Market Commentary | Generative AI – Just the Beginning

Market Commentary | Generative AI – Just the Beginning

Artificial intelligence is driving the Fourth Industrial Revolution. Some are comparing the potential of the technology involved to the creation of the Internet. We find that view to be too conservative.

We are not software engineers or technology gurus. However, we look at data day in and day out, analyzing markets, growth drivers, risks, and valuations with the goal of delivering excess risk-adjusted returns for our clients. We believe the scale of potential value creation in the growth of AI and its effects on people, business, and economies is impactful.

AI’s Economic Impact and Market Reach

The largest potential effect of artificial intelligence in the short term will be increasing productivity. Goldman Sachs Research estimates that AI could add the equivalent of $2.6 to $4.4 trillion annually to the global economy. McKinsey estimates that AI can potentially add 1.5% to GDP growth annually as a baseline estimate in the United States, with more powerful AI leading to 2.9%. Some examples of productivity improvements that are being implemented today include:

  • Marketing and Sales: write copy with text, images, and videos; create product use guidelines
  • Operations: improve customer support chatbots; identify production errors and defects
  • IT/Engineering: write code; auto-generate and auto-complete data tables
  • Risk and Legal: draft and review documents; summarize and highlight changes
  • HR: assist in creating interview questions; automate onboarding and feedback procedures
  • Utility/Employee Optimization: optimize communication (email responses/translation); create business presentations (text/visual)



These advancements only scratch the surface of the potential AI can unlock. AI applications offer comprehensive, far-reaching, and radical operational improvements for almost every industry out there. A prominent player in the semiconductor space recently published to illustrate the magnitude of  AI’s potential disruptiveness and impact on the marketplace:

  • Contact Center AI – 500 million calls/day
  • Meeting Transcription – 4 billion meeting minutes/day
  • Public Safety – 1 billion smart city cameras deployed
  • Retail asset protection – $94.5 billion inventory loss/year
  • Medical Imaging – 10 million diagnostic scans/day
  • Industrial Inspection – 32 million vision sensors installed by 2025
  • Transportation – 10 trillion miles/year
  • Credit card fraud – 1.28 billion transactions/day
  • Product recommendations – 1 billion e-commerce visits/day


Per MIT Technology Review, we will likely see many more developments this year (both good and bad), including customized chatbots, movie giants using generative AI throughout the production pipeline, AI-generated election disinformation, and multi-tasking robots.

In 24 years (1997 – 2021), the total enterprise value creation from the Internet was $13 trillion. In nine years (2021-2030), the enterprise value creation from AI applications, foundational AI models-as-a-service, and AI hardware is estimated to be $87 trillion (this figure only accounts for value created in the direct market and ignores indirect value created through productivity and other improvements).

The Artificial Intelligence Technology Stack

Capturing growth in the artificial intelligence space requires both a grasp on its potential market size and a thorough understanding of how AI may develop over time. A visual representation of the AI technology stack is provided below:

  • Hardware/GPUs/Processing Power – the infrastructure of all AI and the area of the market that has exploded over the last year. Semiconductors enable the processing required for AI to function and grow. Bloomberg estimates that the generative AI hardware market will grow from $40 billion in 2023 to $1.3 trillion in 2032.
  • Cloud – servers and storage for extremely large data sets which are in growing demand as more companies and industries integrate AI into functions and processes. Merrill Lynch estimates the cloud AI market will grow from $13 billion in 2023 to $111 billion in 2030.
  • Foundational Models – large language models (LLMs) as an example, there is currently a battle between creating open source versus closed source models and the need to develop models built for speed versus models built for customization.
  • Tools – allows developers to build foundational model applications faster and connect to external endpoints and databases. A building block design with large data sets and programming ability to stack code on to different inputs/outputs.
  • Applications – recreating or reimaging current products/services by integrating foundational models to increase functionality. There has also been an explosion of new applications designed directly for end users in specifically targeted markets.

Currently, many of the largest public companies in the world are monetizing the semiconductor and cloud space (the first two levels of the technology stack). Businesses involved in the other three levels are predominantly private but have co-investment from those same large technology players.

Investing in AI

We want to emphasize that we believe artificial intelligence is not a fad, and the market potential it represents may be one of the most exciting opportunities for investors in our lifetimes. We incorporate both direct and indirect exposure in our investment thesis, with exposure to the direct technology stack as well as exposure to companies that are integrating artificial intelligence to enhance their own bottom lines and operational efficiency. These investments don’t come without risk, and as with any rapidly developing market, there will be volatile swings in valuations, good investments, and bad investments. Keep in mind that an overwhelming majority of companies involved with the growth of the internet in the 1990s are not around today. It’s important to work with your financial advisor to align your investments with your risk profile. Please reach out to them with any questions or concerns that you may have.

Artificial intelligence didn’t write this commentary, but it certainly could have.

-The Seventy2 Capital Team
Commentary and Research provided by:
Michael Levitsky, CFA®, CAIA® – Managing Director, Investment Strategy


Investment products and services are offered through Wells Fargo Advisors Financial Netowrk, LLC (WFAFN), Member SIPC. Seventy2 Capital is a separate entity from WFAFN. The report herein is not a complete analysis of every material fact in respect to any company, industry or security. The material has been prepared or is distributed solely for information purposes and is not a solicitation or an offer to buy any security or instrument or to participate in any trading strategy. Additional information is available upon request.