The Digital Frontier—can the AI hype go on forever?

We believe that the current AI hype in financial markets will only be justified if companies can adopt AI quickly and effectively. In The Digital Frontier series, we will evaluate the state of AI and data centre investment and explore implications for different countries, cities, and sectors.

What you will learn:

• Although AI adoption rates have been on an upward trend and have increased faster than we initially expected, there are signs of a potential slowdown. There is also a chance the adoption might take a while before translating into meaningful boosts to productivity and earnings.
• On the upside, financial market fundamentals appear to be in a decent shape, with valuations lower than the peak during the dot com bubble. But high market concentration around tech firms, a turn in the investor sentiment, and expanding private capital market remain major risks.
• The real economy is already reaping the benefits from AI in the form of investment into semiconductors and data centres. Strong production and investment have been driven by current demand for computing power, rather than firms anticipating future demand and overinvesting. Limited financing risks also mitigate burdens on corporate financial statements.
• Over the long run, we believe AI will remain pivotal to boosting productivity in the face of poor demographics globally. The biggest uncertainty is over the path towards that point—and the pace and nature of AI adoption will likely be the greatest determinant.