What AI means for the economy 🤖

- Also: Can Europe beat China and the US in quantum computing? # # --------------------------------------------------------------- In today's special tech edition: - What could advances across AI mean for [society]( and the [economy?]( - [Highlights from our Disruptive Technology Symposium]( in London, which brings together some of Europe's leading tech companies. - And the biggest opportunities for [China's online gaming companies may be beyond its own borders.Â]( (Was this newsletter forwarded to you? [Sign up now.]( --------------------------------------------------------------- Stability AI CEO says AI will prove more disruptive than the pandemic Stability AI founder and CEO Emad Mostaque said advances in AI have helped us to figure out how to “make humans scale.” At our Disruptive Tech Symposium in London, he said [major changes are coming to entertainment, education, medicine and the IT industry itself.]( (L to R): Goldman Sachs' Eric Sheridan & Emad Mostaque of Stability AI. - 📸 Media: Mostaque explained that AI generates images that are almost photorealistic today and will be even better tomorrow. “You'll see the entire cost structure of media creation, video game creation and others change dramatically.” - 📚 Education: AI has great potential to scale one-on-one instruction, Mostaque said. “As of this year, you can have your own personalized tutor that adapts to you,” he said. With AI-powered instruction comes the promise of more effectively addressing learning challenges, he said, predicting that dyslexia, for example, will be “solved” in the next few years. - 💊 Medicine: Mostaque cited Google's recent success in optimizing its large language model to answer medical questions. “We finally have a single file that's as good as a human doctor,” he said. The tech industry has been talking about so-called expert systems for decades, but their arrival has been sudden and their disruptive effects are accelerating fast. “This is a much bigger disruption than the pandemic," he said. "I'm not sure that any of us can cope with the speed. You know, frankly it's terrifying.” --------------------------------------------------------------- Generative AI could raise global GDP by 7% As tools built on generative AI work their way into businesses and society, they have the scope to drive a 7% (or almost $7 trillion) increase in global GDP and lift productivity growth by 1.5 percentage points over a 10-year period, [according to Goldman Sachs Research](. But shifts in workflows triggered by these advances could also expose the equivalent of 300 million full-time jobs to automation, Goldman Sachs economists Joseph Briggs and Devesh Kodnani write in a report. Our economists estimate that roughly two-thirds of U.S. occupations are exposed to some degree of automation by AI. They further estimate that for those occupations that are exposed, roughly a quarter to as much as half of their workload could be replaced. But not all that automated work will translate into layoffs, the report says. “Although the impact of AI on the labor market is likely to be significant, most jobs and industries are only partially exposed to automation and are thus more likely to be complemented rather than substituted by AI,” the authors write. They note that jobs displaced by automation have historically been offset by the creation of new jobs, and the emergence of new occupations following technological innovations accounts for the vast majority of long-term employment growth. Advances in AI are expected to have a far-reaching effect on the global enterprise software, healthcare and financial services industries, Kash Rangan, senior U.S. software analyst in Goldman Sachs Research, writes in a separate report. Added up, GS Research estimates the total addressable market for generative AI software to be $150 billion, compared with $685 billion for the global software industry. --------------------------------------------------------------- How European tech companies are weathering current challenges Some of the challenges facing tech start-ups — from the impact of rising interest rates to the resolution of Silicon Valley Bank — are filtering through the European ecosystem differently than in the U.S., says Blossom Capital Founder and Managing Partner Ophelia Brown in an episode of [Exchanges with Goldman Sachs](. Brown spoke during our Disruptive Technology Symposium with Clif Marriott, co-head of the Technology, Media and Telecommunications Group in EMEA at Goldman Sachs, about SVB, how's she's advising founders and her expectations for the next phase of generative AI. Goldman Sachs' Clif Marriott at the Disruptive Technology Symposium in London. - While European founders were shocked by SVB's collapse, the institution had a much smaller footprint in the U.K. than in the U.S., Brown says. She notes that while start-ups will take away some vital lessons about things like treasury and liquidity management, SVB's resolution isn't likely to have a lasting impact in Britain or on the Continent. - As interest rates climb and valuations come under pressure, European tech companies were already used to making do with less capital than some of their peers across the Atlantic. Brown says her firm's advice to companies has long been to grow efficiently and be in control of their “own destiny.” But that doesn't necessarily mean being conservative and always conserving cash: “We're investing in industries where there should be great tailwinds of growth and you should be playing into that,” she says. - Even as interest in generative AI builds, it will still take another year or so before start-ups with brand new applications using the tech start popping up, Brown says. In the meantime, she says these advances will increasingly be used in existing software, from Zoom to Microsoft Teams. [Listen to the podcast]( --------------------------------------------------------------- China's biggest opportunities in online gaming may lie outside its borders China's [online gaming market is the biggest in the world]( but the most compelling opportunity for its native game developers and publishers might be capturing more users outside its borders, according to Goldman Sachs Research. Chinese online gaming companies have steadily entered international markets, moving from development- and publishing-only strategies to co-development with international companies, analysts Lincoln Kong, Ronald Keung and Steve Qiu [write in a report.]( More recently, they have expanded their playbook to mergers and acquisitions promising new revenues and talent, and they have looked to develop more games with a global audience in mind. These moves have helped China-domiciled mobile game makers raise their aggregate market share in the overseas mobile games market from less than 10% in 2017 to 22% by the end of 2022. GS Research forecasts that share could rise to as high as 30% by 2025. Last year, international markets represented an estimated 31% of China's total online games revenue, and the team expects that to rise to 35% by 2025. “Chinese players are already at the forefront of globalization,” GS analysts write. “The overseas market still represents ample opportunity for Chinese games companies.”  --------------------------------------------------------------- Can Europe beat China and the US in quantum computing? As [funding pours into quantum computing]( investors are focused on the potential for this technology to address scientific, business and security problems beyond the reach of today's conventional computers. A key question is whether the technology will be globalized or fragment regionally, according to [industry executives who spoke at the Goldman Sachs 2023 Disruptive Technology Symposium.]( - “I'm not aware of anything since the Industrial Revolution that even comes close to resembling the resources that are being managed at a national level in order to gain competitive advantage for individual countries,” Ilyas Khan, vice chairman and founder of Quantinuum, said during a panel. - Given the important business and national security concerns that surround quantum computing, Europe needs to develop its own domestic industry and expertise — unlike what took place when U.S. companies scaled up now dominant cloud-computing businesses, Stephen Nundy, investment partner and chief technology officer for Lakestar, a European venture capital fund, told the symposium. - “It will be very important to think about the European angle and ensure that we have capabilities in Europe to be self-reliant on the hardware development side,” said Pia Lemmetty, head of finance for Finland's IQM Quantum Computers, which built a pilot foundry for quantum processors. - Markus Pflitsch, founder and CEO of Terra Quantum, said corporate clients should start building relationships and expertise now. His Switzerland-based company is developing quantum algorithms, software that can run today on all available native quantum chips but also with simulated qubits based on classical computers, while the development of quantum hardware proceeds. --------------------------------------------------------------- Briefings brainteaser: From Unicorn to … Private companies valued over $1 billion are known as Unicorns. Do you know what private companies valued over $10 billion are called? A) Megacorns B) Decacorns C) Hectocorns D) De-unicorned [Check your answer here](. --------------------------------------------------------------- ICYMI: In the media [CNBC]( April 4 [Goldman Sachs invests $2 billion in Black women-owned businesses — the first chapter of a bigger plan]( [CNBC]( April 3 [OPEC's pricing power is higher than it has ever been, says Goldman Sachs' Jeff Currie]( (4:13) --------------------------------------------------------------- --------------------------------------------------------------- Some of the images used in this newsletter are sourced via Getty Images. The data provided in this newsletter is for information purposes only and should not be construed as investment or tax advice nor as a recommendation to buy, sell, or hold any particular security. Goldman Sachs believes the data in this newsletter is accurate, but does not verify its accuracy independently and does not warrant or guarantee that it is accurate or complete. 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