MIT economist warns AI hype could waste billions for tech companies

In a recent interview with Bloomberg, MIT economist Daron Acemoglu emphasised that while he isn’t opposed to artificial intelligence (AI), the technology is currently overhyped. “I’m not an AI pessimist,” he declared, clarifying that his concerns stem from the unchecked investment frenzy and overblown expectations surrounding AI's potential economic impact.

Acemoglu contends that, despite AI's promise, it will likely affect only 5% of jobs over the next decade, contrary to claims that it could 'revolutionise' the workforce. He said that this is good news for workers but bad for the companies sinking billions into the technology expecting it to drive a surge in productivity. The professor believes that AI is far from triggering an economic transformation, warning that a lot of money is going to get wasted.

He outlined three potential scenarios for AI’s trajectory, a gradual cooling off of the hype with practical applications emerging, a tech stock crash following a period of frenzied investment, leading to disillusionment, “AI spring followed by AI winter” or, most worryingly, a prolonged mania where billions are poured into AI without clear purpose, resulting in mass job cuts, only for companies to realise that the technology cannot deliver. “Now there are widespread negative outcomes for the whole economy,” he cautioned, suggesting that a combination of the latter two scenarios is most likely.

While AI models like OpenAI’s ChatGPT are "remarkable", Acemoglu pointed out significant limitations, particularly in terms of reliability and judgement. “You need highly reliable information or the ability of these models to faithfully implement certain steps that previously workers were doing,” he said, highlighting that AI is far from being able to replace workers in most industries. The investment surge, with firms like Microsoft, Alphabet, Amazon, and Meta Platforms pouring more than $50 billion into AI during the second quarter alone, might not be justified given AI’s current limitations.

As AI continues to dominate headlines and corporate boardrooms, Acemoglu’s warnings serve as a reminder that not all technological revolutions fulfil their grand promises. While the allure of AI is undeniable, the economist suggested that much of the current excitement may be leading us down a precarious path. "When the hype gets intensified, the fall is unlikely to be soft," he cautions, urging caution amidst the frenzy. Only time will tell whether the investments driving today’s AI boom will translate into lasting economic change, or if they will merely deepen the divide between expectation and reality.