Productivity Gains From AI To Boost Economic Growth in 2024 and Beyond

2023 was an important year for artificial intelligence (AI), with McKinsey calling it a “breakout year" as some of the biggest tech companies in the U.S. rolled out new AI products and services. Yet, experts suggest we could still be in the early stages of the AI boom, anticipating an AI-fueled productivity surge could boost economic growth in 2024 and beyond.

The Year of AI

In 2023, some of the biggest tech heavyweights in the U.S. by market capitalization, including Microsoft (MSFT), Alphabet (GOOGL),  Meta (META),  Amazon (AMZN), and Nvidia (NVDA), rolled out new AI products and services.

Boosted by investor enthusiasm about their AI efforts, shares of all five companies were up 50% or more for 2023 going into the final two weeks of the year, with Nvidia and Meta leading the pack, with year-to-date gains of 250% and 176%, respectively, through the close of trading on Dec. 18.

Microsoft-backed OpenAI also released updated versions of ChatGPT this year following its launch in November 2022, offering significant improvements to the popular generative AI (GenAI) tool. CEO Sam Altman reported in November that there were over 100 million active weekly ChatGPT users and that more than 90% of Fortune 500 companies are building on OpenAI's products. 

As AI evolves, more workers and companies are integrating it into their workflows, surveys show. More than half (56%) of U.S. workers said they use GenAI at work, and 42% of chief financial officers (CFOs) reported that their companies are exploring ways to use the tech. Consultants have even warned that companies waiting to adopt AI risk being left behind by competitors.

AI quickly became one of the hottest investment themes of the year, with mentions of AI surging to record highs in earnings calls and views of the term on Investopedia's website soaring. Still, experts anticipate some of the biggest gains from AI could be yet to come.

GenAI to Bolster Growth, Economists Project

Goldman Sachs economists recently raised their global ten-year Gross Domestic Product (GDP) forecast due to the economic gains anticipated from AI integration, saying that their "expectation is that generative AI will have a measurable macroeconomic impact."

The economists said they "expect the impacts on productivity to be meaningful,” estimating that AI could contribute to an increase of 1.5 percentage points in annual U.S. productivity growth if widespread adoption were achieved over the next decade. 

Separately, McKinsey researchers reported that “generative AI’s impact on productivity could add trillions of dollars in value to the global economy,” estimating that genAI could add the equivalent of $2.6 trillion to $4.4 trillion annually. 

“Generative AI could enable labor productivity growth of 0.1 to 0.6 percent annually through 2040, depending on the rate of technology adoption and redeployment of worker time into other activities. Combining generative AI with all other technologies, work automation could add 0.2 to 3.3 percentage points annually to productivity growth," McKinsey projected.

GenAI “could ultimately automate roughly 25% of work tasks” in major developed markets like the U.S., Goldman economists estimated, anticipating that greater automation will "drive labor cost savings and free up workers’ time, some of which will likely be allocated to new tasks.” 

2024 Could Be 'Very Important' Year for AI

As AI rapidly evolves, it may be difficult to anticipate the technology's future capabilities and impacts, but Haim Israel, head of global thematic research at Bank of America, expects 2024 will be "very important" for AI, specifically in regard to new generations of AI models and government regulation.

“For generative AI we really see all the stars aligning to create a massive revolution,” Israel told Investopedia, saying that “never [has a] technology [been] adopted so fast” and “it’s developing in warp-speed.”

A major "discussion in 2024 is also going to be about the next generation of AI-based technologies" which could include emotionally intelligent AI and simulation, which provides data for sectors where datasets are unavailable, Israel noted.

Another facet that Israel expects to be at the forefront of AI in the new year is regulation, as governments work to safeguard against potential harms brought on by widescale AI adoption.

Upcoming elections could highlight concerns around AI and privacy as well as misinformation, Israel noted, saying that "2024 is going to be a year that regulators across the world will have to start addressing" the impacts of AI.