A new report from the consulting firm Bain & Company warns that the artificial intelligence (AI) industry may not generate enough money to support its own rapid growth.
According to Bain's annual Global Technology Report, AI companies will need an estimated $2 trillion in yearly revenue by 2030 to pay for the massive computing power required to meet demand. However, the report predicts that their actual revenue will fall short by $800 billion. This means the money coming in from services like ChatGPT is not keeping up with the huge costs of building and running data centers.
This gap raises serious questions about the industry's high valuations and long-term business models. While the use of AI is exploding, the financial returns and cost savings it generates for companies are not growing fast enough to cover the expenses.
Supply Chain and Energy Concerns
The report highlights that if this trend continues, "AI will increasingly strain supply chains globally." The demand for AI computing power is expected to be enormous, potentially requiring enough energy to power 200 gigawatts by 2030, with half of that demand coming from the United States.
Major tech companies like Microsoft, Amazon, and Meta are planning to increase their annual AI spending to over $500 billion. However, even leading AI firm OpenAI is currently losing money and prioritizing growth over profit.
Other Tech Trends
In addition to AI, Bain's report also identified other emerging areas:
Quantum Computing: A new technology that can generate $250 billion in value for finance, pharmaceuticals, and other sectors, with adoption likely to expand incrementally in the coming years.
Humanoid Robots: In attracting investment, humanoid robots are in their infancy and heavily dependent on human input. Their commercial viability will await the creation of an enabling ecosystem.
Briefly, the AI business has a fundamental challenge: it has to become financially viable to power the very growth that it is seeking.
The chairman of Bain's technology practice, David Crawford, explained that by 2030, tech companies will face a huge challenge. They will need to spend around $500 billion on infrastructure and find a way to earn an extra $2 trillion in new revenue to keep up with AI demand. He also warned that AI's massive need for computing power is growing faster than our ability to make efficient chips. This will put immense strain on power grids that haven't been significantly upgraded in years.
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