Goldman Sachs Generative AI Podcast — Sep 2024
Goldman Sachs breaks down generative AI's impact across industries and identifies five traits of likely winners: large markets, quality data, platform agility, product evolution, and smart capital allocation. Apple's new AI features could drive iPhone upgrades. The firm warns of risks from deepfakes, copyright uncertainty, and job displacement, but sees opportunities in data infrastructure and AI platforms.
Chapters
All right, ready for a deep dive into generative AI?
Let's do it.
We're unpacking this Goldman Sachs report. Gen AI Catalyst or Culprit.
Yeah, it's dense, it's a beast.
But packed with insights about how generative AI could impact, well, everything.
I mean, they really go deep, like examining its influence on everything from software to health care to even energy infrastructure. It's wild.
And you know how I love a good disruptive tech story.
Right.
What really jumped out at me was how this isn't just about big tech.
Exactly, exactly. They're saying this is way bigger than just, you know, Google and Microsoft. They think it'll impact industries. Well, industries most people wouldn't think of right away.
Like what? Give me an example.
Okay, so think about financial services. Right? They're saying generative AI could totally change the game because it lets you analyze huge data sets. But here's the kicker.
Using just normal English, no more needing to be a coding whiz to find the data. You know?
That's what they're saying.
That's huge.
Yeah, it's like having a conversation with your data.
That's a great way to put it. Yeah, but there's gotta be a catch. What's the catch?
The catch is data quality. It's huge. Goldman Sachs is basically saying, look, forget just having an AI strategy. You need a killer data strategy first.
Okay, so data strategy, what does that actually mean for businesses?
It means clean your data.
Okay.
Get rid of all the redundancies, you know, and then you got to organize it so AI can actually use it.
It's like, what, Laying the groundwork. It's got to be ready to go.
It's like building a house. You need a strong foundation.
I like that. So if your data is a mess, even the most advanced AI is going to be useless.
Garbage in, garbage out, Right?
Exactly. Okay, so we've talked about the data part, but let's talk about jobs. Yeah, that's the question on everyone's mind. Is AI going to take everyone's jobs?
Right. Everyone's worried about that. Goldman Sachs actually suggests. Well, it's a cautiously optimistic outlook. Cautiously, Cautiously optimistic. They say it could boost productivity, maybe even lead to some new jobs being created.
So not the doomsday scenario everyone's predicting?
Not quite. They actually Compare it to ATMs, believe it or not.
ATM.
Yeah. Remember when ATMs first came out, everyone thought bank tellers would be out of a job, Right?
Right.
But the number of jobs actually went up because the role change, interest.
So More of a shift in the job market. Not mass unemployment.
That's what they're predicting. But they do say it highlights how important adaptability is.
You know, you gotta be able to roll with the punches.
Exactly. The winners, they're gonna be the ones who can adapt, learn new skills.
So what makes a winner in the age of AI?
Let me tell you. Goldman Sachs actually pinpointed five key characteristics.
Okay, Leona.
First, a large addressable market. Basically you need a broad reach.
Makes sense. Gotta put customers.
Yeah.
Okay, what else?
Second, and you probably saw this coming, hit me.
High quality data, garbage in, garbage outright.
You got it. Third, and this is interesting platform agility. Think of it like how quickly can they integrate with all these new AI technologies?
So you gotta be able to move with the times. I got it. What are the last two?
Okay. The fourth is product evolution. Are they using AI to make truly innovative products? And finally it comes down to are they smart with their money? Strategic capital allocation, how are they investing in AI?
So it's not enough to have a cool product. You got to be able to sell it, market it, bring it to the masses. It's like business savvy on top of everything else.
Exactly.
Okay, so let's talk about companies. Goldman Sachs points to Apple, a prime example. Now Apple, they always seem to be ahead. What makes them so special in the AI era?
Well, they've got this incredibly loyal customer base. They've built that by consistently designing amazing products. And they get it. They prioritize privacy. They know that trust equals revenue.
People will pay a premium if they trust you. Absolutely. So where does generative AI fit into Apple's plan?
So at their latest wwdc, remember they announced. Drumroll please. Apple Intelligence.
Apple Intelligence, okay.
It's this whole suite of AI powered features all integrated across their products.
Like what? What kinds of features?
Well, for one, Siri is getting a major upgrade. I'm talking deeper language, understanding, text based communication. It's going to be way more personalized responding based on your habits and stuff.
So basically Siri is becoming a real personal assistant, not just a voice you shout at.
Exactly. And it's not just Siri Think AI writing tools that can rewrite your stuff. Summarize te. And this is cool new animojis and some insane AI powered image editing tools.
It sounds like this Apple Intelligence thing is going to be everywhere on our devices.
That's the idea.
What does Goldman Sachs think about all this?
They think all these new features are going to push people to upgrade their iPhones, especially towards those Higher end models.
They're even thinking we might see a price increase because of it. Bold move, Apple.
Right.
Especially with how the economy is looking. Okay, so we talked about Apple the innovator, but Goldman Sachs also highlights Dell as a company that's surprisingly well positioned for the AI age. And Dell's not exactly, you know, the first company you think of when you think cutting edge tech, right?
Not the flashiest, but that's what's so interesting. Dell's strength is in their diversification. They're not just a hardware company anymore, they're huge in software and services now too.
Right. They've been quietly building up their empire. Yeah, but how does that help them win in the AI game?
Think about what AI needs, right? Massive infrastructure, right?
All those data centers, businesses are going.
To need crazy powerful servers, tons of storage, and guess what?
Dell's got that in spades.
Dell is a leader in both. So while everyone's out there digging for gold, Dell's the one selling the picks and shovels.
Smart. So they're betting on the AI boom even if they're not the ones on the front lines.
Exactly. Goldman Sachs sees their diversified portfolio, their history of innovation as a real advantage.
It's interesting to see how different companies are approaching this. But let's be real, not all of this is good. There are some potential downsides to AI too, right?
Oh, absolutely. Generative AI, as cool as it is, isn't all sunshine and rainbows. There are definitely risks.
So what are the storm clouds on the horizon? What's Goldman Sachs worried about?
Well, one of their biggest concerns is misuse.
Misuse? Like how?
Think about it. Generative AI can create incredibly realistic fake stuff. And I mean really realistic.
We've already seen the tip of the iceberg with those deep fakes, right?
Exactly. And this could have huge consequences. Like imagine what it could do to political campaigns, financial markets, all sorts of stuff.
It's like, how do you even know it's real anymore?
Exactly. And on top of that, they're worried about job displacement.
Okay, back to the jobs question.
Even though they're, you know, cautiously optimistic long term, they know AI is going to automate some jobs out of existence.
Which is where I'm guessing their emphasis on retraining and social safety nets comes in.
You got it. They're saying, governments, businesses, we got to get ahead of this. We need to equip people with the skills they'll need in an AI powered world.
We can't just leave people behind.
Exactly. We got to be proactive.
So it's not even just about teaching people how to code. It's about those uniquely human skills, the critical thinking, the creativity.
All that stuff I can't do. No matter how advanced AI gets, it's not going to replicate that.
It's about evolving alongside the technology, not being replaced by it.
Well said.
Okay, so we've talked about misuse, job displacement. What else are the Goldman Sachs folks worried about?
Well, they also go a little deeper into the technical side.
Okay. Get into the weeds a bit.
They talk about the generative AI tech stack. Have you heard that term?
I'm not going to lie, I'm more of a big picture person. But break it down for me.
Okay, so they basically break it down into three layers. The bottom layer, that's your infrastructure, the foundation. Exactly. The actual hardware and software needed to train and run these massive AI models.
So we're talking data centers, processing power, all of that. Yeah.
That's where companies like Nvidia come in. They make those GPUs that are essential for all this. They're already cleaning up, by the way.
Right place, right time.
Exactly.
So we've got the foundation, that infrastructure layer. What's the next layer up in this AI tech stack?
Okay, so the next layer, that's all about platforms.
Platforms, okay.
Yeah. Think of them as like the bridge between, you know, all that raw computing power.
We were just Talking about the GPUs and all that.
Exactly. And the applications, the stuff we actually use. So these platforms, they give developers the tools and services to actually build AI powered applications.
So it's like what, giving developers a head start?
Exactly, exactly. Instead of starting from scratch, they can use these platforms to build things faster.
Makes sense. Work smarter, not harder.
Right. And there are some big players already. Like you've got Databricks, Snowflake, C3, AI.
It's interesting to see how quickly this whole ecosystem is developing. But let's shift gears a bit. Goldman Sachs also dives into how generative AI could impact intellectual property. Especially like in creative fields. Things get a little murky there.
Oh yeah, for sure. It's a huge can of worms.
Yeah.
Think about it, right? AI is generating art, music, even writing. And it's good, getting better all the time. Yeah, but copyright law, it's from a different era.
Didn't see this coming.
Not at all.
Yeah.
So it's like who owns the copyright to something created by AI? Is it the developer who made the AI, the user who told it what to do is a public domain.
Yeah. Who gets the credit?
Exactly. Some people say it should be public domain. Like it's not really creative because a human didn't make it. Others say, no, the developers or the users should own it. It's a debate that's just heating up.
Yeah. It sounds like we're going to need a whole new set of rules for this stuff.
We probably will. And it goes even beyond copyright. Like, how do you even prove if something's authentic anymore?
Right. Is it real, Is it fake?
How can you be sure something was made by a human and not by AI?
It's kind of scary when you think about it. Okay, so we've talked about the legal side, the intellectual property stuff.
Yeah.
What about the economic implications of all this? Goldman Sachs gets into that too, right?
Oh, absolutely. They paint a pretty well nuanced picture, I would say. On the one hand, they say generative AI has this massive potential to boost productivity across basically every industry.
Because it can automate so much.
Exactly. Imagine AI doing all the boring stuff, all the repetitive tasks, freeing up humans to focus on, you know, more creative work, more complex problems.
So it's like AI takes care of the grunt work, lets humans do what humans do best.
That's the idea. And that could mean lower costs, faster.
Innovation, which could lead to a massive economic boom, Right?
That's what they're saying. But of course, it's not quite that simple.
There's always a catch.
Right. The flip side of increased productivity is. Is job displacement.
Right? Back to square one.
Yeah. And Goldman Sachs, even though they think I will create more jobs overall, they know some people are going to be.
Left behind, which is why they're pushing so hard for retraining those social safety nets.
Exactly. We have to support the people who might get caught in the crosshairs of this shift.
It's got to be about lifting everyone up, not just the people who are already ahead. Okay, so that's the potential upside, the channel downside. What else do they say about the economic side?
Well, they also talk about global trade, like who's going to come out on top in this new AI powered world.
Right. Because this tech isn't being developed equally everywhere.
Exactly. And they say the countries and companies that figure out how to use generative AI effectively, they're going to have a huge advantage.
It's like a new arms race, but with AI instead of weapons.
That's a good way to put it. And it's why, you know, international collaboration, ethical frameworks, that stuff is so important.
So we don't end up in a Terminator scenario.
Exactly. We want to use AI for good. Not to make existing inequalities even worse.
I've got to be smart about this. It's not just about the tech, it's about how we use it 100%. Okay, so zooming in a bit. How is all of this impacting how businesses actually operate on a day to day? Like, are they adapting?
Oh, they're scrambling. Goldman Sachs argues that generative AI, it's going to fundamentally change everything. How companies operate, how they compete, even what it means to generate value.
Okay, so it's a whole new ballgame.
Totally. And to illustrate, they look at retail.
Retail.
Okay, think about it. AI chatbots. They're already being used for customer service.
Product recommendations, even stuff like managing inventory.
Right. And that's just the start. As generative AI gets better, it's only.
A matter of time.
We're going to see even more personalized interactive shopping experiences.
Like what? Give me an example.
Okay, imagine a virtual shopping assistant that knows exactly what you want before you even do. Or an AI stylist that gives you fashion advice.
Or how about this? AI generated product descriptions that are tailored just for you.
Exactly, exactly. It's all about personalization.
So basically AI could become your personal shopper. That's pretty wild. But retail is just one slice of the pie, right?
Right.
What about other industries? How are they being impacted?
Generative AI is going to shake things up everywhere. Transportation, Manufact, energy. Pick an industry.
Okay, okay, I get it's a big deal. Let's take them one by one. Transportation, what are we talking about? Self driving cars.
That's a big one. Of course. But it goes beyond that. Imagine AI optimizing logistics, delivery routes.
So fewer trucks just sitting in traffic.
Exactly. Safer roads, faster deliveries, all that good stuff.
Okay, that's transportation. What about manufacturing? How is AI going to disrupt that?
Well, they're already using it to design new products, but also to make production more efficient. Even predict when equipment's going to fail before it actually happens.
Like predictive maintenance on steroids.
Exactly. It's all about doing more with less. Being more sustainable.
Makes sense. Okay, last but not least, energy. How is AI going to change the energy game?
Big time. Think about AI optimizing energy consumption. Right. Or even helping us develop new sources of renewable energy.
Finding that magic solution to our energy needs.
That's the dream. And, and then there's things like imagine AI predicting power outages, you know, preventing them before they even happen.
It would be amazing. No more blackouts in the middle of summer.
Exactly. So yeah, energy is another industry where AI could be huge.
It's really incredible to see how generative AI is poised to touch every part of our lives. It's like, what haven't we talked about yet? Are there any other key takeaways from the Goldman Sachs report that we should touch on?
You know, one thing they emphasize, and I think it's easy to forget this, is that we're just getting started.
This is still early days for AI.
Yeah, we're in the very early stages of this generative AI revolution.
So everything we've talked about is just.
A preview, barely even the true potential of this technology. It's still unfolding in the next few years. We're going to see applications we haven't even imagined yet.
It's kind of exciting, but also a little overwhelming. You know, like, it's hard to even wrap your head around it.
Oh, I know what you mean. It's a lot to take in. But, you know, I'm optimistic if we approach this thoughtfully, if we're careful, we can use AI for good.
We can't just blindly rush into this.
Exactly. This technology has so much potential, but it's on us to make sure we use it wisely.
Okay, so we've talked about the big picture, the potential benefits, the risks. But let's get down to brass tacks. What does all this mean for investors? Where's the smart money going in the age of AI?
That's the million dollar question. Right. And it's a really exciting time to be paying attention. This isn't just a tech revolution. It's a massive investment opportunity.
So where do we even start?
Well, Goldman Sachs highlights a few key areas. First up, data infrastructure. We've talked about how data hungry these AI models are. They need massive amounts of data to.
Learn, which means they need the hardware, the software, the whole shebang.
Exactly. And the companies that provide that infrastructure, they're in a great spot. Think Nvidia. They make those GPUs the brains of the operation.
Those are essential.
Absolutely. And then you've got the cloud computing giants, Amazon Web Services, Microsoft Azure, Google Cloud platform.
The picks and shovels of the AI gold rush. Right?
Exactly.
Okay, so that's infrastructure. What else are the Goldman Sachs folks watching?
They're also big on AI platforms. That middle layer we talked about, the one that connects the raw computing power to the applications we use every day.
Right. They make it easier for developers to actually build the AI tools.
Precisely. And that's key because this whole market is moving so fast. Companies like Databricks, Snowflake, C3, AI they're making AI development more efficient, more accessible.
So those are good bets, you're saying?
Potentially, yeah. But it's not just about the platforms. What about the companies actually creating those AI applications? The stuff we'll be using.
Right. That's the really exciting part.
Exactly. We talked about Microsoft's copilot, Adoraby's Firefly, but it's not just the big guys. Goldman Sachs also sees a lot of potential in smaller AI startups.
More niche, focused on specific problems.
Exactly. Think AI for drug discovery, for marketing, even AI powered robots for manufacturing and logistics.
It's amazing to think how much innovation is happening right now.
It's really incredible.
But it can't all be smooth sailing.
Yeah.
There's going to be some bumps in the road, right? Yeah. Investing in AI, that's not for the faint of heart.
You're not wrong. Investors need to be smart about this. Not all AI companies are created equal. And this market, it's still young. It's going to be volatile.
So what's your advice for people who want to dip their toes in the AI waters? What should they be thinking about?
Do your research. Don't just chase the hype. Look for companies that have a real edge, whether it's their technology, their team, the market they're in. Are they solving real problems? Do they have a solid plan? Those are questions you got to ask.
Don't put all your eggs in one basket either.
Exactly. Diversification is key. Be prepared for some ups and downs. This is going to be a wild ride.
The wild west to the tech world. I like it. So, as we wrap up this deep dive, I'm curious, what are your final thoughts on generative AI? What does the future hold? Give it to me straight.
I'm going to be honest. We're just scratching the surface. What we're seeing now is just a glimpse of what's to come. In the next few years, AI is going to be everywhere. It's going to change how we work, how we learn, how we create, even how we interact with the world around us. It's going to be huge.
It's kind of mind blowing when you really think about it.
It is. But honestly, I'm optimistic. If we approach this thoughtfully, ethically, we can use AI to solve some of our biggest problems. It has the potential to really make.
A positive impact, a future worth fighting for. And for our listeners, remember what we keep coming back to. Data is the key to all of this. If you can understand it, organize it, leverage it, you're going to be ahead of the game. So start thinking about your data strategy now. It's never too early. This has been the deep dive. Thanks for joining us.
