An IBM survey suggests that businesses are struggling to achieve acceptable ROIs from AI investments.
Cheaper AI is likely required to successfully scale up the technology.
The trend of affordable AI models running on cheaper hardware does Nvidia no favors.
These 10 stocks could mint the next wave of millionaires ›
There’s no question that artificial intelligence (AI) has real use cases and that the latest AI models can do some incredible things. But it’s important to remember that the technology has limitations. Ultimately, all an AI model does is predict the next token — characters of text, pixels in an image, and so forth — in a stream of tokens. There’s no real reasoning or thinking, just a bunch of statistics.
Because of these limitations, AI models often get things wrong or create false information. It’s not surprising, then, that businesses are struggling to make AI investments work. International Business Machines (NYSE: IBM) recently conducted a survey of 2,000 CEOs around the world, and the main takeaway paints a rough picture for companies like Nvidia (NASDAQ: NVDA) that are all-in on AI.
According to IBM’s survey, just 25% of CEOs said AI initiatives have delivered the expected return on investment (ROI) over the past few years. Worse, only 16% of CEOs report that AI initiatives have been scaled enterprise-wide.
AI is still providing value to businesses, although perhaps not as much as originally expected. About 52% of CEOs claim their organization is realizing value from AI investments outside of cost reductions. Around two-thirds of CEOs noted that the risk of falling behind, rather than a clear view of the financial benefits, is driving AI investments right now.
While AI technology is struggling to deliver for businesses, CEOs remain optimistic. A full 85% of CEOs expected AI to deliver a positive ROI by 2027.
Nvidia’s growth story hinges on ever-growing demand for more powerful AI accelerators to train and run AI models of increasing complexity and cost. However, with businesses struggling to produce positive returns on investment from AI initiatives, the path to positive ROI almost certainly involves bringing down the cost of AI.
That’s not a trend that will benefit Nvidia. Nvidia needs to sell many millions of its data center graphics processing units (GPUs), and it needs to sell them for tens of thousands of dollars each to keep growing. While expanding usage of AI can drive demand for GPUs, the track record of businesses making AI investments work suggests that the future of the AI industry involves more efficient AI models capable of running on cheaper hardware.
Story Continues
