AI Revolution Is Underway, Yet Its Economic Impact Is 'Several Years Off': Goldman Sachs

Goldman Sachs analysts Joseph Briggs and Devesh Kodnani recently shed light on the ongoing adoption of artificial intelligence (AI).

The transition toward AI is advancing steadily, the analysts said. A major economic impact is still “several years off.”

Many U.S. workers have already begun integrating AI tools into their work routines. Over 25% use these technologies every week.

Despite these figures, formal adoption by firms remains modest — less than 5% of companies leverage AI to enhance their product and service offerings.

The adoption rate is notably higher in certain sectors including information technology, professional services, and finance. Companies anticipate a surge in adoption rates across various other sectors in the coming six months.

ChatGPT‘s monthly visit count soared beyond the billion mark in early 2023, yet they have experienced only minimal increases ever since.

As the broad-based adoption of AI remains low, Goldman Sachs suggests that any major boost to productivity and economic growth may not materialize until after 2027 in the U.S. and 2028 in other developed markets, with the most significant impacts expected post-2030.

AI proponents argue that the technology’s influence on the job market might be less about job displacement and more about augmenting the productivity of the existing workforce.

The expectation of a net increase in hiring due to AI contradicts the widespread fear of job losses, according to Goldman Sachs.

The proportion of job openings related to AI in the IT sector has seen a significant increase over the past year and a half, reflecting the technology industry’s growing emphasis on artificial intelligence.

Initial findings from early adopters indicate significant boosts in labor productivity due to AI implementation. Academic research suggests an average labor productivity increase of 25% (with a median of 16%) following AI adoption.

“The sizable increase in AI-related investment and large productivity gains among n early adopters adds to our confidence that generative AI poses meaningful economic upside, while the slow adoption pace suggests that sizable macroeconomic impacts are still several years off,” Briggs and Kodnani said.

The Road Ahead: Uncertainty And Potential

The pathway of AI integration into the economy is fraught with uncertainty, especially concerning its effects on investment, the labor market, productivity, and financial markets.

Goldman Sachs predicts that generative AI could elevate labor productivity in developed markets by approximately 1.5 percentage points annually over a decade, translating to a cumulative increase of around 15%.

This growth could potentially contribute an additional 0.4 percentage points to the growth of the gross domestic product (GDP) by the end of the forecast period.

These benefits hinge critically on widespread AI adoption and a significant ramp-up in related investments—factors that might take years to fully realize.

Investors are already positioning themselves to capitalize on the expected transformative impact of AI on the economy, by flocking into AI-related stocks.

This forward-looking strategy is evidenced by the remarkable performance of the Global X Artificial Intelligence & Technology ETF AIQ, which has risen by more than 40% over the past year, largely outperforming the broader stock market trends, as seen in the more modest gains of the SPDR S&P 500 ETF Trust SPY.

Chart: AI Stocks Outperformed S&P 500 In The Last Year