A new report has found that 8% of UK and 7% of US decision makers plan to spend more than $25m (£19.5m) on AI initiatives this year. It comes after many investors raised concerns about the technology's capabilities and potential return on investment.
According to State of AI Report 2024 A quarter of decision makers said their organisations plan to spend between $11m (£8.5m) and $25m (£19.5m) on AI in 2024, according to consultancy Searce.
The main reason for the creation of these investments There was a boost to new business growth, cited by 31% of UK and 35% of US respondents, and they believed this was starting to bear fruit.
More than 90% of UK decision makers surveyed consider their AI initiatives to be “successful”, and almost a third plan to increase their AI spending by up to 50%. A further 8% said they would see investment increase by 100% or more.
The findings are based on a survey of 300 senior executives and technical professionals from organisations with revenues of at least $500m (£390m), conducted in June and July this year.
The report found that 70% of business decision makers already have at least three generative AI use cases up and running as a result of their investments. These include tools for customer service, internal research, content generation, marketing and sales, coding, data analysis, and data mining.
SEE: Generative AI: UK business leaders face investment challenges as everyone calls themselves an expert
However, while 51% of respondents considered their investments to be “very successful,” only 42% said they were “somewhat successful.”
“The difference between highly and relatively successful initiatives highlights a gap in AI adoption maturity,” the report’s authors write.
“This enables organizations to focus on talent development, data quality, and robust measurement metrics to expand their AI capabilities and achieve greater return on investment.
Paul Pallat, vice president of applied AI at Searce, said in the report: “When using AI, organizations often focus on short-term, easy-to-achievable goals, resulting in significant technology and process debt that becomes costly to manage as the organization grows.”
The authors added: “To truly generate Return on investment“Organisations need to move away from blindly investing in these initiatives and hoping for the best, and instead adopt a results-oriented approach, supported by proper governance, measurable change management structures and processes.”
UK business leaders worried about shortage of AI talent to support their investments
Respondents were asked about the challenges of AI implementation that most worried them. For UK decision makers, it was a shortage of skilled talent, cited by 19%.
Level “Skills Shortage Jobs“The rate at which a vacancy cannot be filled due to a lack of skills, qualifications or experience is very high in the UK ICT sector. This has risen from an already high 25% in 2017 to 43% in 2022, the latest year for which data is available.
A recent report also found that the UK is The 25th most technologically advanced country in Europesignificantly behind other digital leaders in the region such as Germany, France and Spain.
SEE: UK lacks key skills such as AI and strategic thinking, Red Hat says
The UK government has identified a digital skills shortage in the country and has made a number of key investments in the past year or so to try to address the issue, with more than £200 million in support for colleges and universities announced in November 2023 offer more training opportunities in industries including digital.
In March this year, Science Minister Michelle Donelan unveiled a further package worth more than £1.1bn for to fund 4,000 doctoral dissertations in the field of engineering and physical sciences.
Microsoft has also made a significant investment in bridging the digital skills gap in the UK. In December 2023, the tech giant announced “Multi-million dollar investment” in AI skills training more than a million people.
US Business Leaders Concerned About Privacy and Security of Their AI Data
According to the Searce study, the biggest barrier to AI adoption for U.S. decision makers was another issue: 20% of respondents said it was data privacy and security. This is due to concerns about protection of confidential information, ever changing rulesAnd maintaining customer trust.
“This skepticism may be a consequence of high-profile failures or unrealistically high expectations, leading to caution in AI investments,” the authors write. Such high-profile failures may include DPD Chatbot Swears at Customers, Microsoft's Twitter Trolling Botand Google's Bard (now Gemini) model answer a question incorrectly as soon as it is askedwhich resulted in a $100 billion loss in Alphabet shares.
There is also strong evidence that AI capabilities overvaluedA recent Stanford study found that AI still not as good as humans in complex problems of solving advanced level mathematical problems, visual common sense and planning.
A Deloitte 2022 Report The percentage of organizations in the AI “poor” category (high adoption/low results) increased from 17% to 22% over the year, indicating a performance lag.
SEE: Data Scientists Survey: Do Tech Executives Believe in the AI Hype?
Investors are concerned about the ROI of AI, and businesses should be too
Julian Mulhare, Searce's managing director for EMEA, said in a press release for the report: “As our research shows that global investment in AI continues to grow, it is critical for companies to focus not just on the cost but also on the tangible returns that these investments can deliver.”
That point is underscored by investors expressing concerns about when, if at all, the huge cash injections into tech companies developing AI models will pay off.
Jim Covello, an analyst at Goldman Sachs, wrote in the June issue report“Despite the high price, this technology is far from useful… Overbuilding things the world doesn't need or isn't ready for usually ends badly.”
Sequoia Capital partner David Kahn said in a statement: blog post that the AI industry will need to generate a whopping $600 billion a year to cover the cost of the hardware.
SEE: UK new tech startups face first decline since 2022, with numbers down 11% this quarter
In accordance with S&P GlobalMicrosoft, Alphabet and Meta's combined capital expenditures increased 60% year over year as a result of AI investments. Alphabet alone spent $13 billion in Q2which is 91% higher than in the second quarter of 2023, putting pressure on profitability.
However, Meta CEO Mark Zuckerberg noted during the Q2 2024 earnings conference call that he expects it to be “years” before the company monetizes its AI products. Less-than-encouraging comments like those from Zuckerberg played a role in the shares of the “Magnificent Seven” U.S. tech companies — NVIDIA, Meta, Alphabet, Microsoft, Amazon, Tesla, and Apple — collectively losing 1.3 trillion dollars more than five days in early August.
Moreover, while business leaders may be excited by the prospect increased internal efficiency Thanks to AI, consumers don't necessarily share this optimism. New study from Washington State University found that having the term “artificial intelligence” in a product description actually “reduces purchase intent.”
This is largely due to a lack of trust in AI capabilities and the perceived risk associated with elements such as loss of control and privacy. Therefore, businesses must understand the ROI of using AI in their products as well as in internal deployments.