Goldman Sachs - Navigating The AI Era
Goldman Sachs - Navigating The AI Era
Goldman Sachs - Navigating The AI Era
the AI Era
How Can Companies Unlock
Long-Term Strategic Value?
Executive Summary
AI has been advancing in its technical efficacy over recent decades,
with key breakthroughs across its three primary components—compute,
model architecture, and data—leading to the pivotal inflection point
we’re witnessing today. AI now surpasses key human benchmarks across
reading comprehension, image and speech recognition, and language
understanding. The usability and interface of early platforms have made
the technology accessible to the imaginations of millions. The net result
is a new technology era poised to transform nearly every industry,
sector, and job function.
In our view, this is more than “business as usual” for decision makers,
investors, and the broader public. The rapid rise and mass adoption of
Generative AI in a relatively short amount of time—OpenAI’s ChatGPT
was introduced to the public in November 2022—have led to a velocity
of fundamental shifts and strategic decisions we haven’t witnessed
since the advent of the Internet and mobile technology. In 2023, the
total market cap for our basket of AI winners increased by 75%.¹ VCs
are excited to invest in the next disruptive AI startup, public market
investors are eager to understand how AI will impact every sector,
and companies are working to understand how AI will fundamentally
alter the strategic landscape.
Artificial Intelligence (AI) The intelligence of computers Generative AI (GenAI) AI for generating new content,
or software, especially to perform functions normally including but not limited to text, pictures, video, and
associated with human intelligence. computer code.
1
AI winners basket as denoted by GS FICC and Equities; FactSet market data priced as of 22-Sep-2023
A New Technology Era
Although corporate and consumer applications of GenAI Al Investment is Likely to Grow Over the Next 2–3 Years
are still in their infancy, we have observed several key Private Al investment (dotted lines show GS revenue projections*)
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2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025
Emergence of Strategic Theses: Although the majority Source: Stanford Institute for Human-Centered Artificial Intelligence, Goldman
Sachs Research
of M&A at this stage has been focused around a
*Average of GS Research 2022–2030 revenue growth estimates for Microsoft
small group of early use cases and core-enabling Azure, NVIDIA, Google Cloud, and Amazon Web Services (when available)
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Anticipated
By Sector Inquiring Most Interesting Client Questions Profit From
Impact From
About Al-Driven Cost
GenAI
GenAI Reduction*
Technology,
Does GenAI create fundamental risk/danger to human society and
Media, and 90%+ High $860bn
civilization?
Telecom
Consumer/ How can GenAI drive enhanced personalization for the customer/
<10% Moderate $390bn
Retail consumer experience?
Financial When will GenAI take out major parts of the financial services
~20–40% Moderate $340bn
Institutions value chain—underwriting in particular?
Real Estate ~10–20% High What are the practical RE use cases of GenAI? $330bn
Natural
<10% Moderate How do we get credit in our valuation for our GenAI capability set? $240bn
Resources
2
https://www.mckinsey.com/mgi/overview/in-the-news/ai-could-increase-corporate-profits-by-4-trillion-a-year-according-to-new-research
Full
• Supply/demand rebalancing
• Increased importance of proprietary data Realization
Phase 2 of Value
• Establishment of monetization norms and practices
• Proliferation of specialized apps
While the AI phenomenon is still in Phase 1, developments so the potential is relatively well understood. Most
are evolving quickly on the macro and micro scale. We notably on the biopharma side, AI helped develop the
continue to see massive investment in graphics processing COVID-19 mRNA vaccines and continues to be actively
units (GPUs)—the foundational enabling hardware used in drug design and development.
of GenAI—as well as several prominent foundation
models. We are observing early use cases around Over the long term, GenAI may become integral to
more specialized applications while corporates are drug discovery, optimization, and clinical trial design
simultaneously recognizing the importance of their processes.³ There are already more than 500 AI-enabled
proprietary data. With this recognition of proprietary medical devices that are FDA-approved and sold in the
data as a tool for training AI models and generating United States.⁴ This is likely just the beginning. In addition,
valuable and unique insights, corporates are focused on GenAI can be leveraged in the near term to advance
optimizing their data infrastructure to prepare for the workflow optimization and automation, reducing physician
AI Era. burnout and driving greater patient-centric care.
³ https://www.bain.com/insights/getting-the-most-out-of-generative-ai-in-healthcare/
⁴ https://www.fda.gov/medical-devices/software-medical-device-samd/artificial-intelligence-and-machine-learning-aiml-enabled-medical-devices
technology’s life cycle. The dot-com boom provides a Wall Street +190%
cautionary tale. While AI investor enthusiasm may not Consensus YTD Stock Performance
Mar-19 Mar-23
Peter Callahan
Managing Director, US Technology, Media, and
*past performance does not guarantee future results
Telecom Sector Specialist, FICC and Equities,
Goldman Sachs Source: FactSet; market data as of 23-Sep-2023, public company filings. Microsoft Cloud
revenue, which includes Azure and other cloud services, Office 365 Commercial, the
commercial portion of LinkedIn, Dynamics 365, and other commercial cloud properties
⁵ https://www.goldmansachs.com/intelligence/pages/top-of-mind/generative-ai-hype-or-truly-transformative/report.pdf
⁶ https://www.gsam.com/content/gsam/us/en/advisors/market-insights/gsam-insights/perspectives/2023/artificial-intelligence-future.html
⁷ McKinsey, https://www.mckinsey.com/mgi/our-research/generative-ai-and-the-future-of-work-in-america#/
GenAI M&A
Supercycle
GenAI
Deals Today
8
https://pitchbook.com/news/articles/AI-Goldman-Sachs-investments
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https://www.goldmansachs.com/intelligence/pages/ai-investment-forecast-to-approach-200-billion-globally-by-2025.html