ChatGPT, an AI-based chatbot from OpenAI, has gone viral. Based on the company's GPT-3.5 large language model, ChatGPT is capable of some impressive feats. It's not always right, but this technology has incredible potential.
I asked ChatGPT the following question about International Business Machines (IBM 0.58%): "In two sentences, explain why IBM could be a winner in the AI market." Here's its response:
IBM has a long history in the field of AI and has developed a strong portfolio of AI products and services. The company also has a large and diversified customer base, which could provide it with a competitive advantage in the AI market.
IBM, in fact, was a pioneer in the field of using computers to understand natural language. Way back in 2011, IBM's Watson computer won Jeopardy! against former champions. This achievement came more than a decade after IBM's 1997 victory over the world chess champion using its Deep Blue computer.
The advances in AI that underpin ChatGPT are going to unlock new business models and mint new billion-dollar companies. Tech giant Microsoft, already an investor in OpenAI, extended its partnership with a multiyear, multibillion-dollar investment earlier this month. Microsoft views AI as the next great computing platform, and it's spending heavily to make sure it emerges as a leader.
NYSE: IBM
Key Data Points
Using AI to boost productivity
IBM predicts that AI has the potential to add around $16 trillion to the global economy by 2030. The company's focus is helping its large base of enterprise customers use AI to improve productivity, boost efficiency, and lower costs.
As global economies appear headed for recessions, that pitch should resonate with IBM's customer base. While IBM does a wide variety of things with AI technology, enterprise automation is the star of the show.
IBM's automation solutions, part of its software segment, grew revenue by 9% year over year at constant currency in the fourth quarter. Revenue from data and AI solutions, which focuses more on analytics, customer care, and supply chain management, grew sales by 8%.
IBM CEO Arvind Krishna gave a few examples of how IBM clients are currently using its AI capabilities during the fourth-quarter earnings call. For example, a quick-service restaurant chain is using IBM's AI to partially automate drive-thrus and order taking; a customer is using AI to increase the rate that calls into its call centers are handled without requiring human intervention; and another customer is using an AI-powered chatbot to help retirees with their pensions.
The large, diversified customer base that ChatGPT mentioned will come in handy as IBM works to grow its AI business. The company has long-standing relationships with the largest companies as well as many governments. One example: 90% of the world's 50 largest banks use IBM's mainframe systems. When an IBM client is looking to find ways to improve productivity with AI, IBM is going to be the obvious choice.
The sleeper in the AI market
IBM's work on AI to improve clients' productivity won't get the same attention that ChatGPT is getting. However, the company is in a good position to be one of the driving forces behind large enterprises adopting AI technology to automate workflows, improve productivity, and reduce costs.
The ability to save your customers money is especially important in tough economic times. Big companies are putting a renewed focus on keeping costs in check, and layoffs are starting to pile up. New tech projects aren't going to be all that appealing, except when they promise to lower costs. IBM will still feel some pain from a recession, just like nearly every other company, but its focus on helping its clients knock down costs should play well with its customer base.
