Is AI hype fading? Companies are set to turn talk into action in 2024: analysts

The excitement around artificial intelligence that fueled the U.S. stock-market rally last year is poised to translate into more real-world uses in 2024 as potential applications of the technology expand to a broader market, according to Deutsche Bank analysts. 

“This [2024] is a pivotal year for generative AI to move beyond experimentation to implementation and for winners and losers to begin to emerge,” said Deutsche Bank research analysts Adrian Cox and Galina Pozdnyakova in a Monday client note. 

When generative AI products started rolling out to the general public last year, it kicked off a frenzy of excitement and became the most buzzed-about new technology for U.S. enterprises.

Firms on the Russell 3000 index RUA, which measures the performance of the 3,000 largest publicly traded U.S. companies, could not stop hyping generative AI to investors on their quarterly earnings calls last year. Earnings-call transcript mentions of generative AI-related topics skyrocketed from “virtually none” in 2022 to nearly 1,000 in the first quarter of 2023, according to data compiled by Deutsche Bank. That number surged further to nearly 3,500 mentions in the third quarter of last year. 

However, Deutsche Bank analysts found that the hype faded somewhat by the fourth quarter of 2023, with corporate-transcript mentions of AI topics slipping back to around 2,500 in calls held that quarter (see chart below).

Deutsche Bank analysts said the decline in corporate mentions may mean the froth is beginning to dissipate as companies turn their focus onto “real-world uses” of AI, rather than “pie-in-the-sky applications.”

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The first place that users are most likely to get their hands on generative AI at work is likely to be in “productivity-enhancing tools integrated into existing software,” rather than in “transformative” applications, Cox and Pozdnyakova said. For example, Microsoft’s MSFT, +1.22% 365 Copilot chatbot, which began rolling out for large-enterprise customers in November, offers AI assistance with analyzing, charting and editing Office 365 documents and with catching up on meetings and messages.

Microsoft’s Copilot for Sales and Copilot for Service offerings are set to debut early this year, according to the company. Meanwhile, Alphabet GOOGL, +2.02% GOOG, +2.06% is rolling out its own version of task-enhancing tools integrated into existing software — Duet AI for Google Workspace Enterprise. 

“Implementation will take time but it is likely eventually to be very widely deployed and ingrained in workflows,” said Deutsche Bank analysts. “Expect an ‘s-curve trajectory’ rather than a rocket straight up to the moon.”

That is because AI will also collide with the ballot box for the first time since the launch of ChatGPT, which means democracy is about to meet the most disruptive force since at least the rise of social media, said Cox and Pozdnyakova. That would raise tons of questions about the threat of disinformation in this unprecedented year of elections around the world, wrote analysts.

While social media enables the mass distribution of information, generative AI enables the mass generation of content by anyone with a laptop. However, the world may be unprepared for the potential avalanche of personalized advertising, targeted disinformation and ultra-realistic deep fakes, not to mention the more general dilution of accurate information, the analysts said. 

“Regulation [on generative AI], or its absence, at this pivotal moment will have a permanent legacy,” they wrote.

U.S. stocks were trading lower on Tuesday after the yield on the 10-year Treasury BX:TMUBMUSD10Y rose 12 basis points to 4.069%, after Federal Reserve Governor Christopher Waller said the central bank is likely to be able to cut interest rates this year but added that there is no need for the policy to be rushed. The S&P 500 SPX was off 0.6%, while the Dow Jones Industrial Average DJIA was down 0.9% and the Nasdaq Composite COMP was slumping 0.5%, according to FactSet data.