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Article17 Jul 2023

The Mighty Transformational Power of Generative AI

A recent report from Citi Research’s Amit Harchandani lays out how the team views generative AI and it’s potential to drive profound transformation across a range of industries.

Generative AI holds tremendous potential to transform work across industries and boost overall productivity.

In fact, Citi research analysts take the view that Generative AI can not only bring the power of AI itself to the masses but accelerate the very democratization of innovation.

As such, it’s a game changer, they say.

ChatGPT has become the fastest growing consumer application in history (Time to reach 100 million users worldwide)


© 2023 Citigroup Inc. No redistribution without Citigroup’s written permission

Source: Citi Research, SimilarWeb, OpenAI


Generative AI potentially represents the latest inflection point in the evolution of AI

© 2023 Citigroup Inc. No redistribution without Citigroup’s written permission

Source: Citi Research, IDC

Its impact will be far reaching, the report says. 

  • Public markets: The reverberations have already been felt across public markets–from Alphabet shares slumping in February to Nvidia shares surging.
  • Private markets: Equity funding going to Generative AI firms rose more than 70% YoY in 2022, according to data from CB Insights. The research firm notes that three of the top 5 largest funding rounds in the March quarter this year went to generative AI companies.
  • Public policy: Policy makers are trying to keep step. For example Italian regulators banned ChatGPT for almost a month earlier this year while the EU parliament passed the AI act with a big majority.
  • Cybersecurity: Generative AI could be a force multiplier for cyber vendors as it amplifies the ability of the masses (i.e., less sophisticated IT and security professionals) to assess threats in a timely manner as complex security situations are now simplified. Generative AI, the analysts say, could solve for the talent shortage (estimated ~3.5M positions that need to be filled globally) that the security industry currently faces.


Generative AI Technology Value Stack

© 2023 Citigroup Inc. No redistribution without Citigroup’s written permission.

Source: Citi Research

Artificial intelligence (AI) describes algorithms (such as ChatGPT) that can be used to create new content, including audio, code, images, text, simulations, and videos. It builds on exponential increases in the size and capabilities of deep learning models, made possible thanks to high-performance computing (HPC) power and richer datasets. Further, we see Google’s innovations in Transformers and diffusion models now serve as the foundational basis for LLMs and Generative AI.

According to a recent Accenture analysis based on US jobs data, nearly 40% of working hours across industries can be impacted by Large Language Models (LLMs). Based on the same analysis, Accenture also notes that in 5 out of 22 occupation groups, Generative AI can affect more than half of all hours worked.

Generative AI will transform work across industries

© 2023 Citigroup Inc. No redistribution without Citigroup’s written permission.

Source: Citi Research, Accenture

The redeployment of worker time (gained via automation and/or augmentation using Generative AI) into other activities could meaningfully boost overall productivity for years to come.

According to a recent McKinsey analysis, Generative AI could add labour productivity growth of 0.1 to 0.6 percent annually through 2040. That’s trillions of additional dollars to the global economy

The report points out that consumers have not only enthusiastically embraced Generative AI, but also have high trust-levels for Generative AI-based interactions - recent studies also support this view.

  • Generative AI acceptance and trust: As noted earlier, the fact that ChatGPT has become the fastest growing consumer application in history illustrates that consumers have enthusiastically embraced Generative AI. However, we believe they also have high trust-levels for Generative AI-based interactions – multiple recent studies support our view and below we share findings from one such study carried out by Capgemini based on a sample of ~8600 respondents across multiple countries that suggests that ~73% of the respondents trust content written by Generative AI.
  • Generative AI: Assessing the risk/reward — The team also outlines in detail how to assess the risk/reward associated with Generative AI via a two-stage framework. In the first stage, they aim to identify companies that are “affected” vs. others that are not, as opposed to simply tagging them as “winners” and “losers”. In the next stage, they look to gauge those “affected” based on two principles explained in full in the full report.
  • Generative AI: Impact Across Supersectors — The team then leverages contributions from Citi’s supersectors to assess Generative AI’s adoption curve, as well as those where Generative AI poses a potentially material risk to business models.
  • Generative AI: Challenges & regulation — The key challenges in the team’s view include those centered around bias, inequality, authenticity, infringements as well as the more debated one underpinned by existential concerns. The emergence of Generative AI has unsurprisingly seen AI as a broader topic become a firm focus for policy makers around the world. However, the regulatory path taken so far has varied. Given the stakes involved, we do believe policy & governance evolution will play a defining role.
  • Generative AI: Top-down perspectives — Citi’s strategists observe that the current hype around AI is nothing in comparison to what they have seen in the previous equity bubbles. Meanwhile, Citi Research’s ESG team emphasizes that it is incredibly important to understand the potential limitations of Generative AI and utilize it with caution.

For more information on this subject, and if you are a Velocity subscriber, please see the full report, first published on July 10th here Global Equity - AI Unleashed: Generative AI Impact and Citi’s GAIN Baskets.

And for more on AI please see these recent items and more besides on the ICG website

What You Need to Know About AI Regulation

How Will Artificial Intelligence Change Education?

AI Is Coming to a Data Centre Near You

How AI is Turbocharging Sports Tech

AI Time: Artificial Intelligence is Driving Progress in Autonomous Vehicles  

Citi Global Insights (CGI) is Citi’s premier non-independent thought leadership curation. It is not investment research; however, it may contain thematic content previously expressed in an Independent Research report. For the full CGI disclosure, click here.



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