Speed trap: Why firms jumping blindly on the AI bandwagon may hit a wall

Seduced by the hype, many enterprises have deployed AI prematurely and got it wrong.

- Vikram Khanna

There's a startling disconnect in the world of artificial intelligence (AI). Tech giants such as Amazon, Google, Meta and Microsoft have invested more than US$300 billion (S$385 billion) over the last two years on building the infrastructure to power AI, such as high-end chips, data centres, cooling systems and fibre networks. For this, they, together with chip designers such as Nvidia and AMD, have been handsomely rewarded by investors.

Amid this frenzy, companies have spent more than US$30 billion on enterprise systems that offer generative AI. But a recent MIT study has found that 95 per cent of these end users have earned zero return on their investments. There are lots of pilot projects but most are not leading to deployments.

Despite being all the rage in boardrooms across the world, AI is not delivering the value for which it is being hyped. Even some of the pioneers of AI applications now acknowledge that there is much irrational exuberance. OpenAI co-founder Sam Altman, for instance, said AI is in a bubble and some people will lose "a phenomenal amount of money", although he's still bullish long term.

ELUSIVE PRODUCTIVITY GAINS
Productivity gains from AI, which were supposed to be one of its biggest benefits, have also not yet materialised. There is a parallel here with the introduction of personal computing in the early 1980s. The Nobel Prize-winning economist Robert Solow famously said in 1987: "I see the computer age everywhere except in the productivity statistics." It was not until the mid-1990s that productivity showed any significant improvement.