Moody’s Investor Service said on Tuesday that in a year of U.S. presidential elections, artificial intelligence (AI) technology based job losses may pose social risks.
“While AI will spread faster than previous innovations, effects on the macroeconomy and sovereign credit quality will become material only after the private sector fully integrates the technology,” said Moody’s.
The report also pulls data from PwC latest report that found that 25% of global CEOs believe that the deployment of generative AI whill lead to heacountry reductions of at least 5% in 2024.
Moody’s added in their report 2024 AI Outlook that advances within artificial intelligence (AI) technology remains at an early stage and will not significantly affect credit quality over the next 12 months. However, there are some industries that are feeling the effects, the impact will broaden to many more issuers over the next two to three years.
‘’We expect that over the next two years only software and semiconductor companies will see a material effect on credit quality stemming from AI adoption and implementation, although a small number of firms in other industries may also be affected. Beyond 2026, the impact will be much broader.’’ said Vincent Gusdorf, Senior Vice President – DeFi & Digital Assets at Moody’s.
The credit rating company said that AI innovation will develop rapidly in 2024, drawing more users and fostering a vibrant network of hardware suppliers and app developers. Hence, the risks will also increase as organisations start rolling out AI applications at scale for the first time.
AI investment is expected to rise as firms move from exploration to deployment. “A shortage of high performance graphical processing units (GPUs), essential for most AI computing, will persist in 2024, but supply will improve gradually. Proprietary and open-source AI models will continue to advance, increasing their parameters, training data, input size, and accuracy,” said Moody’s.
International Data Corporation (IDC) estimates that firms’ spent $19 billion in 2023 on Generative AI (GenAI) software, hardware, and related services, a number that will double in 2024, reaching $151 billion in 2027.
By then, Moody’s predicts GenAI spending will account for 29% of overall AI spending, up from 11% in 2023.