Was 2023 "The Year of AI"? We don't think so. Here's why…
| From the desk of Miles Everson: Hello! I hope you’re having a great midweek so far. For today’s “The Independent Investor,” I’m thrilled to talk about another investment insight from my friend and colleague, Professor Joel Litman. Every Wednesday, I share all-things finance and investment to help you achieve financial stability in the long run. Are you ready? Continue reading below to learn more about Professor Litman’s thoughts on the growing AI industry. |
|
Was 2023 "The Year of AI"? We don't think so. Here's why… How are you doing in terms of using artificial intelligence (AI)? Good? Bad? Just… okay? It’s no surprise that by now, various kinds of AI are emerging left and right, providing assistance to professionals and businesses on the nature of work that they do. Whether it’s writing, financial analysis, coding, programming, graphic design, etc., there’s an available AI that people and organizations can use. That’s why if you truly want to thrive in this digital era, you have to learn to use AI to your advantage! Sure, AI in itself won’t be able to replace you in the workplace, but if you also don’t utilize this tool properly, someone using it will be able to replace you in the workplace.
The “Year” of AI In 2022, Professor Joel Litman , Chairman and CEO of Valens Research and Chief Investment Strategist of Altimetry Financial Research, declared 2023 to be “The Year of AI.” He admitted later on that he was wrong. According to him, AI was mentioned in earnings calls almost 10 times as much in 2023 as it was in 2022. With the rise of chatbot ChatGPT, folks expected AI to supercharge nearly every industry. … and he was one of those folks. He predicted businesses would devote their time and energy the following year to embracing this technology. Free from the burden of menial tasks, professionals would spend more time on creative enterprises and improving productivity. Here’s the thing: In 2023, businesses spent more time talking about AI than actually implementing it… and most of these companies didn’t make any real progress. That’s why for Professor Litman, 2024 seemed much more promising in terms of actual AI implementation. Allow us to explain why… In 2023, stocks lived and died by their responses to AI. Take for example the cases of Chegg (CHGG) and Duolingo (DUOL) —two education technology businesses with vastly different approaches to the AI surge. Chegg was forced to admit that free AI products like ChatGPT threatened its tutoring business model. So, it did little to embrace AI after this announcement.
Because of that, its stock fell more than 50% in 2023. On the other hand, language app Duolingo explored ways to improve its platform using AI by reducing the cost of translation and building new personalized lessons for users.
The outcome of that? Shares rose more than 200% in the same time frame! Professor Litman says the world is starting to see an uptick in AI investment… and that’s great for consulting companies, which help clients build and use new tools. For instance: Accenture (ACN), one of the biggest consultants in the world, reported only USD 300 million worth of AI consulting projects for the first six months of 2023. That sounds like A LOT… until you realize Accenture earns about USD 65 billion in revenue per year. AI-related bookings for the company rose to USD 450 million from September to November 2023. The good news? According to Professor Litman, consultants like Accenture will own the AI movement over the next two years! We can see this through Professor Litman and his team’s Embedded Expectations Analysis (EEA)… The team used Accenture’s 2023 share price to calculate what investors could expect from future performance. Then, Professor Litman and his team compared those forecasts with their own. Just take a look at Accenture’s profitability over the years. Uniform return on assets (ROA) already jumped from 42% in 2018 to a high of 49% in 2022.
That’s only the start! Wall Street analysts expected Accenture’s ROA to reach 57% in 2024 and 72% in 2025. That’s why if you’re looking for a way to profit as AI sweeps the business world, this is where your money should be! Consulting firms will help companies implement all the AI projects they discussed in 2023. In fact, there’s still plenty of room for Accenture and the likes to run in the world of AI. Hope you’ve found this week’s insights interesting and helpful.
|
Miles Everson
CEO of MBO Partners and former Global Advisory and Consulting CEO at PwC, Everson has worked with many of the world's largest and most prominent organizations, specializing in executive management. He helps companies balance growth, reduce risk, maximize return, and excel in strategic business priorities.
He is a sought-after public speaker and contributor and has been a case study for success from Harvard Business School.
Everson is a Certified Public Accountant, a member of the American Institute of Certified Public Accountants and Minnesota Society of Certified Public Accountants. He graduated from St. Cloud State University with a B.S. in Accounting.
SIGN UP FOR THE NEWSLETTER
The Business Builder Daily