AI Could Boost Net Margins for Companies by 4% Over a Decade

Goldman Sachs strategists said in a note that artificial intelligence (AI) could boost US net profit margins by nearly 400 basis points over a decade, Bloomberg reported on Wednesday. On the other hand, the burgeoning technology is unlikely to make a notable short-term impact on profits due to several current persisting challenges.

AI Was Mentioned 1,600 Times During Q1 Corporate Earnings Calls

According to Bloomberg, analysts at Wall Street giant Goldman Sachs believe that AI could boost US corporate net margins by 4% over a decade. In their note, Goldman strategists led by Ben Snider said the nascent market could become the biggest long-term support for companies’ profits.

However, the near-term margin growth is looking “unlikely,” analysts wrote, due to several current headwinds such as looming recession, swollen inventory levels, and high inflation and interest rates.

AI has been a hot topic for a while now, but the rollout of OpenAI’s ChatGPT last year has taken it to another level. Microsoft Corporation (NASDAQ:MSFT) backed ChatGPT’s unprecedented success has left many AI-related companies scrambling to introduce their chatbots and generative AI solutions. Further, even non-AI companies are rushing to capitalize on this trend through acquisitions and other deals.

According to Bloomberg’s analysis, the word “AI” has been mentioned roughly 1,600 times by US and European firms during their Q1 earnings conference calls. For example, Google (NASDAQ:GOOGL) CEO Sundar Pichai and other presenters mentioned AI around 143 times at its recent I/O developer conference.

OpenAI CEO Encourages Lawmakers to Regulate AI

Although the AI mania is real, Goldman’s analysts said that predicting the sector’s future impact remains challenging due to many unknown factors around it. One of those factors is the regulation of the AI market.

“In addition to the uncertainty around the eventual impact of AI on economic activity, the potential response of government policy to the widespread adoption of AI means the net long-term effect on corporate profits is difficult to predict.”

Goldman strategists said in a note.

US lawmakers are concerned about the potential risks posed by AI technology, as seen from their decision to summon OpenAI’s CEO Sam Altman before Congress this week. During the hearing, Altman urged lawmakers to regulate the AI sector, saying that the current mania around the technology could be a possible “printing press moment,” but one that needs safeguards.

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