CEOs Embrace Generative AI as a Catalyst for Productivity and Profit
In a recent survey conducted by PwC, CEOs expressed enthusiasm about the transformative impact of generative AI on worker productivity and corporate financials. The study, released ahead of the AI-themed World Economic Forum in Davos, Switzerland, reveals that 68% of US CEOs and 64% globally believe that generative AI will increase the work employees can accomplish in the next 12 months. Furthermore, approximately half of US CEOs expect generative AI to enhance their productivity, potentially boosting profits.
CEOs Betting on Profit Boost
According to PwC, nearly 44% of CEOs foresee generative AI contributing to a net profit increase within the next 12 months. This optimism is driven by the technology’s ability to generate efficiency gains while enabling company reinvention. PwC suggests that 2024 could be the year of “business model reinvention” as CEOs look to leverage generative AI for profitable growth.
Broader Economic Impact
Building on prior research, PwC indicates that generative AI could contribute up to $15.7 trillion to the global economy by 2030—surpassing the current combined output of China and India. The economic gains are expected to be particularly significant in China, with an estimated 26% boost to GDP in 2030, and North America, experiencing a roughly 14.5% GDP increase.
Wall Street’s Response
Investors are positioning themselves to capitalize on the potential profit increases associated with generative AI. Stock indexes, including the S&P 500, Dow Jones Industrial Average, and Nasdaq Composite, continue to reach record highs. With substantial AI exposure, tech giants like Microsoft, Alphabet, and Amazon remain top picks among Wall Street analysts. Nvidia, a leading generative AI chip provider, has seen its share price reach new records in 2024.
Morgan Stanley analyst Keith Weiss notes that the transformative impacts of generative AI outweigh rising investor expectations. The consensus on Wall Street is optimistic, with a projected 11% growth in S&P 500 profits in 2024, driven by the proliferation of new AI tools and a cooling inflation environment.
The CFO’s Evolving Role in the Era of AI
As generative AI takes center stage, the role of chief financial officers (CFOs) is significantly transforming. Previously focused on safeguarding assets and mitigating risks, CFOs now find themselves at the forefront of AI adoption and technology spending decisions.
CFOs Navigate AI Priorities
A CNBC survey reveals that AI is the top priority for tech spending over the next year for 47% of companies. AI budgets surpass those allocated to the second-largest spending area, cloud computing, by more than double. CFOs ensure their organizations harness AI effectively, marking a departure from traditional financial responsibilities.
AI’s Impact on Finance Operations
AI’s integration into financial operations is reshaping how CFOs work. Real-time data, facilitated by AI-enabled analytics, allows CFOs to develop multiple scenarios for capital allocation, leading to more accurate forecasts. Forward-looking projections and stress-testing various forecasts under different scenarios become possible, enhancing the CFO’s role in value creation.
Addressing Regulatory Challenges
CFOs must also grapple with emerging AI-related data and privacy protection regulations and ethical use guidelines. While collaborating closely with IT, risk, and compliance departments, CFOs are actively defining company policies to ensure responsible AI implementation.
A Balancing Act
While navigating uncharted waters, CFOs have the opportunity to position the finance organization as a driver of future value. Despite the challenges, maintaining focus on core responsibilities—stewarding the company, managing financial operations, and being a strategic partner—is crucial. For those who strike the right balance, the AI era presents a significant opportunity to propel finance into the future.