Opportunities on the Horizon: Investing Through a Slowing Economy

Thematic Updates | WEALTH OUTLOOK 2023 | MID-YEAR EDITION | 59 Potential opportunities and risks PwC estimates that AI could contribute up to $15.7 trillion to the global economy by 2030. 2 A large chunk of this is estimated to come from productivity gains ($6.6 trillion). Examples include AI helping educators grade exams, software developers to write or debug code, job seekers to write resumes, or online content providers to sell and advertise products and services. Generative AI will be a key building block for many other future technologies. Generative AI is disruptive too, capable of driving enormous productivity gains and incremental economic growth in the years ahead. Winners and losers will emerge from across all sectors of the economy. And that includes a huge impact on workers. In his congressional testimony in May, Sam Altman, the CEO of OpenAI, the company that created ChatGPT, suggested the rapid regulation of generative AI — remarkable given that few tech CEOs seek regulatory oversight. He suggested the formation of a new government agency charged with licensing large AI models and empowering it to revoke that license for companies whose models don’t comply with government standards. He also proposed safety standards for AI models, independent audits by experts and evaluating and extinguishing dangerous capabilities like acting independently. 3 2 PwC’s Global Artificial Intelligence Study, 2017. 3 Oversight of A.I.: Rules for Artificial ... | United States Senate Committee on the Judiciary, 2023 Indeed, regulation, patents, copyright and data privacy concerns are key risks to watch. Intellectual property is another major issue. Copyright laws vary worldwide, but if someone uses generative AI to write a paper, will the sources of the information be correctly attributed? Another concern is generative AI creating false and even dangerous conclusions, drawing from inaccurate data. People do this too, but generative AI can create and spread false information faster. The technology’s code-writing ability arms cyber criminals with an easier way to write malicious code or create new phishing scams. Then there are social implications, especially when it becomes difficult to discern between human and machine interactions. As this revolutionary technology rolls out, these issues will require humans to create policies, practices, checks and balances. As the technology develops, there will be winners and losers across industries. In the race to establish dominance in AI, larger, well- established companies have more to lose when rolling out generative AI because of reputation risk. Rushing out products or services that are misleading or low quality would be a hit to their reputations. But the benefits will be bountiful for those who get it right and can use AI to support their businesses. There will be billions spent on learning, introducing, embedding and assessing the impacts of generative AI. FIGURE 2 : Valuations and EPS Growth Rates for AI, Robotics and Technology Shares 17.0 14.1 12.5 11.4 15 17 19 21 23 25 27 29 31 0 2 4 6 8 10 12 14 16 18 AI Robotics S&P 500 Technology S&P 500 Forward P/E Annualized Growth (%) 3-5 year expected EPS growth Forward P/E Ratio (Right) Source: Factset as of April 18, 2023. Indices corresponding to each column AI: Indxx Artificial Intelligence and Big Data Index; Robotics: ROBOGlobal Robotics and Automation Index. The indices are unmanaged. An investor cannot invest directly in an index. They are shown for illustrative purposes only and do not represent the performance of any specific investment. Index returns do not include any expenses, fees or sales charges, which would lower performance. Past performance is no guarantee of future results. Real returns may vary.