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Ask anyone in the investment world how important AI is to their business, and there's no better answer than what JPMorgan (JPM) CEO Jamie Dimon said on Monday. Very few people will give it to you.
“While we do not know the full effectiveness or exact speed at which AI will change our business, or what impact it will have on society as a whole, the results will be extraordinary and perhaps a major technological invention.” “I have full confidence that it will be as transformative as it has been in hundreds of years,” Dimon wrote in his annual letter to shareholders. “Think of the printing press, the steam engine, electricity, computing, the Internet, etc.”
Some analysts have referred to AI ushering in the “Fourth Industrial Revolution.” Dimon's comparison makes the same point more specifically.
For JPMorgan, this is great.
The benefits of this technology are helping the country's largest bank to cast a vast web of customers and business areas. Given the interconnectedness of the global financial system, you can be confident that the company is not alone.
But the AI trades that took investors by surprise in early 2023 didn't mean big companies suddenly realized they were, or would be, using AI applications en masse.
Rather, as Yahoo Finance's Dan Howley argued last year, the launch of OpenAI's ChatGPT has made the abstraction of enterprise-level data management technology tangible for consumers.
AI is no longer “just” helping engineers and developers sort through thousands of lines of code or hundreds of commands looking for problems, inefficiencies, and bugs.
Now, you or I can call up an interface and ask it to write a song about, say, a business journalist trying to write a newsletter on deadline about Jamie Dimon's opinions on AI.
By making AI tangible to consumers, Big Tech has been able to capitalize on the lucrative search business. And the business of search is display advertising.
When you combine the economics of the targeted digital advertising business with the investment cycles that have reshaped the income statements of companies like Nvidia (NVDA), it's hard to understand why the stock market has taken notice of this theme. there is no.
But once you move beyond this initial burst of excitement, the AI boom starts to look less like a revolution and more like the point of an executive order for the next few years.
AI is exciting as it brings about the “Fourth Industrial Revolution.” However, Marc Benioff used this framework in 2017. In the same year, Dimon himself also mentioned his AI for the first time.
“Since we first began using AI more than a decade ago and first mentioned it in our letter to shareholders in 2017, we have significantly grown our AI organization,” Dimon wrote. It added that it currently employs more than 2,000 employees specializing in this field.
“We have been actively leveraging predictive AI and ML. [machine learning] Over the years, and now, we have over 400 use cases in production across areas such as marketing, fraud and risk that are increasingly driving real business value across our businesses and functions.” Dimon added.
The technology is not vaporware for the consulting class, as the AI hype cycle has outpaced coverage. Rather, it means the opposite.
Investors care less about what's happening today and are more excited about the possibilities of tomorrow. To suggest any fissures in the AI trade is perhaps saying more about the benefits being realized today than about the perceived limits of the technology's potential.
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