of drugs by 90 percent, even more [at] times by 90 percent, and we start to see that happening.
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Estimated annual net gain to
global GDP from generative AI:
$15.7 trillion by 2030.
Source: PwC, 2017
You asked me about was that a revenue story or was that an efficiency story. I'm a big believer that it's both. And if we add those two things together, revenues from one side and cost efficiency from the other side, some estimates are talking about 16 trillion dollars of net-add to global GDP every year.
[Chris Hyzy speaking]
So, let's talk about the risks now. Um. Initially, coming out of the gates in the last 18 months or so, the big risk was bad data leads to bad outputs, or maybe something becomes uncontrollable.
[Haim Israel speaking]
First of all, you've mentioned it, a lot of bad data sets that the models are being trained, hallucination problems, bad outputs that are coming from those models, copyrights issues. There's a lot of teething problems we're starting to see, and it's good because we're getting aware of that and those things could be handled.
AI risks
- Bad data sets
- Energy shortages
- Privacy concerns
- Cybersecurity
- Deepfakes and disinformation
The other thing we've mentioned, there are more energy needs that the world will have to start addressing. The third point that we have to talk about is privacy issues, and cybersecurity issues, and deepfakes and disinformation. And in the last couple of months, this went ballistic.
Remember that 2024 is an election year, not just in the United States, all over the world. Deepfake is going to be a very important player in all of that, so we have to think about all the bads that are coming with that, and of course, social implications.
[Chris Hyzy speaking]
When it comes to the jobs, you've talked about some jobs, ah, but again, it tends to get a little bit exaggerated. We've seen innovations in the past — ah, jobs go away, but more jobs are created. Is it the same situation this time around?
[Haim Israel speaking]
I am a big believer that more jobs will be created, but unlike other cycles that we've seen in the past, there could be a time lag. This revolution is happening so fast that up until more jobs will be created, we could see at the risk of this, that in short-term the jobs will be eliminated, and then, value will be created.
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In the short term, jobs will likely be eliminated.
In the long term, more jobs should be created.
So, in our research, we actually claim that if you are thinking about automation and AI, up to 74 percent of jobs technically could be impacted. Now, in the past, where we talked about automation, we usually focused on the blue collar. Now, it's really impacting white collar. Those are mostly the jobs that could be disrupted.
So, I don't know if you know that, but this year, 2024, 600,000 new books will be published in the United States. Now, why is this number is important? Because in 2023, 60,000 books were published in the United States. 10 times more. You think there are ten times more writers? There are less writers. Who's writing all those books? That's just one simple example. Already Generative AI is creeping into the job market.
[Chris Hyzy speaking]
That's a great point. Any final summary thoughts?
[Haim Israel speaking]
This is going to be the biggest revolution ever. Those who are going to use Generative AI will get bigger, more efficient. Those who are not going to use Generative AI will just not exist. They're going to be up to us to understand in every industry who's really doing the work and who's not.
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[Chris Hyzy speaking]
Haim, I want to thank you today to discuss what is now becoming that next big revolution.
[Haim Israel speaking]
It is, thank you very much, Chris.
[Chris Hyzy speaking]
I hope this has given you a better idea of this transformative technology. Keep in mind that artificial intelligence remains early in the cycle from development to commercialization, so we suggest that investors move deliberately. If you work with an advisor, they can help you assess the landscape and decide how, when and whether to include artificial intelligence-related investments in your portfolio.
Thanks for watching, and I hope you'll tune in to future conversations.
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