After Huge Investments, Companies Need to Make Bank on Generative AI

(Yahoo!Finance) - If 2023 was the year companies poured money into generative AI, 2024 is the year they’re hoping those investments start to pay off. From Microsoft (MSFT) and Google (GOOGGOOGL) to Samsung and even Volkswagen and Mercedes, businesses are quickly monetizing their generative AI offerings as interest in the technology among consumers and enterprise customers remains red hot.

“We expect 2024 to be a year of increased promotion and initial adoption and 2025-27 to be when the markets may take off from further applications to take advantage of the features as many key elements come together,” analysts with UBS’s Global Research and Evidence Lab wrote in an investor note on Monday.

On Wednesday, Samsung debuted its line of Galaxy S24 smartphones complete with the company’s Galaxy AI package of generative AI capabilities including live translation and photo editing features. On Monday, Microsoft announced that it will begin selling subscriptions for a consumer version of its Copilot AI assistant for $20 per month per user.

The tech giant also said it is opening up the enterprise version of its Copilot for Microsoft 365 to small and medium businesses. It previously only sold the service to businesses with more than 300 employees.

Intel (INTC), Nvidia (NVDA), AMD (AMD), and Qualcomm (QCOM) are selling chips with their own neural processing units for AI apps; PC makers are joining the fray by marketing their laptops and desktops as AI ready; and at CES 2024 Volkswagen said it’s bringing ChatGPT to its in-car voice assistant by the middle of the year.

Now companies just need buy-in from consumers.

“Is there a killer app? Is there a demonstrable application or change that will then make people pay essentially more? I think that is something [companies] will struggle with,” Gartner analyst Ranjit Atwal told Yahoo Finance.

But that’s not stopping businesses from taking a chance on what could be the next great technological leap.

Time to put up

If you followed the developments at CES 2024 earlier this month, you know that seemingly every tech-adjacent company on earth is using AI as a means of marketing their products.

Now it’s up to the companies that are making real AI products to deliver on the promise that the technology will truly change our lives for the better.

The problem for companies, Atwal says, is that generative AI products offer consumers cumulative benefits rather than a single mind-blowing app that’s easy to sell people on.

“It's a combination of elements that … will make the device easier to use. It will make you more productive. So everything becomes kind of cumulative,” he said. “Cumulative is very, very difficult to monetize.”

While selling the average consumer on generative AI products may prove tough, enterprise customers are already on board.

According to Microsoft VP and consumer chief marketing officer Yusuf Mehdi, 77% of people in enterprises who have used the company’s Copilot business software say they would never want to give it up. Microsoft’s Copilot for Microsoft 365 currently costs $30 per user per month, the same price as Google’s own enterprise offering, Duet AI for Workspace Enterprise.

Microsoft’s Copilot Pro will test consumers’ appetite for paid generative AI services. So will the so-called AI PC, the PC industry’s marketing designation for laptops and desktops outfitted with neural processing units designed to power AI applications.

So far, chipmakers like Intel say neural processors will benefit the average consumer by running generative AI apps on their personal devices rather than in the cloud, helping to improve overall privacy and security.

But beyond that, they say we’ll have to wait to see what kind of apps developers cook up before we'll know what AI PCs are truly capable of.

According to UBS’s Global Research and Evidence Lab, though, it’s just a matter of time before consumers get on board.

“We think the motivations, use cases and technology enablers for [generative AI] on edge devices are aligning for initial highend adoption in 2024 and mainstream penetration from 2025-27,” UBS analysts wrote in a research document.

“This has the potential to stimulate positive mix changes [spending on higher priced products] (driving requirements for more processing, storage and upgraded peripherals), and could also pull in replacement cycles as new devices offer increased usefulness, enabling content creation, productivity, and personalization.”

It’s now up to tech companies to keep customers interested in the benefits of generative AI if they hope to make anything back on their investments.

By Daniel Howley | Technology Editor

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