ChatGPT is only the tip of the iceberg. And the iceberg is massive.
That's the view of McKinsey & Company. The influential consulting firm recently released a report titled "The Economic Potential of Generative AI." McKinsey estimates that generative artificial intelligence (AI) could add a whopping $4.4 trillion to the global economy.
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Examining AI's economic impact
To be clear, that $4.4 trillion figure is at the upper end of McKinsey's projected range for the value that generative AI could add. The lower end of the range is $2.6 trillion. But even that amount is almost as big as France's gross domestic product and larger than the GDPs of all but six countries.
However, McKinsey still thinks it could be too conservative. The firm said in its report that its estimate "would roughly double" if generative AI is embedded in software for tasks beyond the scope of its analysis.
Roughly three-quarters of the economic impact of generative AI will be felt in four areas:
- Customer operations
- Sales and marketing
- Software engineering
- Research and development (R&D)
McKinsey expects that AI will significantly impact every industry. The most heavily affected industries, though, will likely be banking, life sciences, and high tech.
How quickly?
Don't look for generative AI to transform the global economy overnight. However, McKinsey doesn't think it will take as long as it previously did.
The consulting company's older model projected that 50% of time spent on work activities would be automated between 2035 and 2070 with a midpoint scenario in 2053. Now, though, McKinsey believes that the timeline will be accelerated by nearly a decade.
It's possible that's not optimistic enough. In McKinsey's early scenario, 50% of work could be performed by AI by 2030 with almost all work automated within the next 40 years.
Unsurprisingly, the firm projects that generative AI adoption will probably be faster in countries with developed economies. McKinsey thinks that other countries with lower wages, such as China, India, and Mexico, will implement the new technology more slowly.
Potential winners
Unlike some predicting the impact of AI, McKinsey didn't attempt to forecast how many jobs could be lost from the adoption of generative AI. Instead, the company's report stated, "Generative AI can substantially increase labor productivity across the economy, but that will require investments to support workers as they shift work activities or change jobs."
On the other hand, McKinsey pointed out several potential winners from the AI boom without identifying specific companies. For example, software engineering productivity could improve by 20% to 45%. This could boost the profitability of technology consultants such as Accenture (ACN -0.32%).
Generative AI could add between $200 billion and $340 billion in value to the banking industry, according to McKinsey's estimates. The technology could help banks reduce their operational costs, increase customer satisfaction, lower risk, and more. Aggressive technological innovators such as Bank of America (BAC -0.21%) could especially benefit.
McKinsey also thinks generative AI will make a huge impact on biopharmaceutical and medical device companies. In particular, the consulting firm expects that the drug discovery process could be streamlined. That could be particularly helpful to big drugmakers with deep pipelines such as Pfizer (PFE 0.55%).
McKinsey's report focused on the beneficiaries of generative AI adoption. However, the companies developing the platforms and chips powering the AI explosion should profit tremendously as well. If the predictions in the report are anywhere close to accurate, high-flying AI stocks such as Alphabet (GOOG 9.96%) (GOOGL 10.22%), Microsoft (MSFT 1.82%), and Nvidia (NVDA 6.18%) could have a lot of room to run over the long term.
