'We're only in 1996': The AI boom is still in its earliest days, according to Bank of America
Bank of America believes the artificial intelligence boom is still in its infancy, comparing it to the internet's early days in the 1990s. While some skepticism has emerged after a surge of investor interest, the bank sees AI as following a similar path to that of the internet, where early doubts eventually gave way to revolutionary changes across industries.
"Skeptics claim that the revenue potential of generative AI doesn't yet justify the heavy investments in AI infrastructure," the report notes. However, Bank of America emphasizes that, like the internet, AI's full impact will come from the vast array of use cases that haven't yet been fully realized. The real significance of the internet lay not in its initial applications but in the many industries and companies it later transformed.
The report, based on surveys of analysts and strategists across more than 3,000 companies, identifies AI as the third major technological cycle in the past half-century. The previous waves—personal computing in 1981 and the internet in 1994—took decades to fully mature. However, AI's influence is expected to arrive much faster, potentially reshaping industries and economies globally within the next five to ten years.
"Generative AI could trigger a technological evolution that impacts every sector, transforming the global economy over the next five to ten years," the report states.
To provide perspective, Bank of America compares today's AI development to the internet's status in 1996, suggesting we are still at the very beginning of what could be a trillion-dollar market in AI capital expenditure over the coming years. Investments in firms like OpenAI, Anthropic, and Inflection AI are seen as necessary steps toward developing generative AI applications, most of which are still in their early stages.
Bank of America’s strategists predict that AI will drive significant margin growth across industries, with the semiconductor and software sectors expected to benefit the most, seeing margin increases of 4.8% and 5.2% over the next five years, respectively.
However, amid the growing enthusiasm, some skepticism remains. On Tuesday, Mike Wilson, Morgan Stanley’s chief US equity strategist, commented that the AI investment wave has been "overcooked," suggesting investors might consider shifting towards more defensive stocks in the meantime.
Just as Canada saw a digital revolution during the rise of the internet in the late '90s and early 2000s, the AI era could lead to profound transformations across industries—from resource management to healthcare. While it may take time for the most impactful applications to emerge, the long-term potential remains vast.