2 April 2024 | 3:33AM EDT

Global Economics Analyst

The AI Transition One Year Later: On Track, but Macro

Impact Still Several Years Off (Briggs/Kodnani)
n Over the last year, we have argued that generative artificial intelligence (AI) could Jan Hatzius
+1(212)902-0394 | [email protected]
raise DM labor productivity growth by 1½pp per year over a 10-year period (or Goldman Sachs & Co. LLC

cumulatively raise labor productivity by around 15%) following a wave of Joseph Briggs
+1(212)902-2163 |
investment and widespread adoption. In this Global Economics Analyst, we [email protected]
Goldman Sachs & Co. LLC
check on the status of the AI transition, finding that it is well underway but that
Devesh Kodnani
significant macroeconomic impacts are still likely several years off. +1(917)343-9216 |
[email protected]
Goldman Sachs & Co. LLC
n Investment in AI-related hardware has surged, with revenues of semiconductor Giovanni Pierdomenico
+44(20)7051-6807 |
manufacturers rising by over 50% since early 2023 and company-level revenue
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Goldman Sachs International
forecast revisions implying an incremental $250bn in annual AI hardware
investment (1% of US GDP) through 2025. This increased investment is not yet
visible in official national accounts data that are relevant for GDP, but shipments
for some AI-related components have recently picked up.

n Actual adoption of AI has only modestly increased so far, with less than 5% of
companies reporting use of generative AI in regular production. And while
adoption is higher in industries that we estimate will benefit the most from AI—
including computing and data infrastructure, information services, and motion
picture and sound production—and is expected to rise going forward, adoption
remains well below levels necessary to see large aggregate productivity gains.

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n Low adoption has limited the labor market impact, but preliminary evidence
suggests that AI is modestly raising labor demand while driving negligible job
loss, thereby creating a slightly positive impulse to net hiring.

n Finally, emerging evidence from early adopters points to large increases in labor
productivity. While early estimates should be interpreted cautiously given
selection and reporting biases, recent academic studies imply an average 25%
increase in labor productivity (16% median) following AI adoption, with anecdotal
company reports suggesting similarly large efficiency gains.

n The sizable increase in AI-related investment and large productivity gains among
early adopters adds to our confidence that generative AI poses meaningful
economic upside, while the slow adoption pace suggests that sizable
macroeconomic impacts are still several years off. Going forward, we will
update this analysis each quarter to track the economic impact of generative AI.

Investors should consider this report as only a single factor in making their investment decision. For Reg AC
certification and other important disclosures, see the Disclosure Appendix, or go to
www.gs.com/research/hedge.html.
 Goldman Sachs Global Economics Analyst

The AI Transition One Year Later: On Track, but Macro Impact Still Several
Years Off

Over the last year, we have argued in a series of publications that generative artificial
intelligence (AI) could raise labor productivity and global growth, primarily from its ability
to automate a large share of work tasks.

The economic upside implied by our analysis is quite large. We estimate that generative
AI could raise DM labor productivity growth by 1½pp per year over a 10-year adoption
period (implying a cumulative increase in labor productivity levels of around 15%; left
chart, Exhibit 1), and forecast a net 0.4pp boost to DM potential GDP growth by the end
of forecast horizon after accounting for the overlap with current technology-driven
productivity gains and a slowing underlying productivity growth trend. However, these
benefits depend crucially on widespread adoption of the technology and a surge in
AI-related investment, both of which we have noted could take several years to fully
materialize (right panel, Exhibit 1).
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Exhibit 1: Our Research Suggests that AI Could Be a Major Driver of Labor Productivity Growth, and that the AI Transition Could Require a
Sizable Investment Cycle
Percentage Estimated Effect of Widespread Percentage Percent of GDP Stylized US AI Investment Cycle Percent of GDP
points AI Adoption on Annual Productivity Growth points
1.8 1.8 3.0 Hardware: User Queries 3.0
Hardware: Model Training
1.5 Software
1.5 1.5 2.5 2.5
1.3
1.2 1.2 2.0 2.0
1.0
0.9 0.9 1.5 1.5

0.6 0.6 1.0 1.0

0.3 0.3 0.5 0.5

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0.0 0.0 0.0 0.0
EM Global DM 2024 2026 2028 2030 2032 2034 2036 2038 2040
Note: Composites based on market FX GDP country weights. Estimates are not forecasts Note: Estimates are not forecasts and instead represent a stylized scenario under a set of
and represent stylized scenarios in which AI productivity gains are realized over a 10-year plausible assumptions for AI model development, compute costs, and adoption.
period following widespread adoption.

Source: Goldman Sachs Global Investment Research

Financial markets have similarly assessed AI as a milestone technology that could drive
investment (first) and productivity gains (later). As Exhibit 2 shows, over the past 6
months, equity market gains have disproportionately been concentrated in AI hardware
enablers (e.g., semiconductor companies) and software enablers (e.g., cloud providers)
that stand to benefit from early increases in AI-related investment, while likely AI
productivity beneficiaries have eked out more modest gains relative to the broader S&P
500. As our US portfolio strategy team has emphasized, many of these gains
(particularly for hardware companies) reflect higher realized revenues rather than higher
valuations, as demand for GPUs and datacenter-related spend have increased
substantially.

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 Goldman Sachs Global Economics Analyst

Exhibit 2: Equity Market Gains Over the Last Six Months Have Been Disproportionately Driven by
AI-Exposed Companies
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Source: FactSet, Goldman Sachs Global Investment Research

While technology companies are poised to be the earliest beneficiaries of AI adoption,

company guidance around AI has broadened over the past year, suggesting that a wider
set of industries are thinking about AI as part of their business plans. Indeed, as Exhibit
3 shows, the share of companies mentioning AI on public earnings calls has surged in
both the US and Europe over the past year, not just in IT and communications
categories but also across industrial, consumer, financial, and health care companies
where AI applications could eventually drive efficiency gains.

Exhibit 3: Mentions of AI on Public Earnings Calls Have Continued to Surge, Particularly Among Information Technology, Industrial,
Consumer, Financial, and Healthcare Companies

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Source: GS Data Works, Goldman Sachs Global Investment Research

Given these early signals, in this Global Economics Analyst, we introduce a set of tools
to track the status of the AI transition as it unfolds. We find evidence that the early

2 April 2024 3
 Goldman Sachs Global Economics Analyst

stages of the transition are well underway but that the largest macroeconomic impacts
likely remain years away.
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 Goldman Sachs Global Economics Analyst

Early Signs of an AI Investment Cycle

Investment in AI—first in AI-enabling hardware, such as semiconductors and
datacenters used to train and query models, then in AI-enabled software used to apply
AI—is likely to rise substantially as models become increasingly sophisticated and AI
adoption rises. As this investment is a precursor to the widespread integration of AI into
business processes, we expect such an investment cycle (which we have estimated
could peak at 2-2½% of GDP) to be the first measurable gauge of AI adoption.

As Exhibit 4 shows, early signs of such an investment boom are already visible among
AI-enabling companies. Specifically, AI enabler company revenues (or, equivalently,
investment expenditures by purchasers of their products) have grown at a rapid clip over
the past few years, with semiconductor companies in particular experiencing a 50%
surge in revenues since early 2023, largely due to an over 200% increase in quarterly
revenues for NVIDIA.

Exhibit 4: Company Revenues Have Picked Up, Particularly Among Semiconductor Producers
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Source: FactSet, Goldman Sachs Global Investment Research

This pickup in revenue growth has coincided with an even larger upgrade to analysts’
expectations of AI-related investment in the coming years. As Exhibit 5 shows, revenue
forecasts for AI enablers have increased substantially since a year ago—entirely in AI
hardware rather than software companies—with larger increases occurring farther out in
the forecast horizon.

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 Goldman Sachs Global Economics Analyst

Exhibit 5: Revenue Forecasts for AI Hardware Enablers Have Been Materially Upgraded Over the Last Year

Source: FactSet, Goldman Sachs Global Investment Research

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Taken at face value, these upgrades imply an additional $250bn of annual AI hardware
investment in 2025, equivalent to 9% of US business investment or roughly 1% of US
GDP and in line with our previously published estimate. Across AI hardware verticals,
these upgrades have been concentrated among semiconductor companies (with
NVIDIA alone accounting for over 75% of the upward revision for semiconductor
producers1) and cloud providers, with somewhat smaller increases in demand for
servers, networking equipment, memory, and real estate (Exhibit 6).

Exhibit 6: The Upgrade to Hardware Investment is Primarily Driven by Increased Investment in

Semiconductors and Cloud

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Source: FactSet, Goldman Sachs Global Investment Research

1
See our equity analysts’ report framing the medium-term market opportunity for NVIDIA driven by elevated
semiconductor demand related to generative AI, and the more recent update on NVIDIA’s Blackwell platform.

2 April 2024 6
 Goldman Sachs Global Economics Analyst

While equity market data provides an encouraging signal that the AI investment cycle is
underway, we have yet to see a sufficiently large increase in investment in the official
national accounts data, which is the key benchmark from a GDP perspective. As Exhibit
7 shows, quarterly investment data from major DMs in both software and hardware
categories has yet to visibly diverge from its longer-run trends (and in some cases has
actually decreased), suggesting that other factors—including demand for non-AI
technologies and cyclical factors—are currently playing a larger role than AI in shaping
the aggregate capex outlook.

Exhibit 7: No Clear Change in the Investment Trend Visible in National Accounts Data Yet
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Source: Haver Analytics, Goldman Sachs Global Investment Research

As demand for AI hardware and software grows, we would expect some of it to

eventually show up in macroeconomic aggregates. And indeed, as Exhibit 8 shows,

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manufacturers’ shipments for some AI-related components—measured at a more
granular level than the national accounts data—have started to pick up, although the
increase has not been uniform across all countries (e.g., Germany has seen a decline
since 2021).

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 Goldman Sachs Global Economics Analyst

Exhibit 8: Manufacturers’ Shipments for Some AI-Related Components Have Started to Pick Up
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Source: Haver Analytics, Goldman Sachs Global Investment Research

Taken together, these findings suggest that an increase in AI-related investment is

underway, but that the AI investment cycle still remains in its early days.

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 Goldman Sachs Global Economics Analyst

Adoption Among Higher-Tech Industries, but Barriers Remain to Wider

Use
The accessibility and ease-of-use of new AI models has raised the prospect of rapid and
widespread adoption across a broad set of use cases. As Exhibit 9 shows, the number
of visits to ChatGPT surpassed 1bn monthly in early 2023 and remained elevated (albeit
with little incremental growth in visits) over the past year, and the majority of US
workers have experimented with generative AI in a professional context, with over a
quarter informally using AI tools at least weekly.

Exhibit 9: Casual Use of Large Language Models Has Exploded, and Most Workers Are Using AI Tools At Work at Least Occasionally
Millions Monthly Visits to ChatGPT Millions Percent Share of US Workers Who Have Used Percent
Generative AI at Work
2000 2000 60 60

1800 Feb. 2024: 1800

1.63bn 50 50
1600 1600

1400 1400
40 40
1200 1200

1000 1000 30 30
For the exclusive use of [email protected]

800 800
20 20
600 600

400 400
10 10
200 200

0 0 0 0
Nov-22
Dec-22

Apr-23

Jul-23
May-23

Aug-23
Sep-23
Oct-23
Nov-23
Dec-23
Jan-23

Jun-23

Jan-24
Mar-23
Feb-23

Feb-24

Daily Weekly Monthly Occasionally Total

Source: Similarweb, Conference Board, Goldman Sachs Global Investment Research

Despite this surge, formal adoption of AI by firms remains low outside of a few specific
high-skilled industries. Using the newly introduced AI supplement to the Census
Bureau’s Business Trends and Outlook Survey2, we find that less than 5% of firms are
formally using generative AI to produce goods and services, although this share is 2-3

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times as high among information, professional services, and financial firms (Exhibit 10).
However, firms say that they expect the growth pace to pick up over the next six
months across most industries.

2
See Breaux, Cory et al., “Tracking Firm Use of AI in Real Time: A Snapshot from the Business Trends and
Outlook Survey,” U.S. Census Bureau Center for Economic Studies, March 2024.

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 Goldman Sachs Global Economics Analyst

Exhibit 10: Under 5% of Companies Are Formally Using Generative AI to Produce Goods and Services,
Although the Share Is 2-3x as High Among Information and Professional Services Firms

0 5 10 15 20 25
Information
Professional/Scientific/Technical
Finance and Insurance
Educational Services
Real Estate and Rentals
Administrative/Support
All Industries
Health Care and Social Assistance
Arts, Entertainment, and Recreation
Wholesale Trade
Retail Trade
Manufacturing
Other Services Share of US Firms Using AI by Sector (%)
Construction October 2023
Accommodation and Food Services March 2024
Transportation and Warehousing Next Six Months

0 5 10 15 20 25
For the exclusive use of [email protected]

Source: Census Bureau, Goldman Sachs Global Investment Research

Within a more granular set of subsectors, adoption rates range more widely, with over
20% of firms using generative AI tools for production in technology industries and
higher current and expected adoption rates in other digitally enabled fields, such as
movie and sound production (Exhibit 11).

Exhibit 11: Higher Adoption Rates Among Computing Infrastructure Providers, Web Search, Information,
and Movie Production Companies

0 10 20 30 40
Computing/Data/Web Infrastructure
Information

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Motion Picture and Sound Recording
Web Search Portals/Libraries/Archives
Professional/Scientific/Technical Services
Computer and Electronics Manufacturing
Securities/Commodities/Other Financial
Retail Trade
Educational Services
Real Estate
Insurance Carriers Share of US Firms Using AI,
Administrative and Support Services Top 15 Subsectors (%)
Ambulatory Health Care Services October 2023
Performing Arts/Spectator Sports March 2024
Credit Intermediation Next Six Months
0 10 20 30 40

Source: Census Bureau, Goldman Sachs Global Investment Research

As Exhibit 12 shows, unsurprisingly, the industries where adoption rates are already
high tend to be those where adoption rates are also expected to increase the most over
the next six months. Taken together, these patterns suggest that the first wave of AI
adoption is likely to be highly concentrated in higher-skilled, more digitally-enabled

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 Goldman Sachs Global Economics Analyst

industries (see our equity analysts’ note on the impact of generative AI on business
services industries), while adoption by less technical fields will likely take longer.

Exhibit 12: Companies in Industries Where Adoption Rates Are Already High Report the Largest Share of
Expected New Adopters Over the Next 6 Months

0 2 4 6 8 10
Computing/Data/Web Infrastructure
Information
Motion Picture and Sound Recording
Securities/Commodities/Other Financial
Retail Trade
Professional/Scientific/Technical Services
Insurance Carriers
Real Estate
Credit Intermediation
Administrative and Support Services
Ambulatory Health Care Services
Merchant Wholesalers, Durable Goods Expected Change in Share
Educational Services of Firms Using AI Over Next
Wholesale Trade Agents and Brokers
Six Months, Top 15 Subsectors
(Percentage Points)
Motor Vehicle and Parts Dealers
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0 2 4 6 8 10

Source: Census Bureau, Goldman Sachs Global Investment Research

These patterns are intuitive and consistent with our previously established framework,
which estimated the productivity benefits from AI adoption as a function of the share of
work tasks that are potentially automatable by AI. As Exhibit 13 shows, early adopting
industries tend to be those where our estimated AI exposures are higher, i.e., those
which have more to gain from adopting AI and thus a greater incentive to move first.

Exhibit 13: Our Estimates of AI Automation Exposure Predict Early Adoption Well at the Sector Level

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Source: Census Bureau, Goldman Sachs Global Investment Research

Among early adopters, the most commonly cited AI-enabled application is marketing
automation, followed closely by chat bots, and speech, text, and data analysis (Exhibit

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 Goldman Sachs Global Economics Analyst

14). Firms expect these applications to remain the most common over the next six
months, suggesting that high-profile use cases will likely remain the driver of AI
adoption, at least until more specialized AI business applications are developed.

Exhibit 14: Marketing Automation, Chat Bots, and Text/Data/Speech Analysis Are the Most Commonly Cited
Early Use Cases for AI

0 5 10 15 20 25 30 35 40
Augmented reality
Neural networks Share of Firms Using AI
Biometrics by Application/Technology:
Robotics process automation
Deep learning March 2024
Machine/computer vision Next Six Months
Decision making systems based on AI
Image/pattern recognition
Recommendation systems based on AI
Large language models
Machine learning
Other
Speech/voice recognition using AI
Data analytics using AI
Text analytics using AI
Natural language processing
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Virtual agents or chat bots

Marketing automation using AI
0 5 10 15 20 25 30 35 40

Source: Goldman Sachs Global Investment Research

Companies in the Business Trends and Outlook Survey report several barriers to more
widespread usage. As Exhibit 15 shows, firms which currently deem AI applicable to
their business cite a lack of knowledge about AI, concerns about privacy and security,
and a lack of maturity of the technology as the foremost barriers to adoption. However,
many of these factors are short-term and are likely to resolve as regimes for AI product
licensing and more sophisticated AI tools develop in the second half of this decade.3

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3
For example, see our equity analysts’ latest note on the outlook for Microsoft’s AI suite, which shows a
healthy pace of expansion (steady growth and high retention, but faster than prior product adoption cycles).

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 Goldman Sachs Global Economics Analyst

Exhibit 15: The Most Commonly Cited Barriers to Early AI Adoption Are Mostly Short-Term Factors Such as
Lack of Knowledge, Privacy Concerns, and Technology Maturity

Cited Barriers to Adoption in the Next 6 Months Among Firms

for Which AI is Applicable to the Business (%)
0 1 2 3 4 5 6 7 8

Lack of knowledge on the capabilities of AI

Concerns about privacy/security
AI is not a mature enough technology yet
Other
Too expensive
Lack of skilled workforce
Concerns about bias
Lack of required data
Laws and regulations prevent or restrict use of AI
Previous/current use of AI did not meet exp.

0 1 2 3 4 5 6 7 8
For the exclusive use of [email protected]

Source: Census Bureau, Goldman Sachs Global Investment Research

Other surveys of businesses and workers generally confirm the message from the
Business Trends and Outlook Survey. As Exhibit 16 shows, a majority of surveyed
individuals across a wide range of surveys generally report either using AI in some
capacity or express some intention to use AI, although implementation into concrete
applications remains limited outside of technical industries. However, many businesses
are making investments into production-grade AI applications for use in the next few
years, and business leaders generally cite short-term concerns such as inaccuracy,
security, and data privacy as the principal barriers to broader adoption. Indeed, our
equity research team’s own IT spending survey indicates that while just 12% of
surveyed CIOs plan to spend 5% or more of IT budgets on generative AI applications

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over the next year, half of CIOs expect to spend that much within the next three years,
with the average IT budget share allocated to generative AI expected to more than
double in that time.

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 Goldman Sachs Global Economics Analyst

Exhibit 16: Industry Surveys Suggest that the Largest Labor Market Impacts and Fastest Adoption Will Occur Over the Next 3-5 Years
Source Date Current Adoption Future Adoption

Over the next three years, a much larger share of CIOs (50%) intend to
In the coming year, 30% of CIOs do not expect to spend on generative AI spend at least 5% of IT budgets on generative AI products, with 10%
Goldman Sachs applications and 58% expect to spend 1-5% of their IT budgets on them. On intending to spend 15-30% of their IT budgets on them. At this horizon, CIOs
March 2024
Equity Research average, CIOs expect to spend 3% of IT budgets on generative AI products expect to spend 7% of IT budgets on average on generative AI. Usage of
during this period. Microsoft Office Copilot in particular is expected to grow from 3% of users to
13% of users during this time.

73% of young company leaders believe AI will be transformative for their

58% of businesses are increasing their investments into AI. 64% are
business, but the vast majority of those which have adopted are still in the
PwC March 2024 concerned about cybersecurity risk from AI, and roughly half are concerned
exploration phase, with only 7% of businesses having AI applications actively
about misinformation and legal and reputational risk.
deployed in their operations.

67% of technology professionals say that their companies are currently using Most adopters are still at the proof-of-concept or product development
generative AI, with the majority of users (54%) expecting that AI adoption will phase, with only 18% of total respondents already having AI applications in
O'Reilly November 2023 lead to productivity improvements while only 4% expect lower headcounts. production. The top cited barriers to implementation are identifying
The most common cited use cases are programming (77%), data analysis appropriate use cases (53%) and a combination of legal issues, risk, and
(70%), and customer-facing applications (65%). compliance (38%).

33% of workers say AI will replace elements of their job in a positive way
56% of workers report using AI tools for work tasks, with 46% saying (e.g., freing up time for other tasks), while just 4% say AI will replace
Conference management is fully aware of their use another 38% saying management is elements of their job in a negative way (e.g., threatening their jobs). 57% of
September 2023
Board only partially aware or unaware. Most workers (55%) say the quality of AI workers say their organization either does not have an AI policy or that one is
output matches that of an experienced worker or better. currently under development, compared to just 26% who say their
organization does have one.
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71% of businesses (sample skewed to technology companies) say their

companies are already using AI in some capacity, with 92% of AI 52% of businesses report that a lack of skilled workers is the biggest barrier
Microsoft September 2023
deployments taking under one year. The average AI investment takes 14 to implement and scale AI.
months to begin to realize returns.

28% of North American respondents say they regularly use generative AI

tools for work, compared to 20% in developing markets. Among AI "top
The most commonly cited risks for AI adoption are inaccuracy (56%),
McKinsey & performers" (organizations where 20% of EBIT are attributable to AI use),
August 2023 cybersecurity (53%), and IP infringement (46%), though only a minority of
Company firms are less likely to cite AI as intended for cost cutting (19%) than among
firms say they are actively working to address those risks.
all respondents (33%) and more likely to cite potential revenue and value
upside.

Most executives in TMT (71%) and healthcare (67% industries believe they 65% of executives believe generative AI will have a high or extremely high
KPMG June 2023 have adequately prioritized generative AI, while only 30% in consumer and impact on their organization in the next 3-5 years, and 60% say they are 1-2
retail say that it is a priority. years away from implementing their first generative AI solution.

Source: Goldman Sachs Global Investment Research

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 Goldman Sachs Global Economics Analyst

Only Modest Labor Market Impacts Thus Far, Concentrated Among Early
Adopters
Our estimates that generative AI could provide significant upside to economic potential
are based on our assumption that AI will primarily raise productivity for workers that
remain employed, and that while some labor displacement is inevitable, AI will
ultimately increase employment by raising aggregate demand and creating new
AI-adjacent occupations. Nevertheless, some commentators fear a more negative
outcome where widespread adoption of generative AI drives significant labor
replacement and increases unemployment.

The modest current adoption rate makes it hard to draw strong inferences from current
labor market data. So far, however, generative AI appears to be raising gross labor
demand while driving negligible job loss, thereby leading to a modestly positive net
impulse to labor demand.

As the left chart in Exhibit 17 shows, the share of AI-related positions declined in 2022
as tech companies pulled back on aggressive hiring after the pandemic, but stabilized in
late-2022 following the emergence of ChatGPT and subsequently began to rise in 2023.
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While overall AI-related hiring demand remains subdued, the share of AI-related job
openings in the IT sector has surged over the last year and a half, consistent with an
increasing focus on AI in the technology industry. The right chart of Exhibit 17 confirms
these patterns, as new job postings referencing AI are highest in the information
services sector, with professional and financial services also prioritizing AI-related hiring
over the last twelve months.

Exhibit 17: AI-Related Job Openings Have Risen Only Modestly, But They Have Surged as a Share of IT Job Openings and Occupy Larger
Shares of Professional and Financial Openings

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Source: LinkUp, Goldman Sachs Global Investment Research

While AI-related hiring demands have risen modestly, we have yet to see signs of
meaningful AI-related layoffs. Exhibit 18 compares the unemployment rates for workers
that are most exposed to AI automation (defined as those in the top 20% most
AI-exposed occupations) with the rest of the workforce. Unemployment rates across

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 Goldman Sachs Global Economics Analyst

these groups have tracked each other closely since 2022, suggesting little job loss due
to generative AI thus far.

Exhibit 18: AI-Exposed Jobs Have Not Seen an Unusually Large Rise in Unemployment
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Source: Census Bureau, IPUMS, Goldman Sachs Global Investment Research

Limited AI-related job loss is confirmed by the Challenger layoff report, which began
asking whether announced layoffs were related to AI in May 2023. While some
companies may be reluctant to ascribe layoffs to AI automation, layoffs due to AI or
technological change more broadly remained very limited at 20k (or 0.1% of total layoffs)
over this period, although technology-related layoffs have modestly accelerated recently
(Exhibit 19).

Exhibit 19: Thus Far, Mentions of AI in Corporate Layoff Announcements Have Been Limited, Although
Technology-Related Layoffs Have Accelerated Recently

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Thousands Layoffs Attributed to Factor in Corporate Announcements: Thousands
16 16
"Technological Change"
14 "Artificial Intelligence" 14
Total (May 2023-Feb. 2024): 19,855
12 12

10 10

8 8

6 6

4 4

2 2

0 0
May-23 Jun-23 Jul-23 Aug-23 Sep-23 Oct-23 Nov-23 Dec-23 Jan-24 Feb-24

Source: Challenger, Gray & Christmas, Goldman Sachs Global Investment Research

The combination of a clear (albeit modest) increase in labor demand and negligible job

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 Goldman Sachs Global Economics Analyst

loss due to generative AI suggests that thus far AI is likely creating a slightly positive
impulse to labor demand on net. Exhibit 20 confirms this pattern, as the net share of
companies citing an impact from generative AI on labor demand in the Business Trends
and Outlook Survey is (very modestly) positive across all surveyed businesses, both
now and in expectation six months ahead. However, over the next six months, greater
divergence in labor market outcomes across sectors is possible, as some sectors (e.g.,
transportation, accommodation) expect net declines in labor demand while others (e.g.,
information, professional) expect increases. Taken together, these responses would be
consistent with a flat-to-positive overall impulse to labor demand but the possibility of
some concentrated job displacement.

Exhibit 20: Most Firms Have Not Adjusted Labor Demand Due to AI and Do Not Anticipate Doing So in the
Next 6 Months, but Net Labor Demand Has Increased Slightly in Early-Adopting Industries

Net Share of Firms Experiencing a Change in Labor Demand From AI

(% Higher Demand Minus % Lower Demand)
-8 -6 -4 -2 0 2 4 6
Information
Professional, Scientific, and Technical
For the exclusive use of [email protected]

Administrative/Support
Manufacturing
Educational Services
All Industries
Retail Trade
Other Services
Construction
Arts, Entertainment, and Recreation
Health Care and Social Assistance
Wholesale Trade
Real Estate and Rental and Leasing
Finance and Insurance Last 6 Months
Accommodation and Food Services
Next 6 Months
Transportation and Warehousing
-8 -6 -4 -2 0 2 4 6

Source: Census Bureau, Goldman Sachs Global Investment Research

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 Goldman Sachs Global Economics Analyst

Productivity Evidence from Early Adopters

Although it is still early in the adoption process and the ultimate effect of widespread AI
adoption remains highly uncertain, emerging evidence from early adopters can help
benchmark the effect of generative AI on labor productivity. We therefore report all
available productivity effect estimates from both peer-reviewed academic studies (which
have the advantage of utilizing careful research designs to identify the causal impact of
AI on productivity) and company-level reports (which have the advantage of measuring
the AI productivity boost in real-world applications) in Exhibit 21.

There are several caveats to interpreting these estimates.

First, companies and workers that benefit the most from new technologies generally
adopt them first, resulting in a positive “selection bias” where average effects among
early adopters tends to exceed those for a typical worker. Indeed, most of the case
studies in our review focus on software coders, customer support workers, and
consultants, occupations in which workers spend a disproportionate amount of time on
repeated tasks (e.g., drafting and debugging code, answering common client questions,
formatting documents and PowerPoints) that are particularly-well suited for AI
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automation. These initial estimates of AI-related productivity gains could therefore

ultimately prove overly optimistic.

Second, publication and reporting biases could lead to an overstatement of productivity

gains. Academic journals are much less likely to publish studies that find no significant
effects for a given treatment,4 and it is unlikely that many companies would publicly
announce that they found no efficiency gains from AI-related investments given the
market’s current focus on AI-related upside.

However, it is also possible that these early estimates may understate the efficiency
gains from generative AI. The case studies in Exhibit 21 consider the automation of only
a few specific tasks for studied workers, and there is presumably incremental upside if

1d757c24c9944255bcabd5fa0125c074
other work-related tasks were also automated. As a result, these estimates likely
provide a lower bound on the productivity upside for the workers in these studies, and
overall efficiency gains may be higher once the application build out that will enable
automation of a broader set of tasks is further underway.

Despite these caveats, early estimates generally support our view that adoption of
generative AI is likely to drive large efficiency gains. Academic studies thus far have
found increases in labor productivity ranging from 9-56%, with the median study
implying 16% upside and the average study implying 25% upside. Estimates from
company anecdotes are generally similar, with companies reporting productivity gains
ranging from 15-46%, a median boost of 25%, and an average boost of 26%.

4
Chopra, F., Haaland, I., Roth, C. and Stegmann, A., 2024. The null result penalty. The Economic Journal,
134(657), pp.193-219.

2 April 2024 18
 Goldman Sachs Global Economics Analyst

Exhibit 21: Early Evidence From Academic Studies and Company Reports Suggests Labor Productivity Increases by Around 25% Following
AI Adoption on Average
Effect of Generative AI Adoption on Labor Productivity: Estimates
Percent Academic Studies Percent Percent Company Anecdotes Percent
60 60 60 60
Median: 16% Median: 25%
50 Average: 25% 50 50 Average: 26% 50

40 40 40 40

30 30 30 30

20 20 20 20

10 10 10 10

0 0 0 0
Edelman et al. (2023)

Adobe

Paypal

Planview
SAP

Octopus Energy
Twilio

Klarna
Peng et al. (2023)

Abramoff (2023)

Noy Zhang (2023)

Lang et al. (2023)

Peng et al. (2023)

Ernst & Young

Korinek (2023)

Ness Digital
Brynjolfsson et al. (2023)

Dell'Acqua et al. (2023)

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Source: Goldman Sachs Global Investment Research

In addition to finding a sizable increase in overall productivity, several academic studies

provide other insights that are relevant for benchmarking the impact of generative AI.
First, in addition to raising output, several studies (e.g., Dell’Acqua et al. (2023)) found
that AI improved the quality of work. Second, Brynjolfsson, Li, and Raymond (2023)
noted that labor productivity improvements were much larger for novice than
experienced workers, suggesting that AI might speed up learning but be less beneficial
for workers that are already effective at their jobs. Third, one of the largest treatment
effect estimates came from a study considering the effect of AI on medical care
providers in Bangladesh (Abramoff et al. (2023)), suggesting that productivity effects
could be particularly large in EMs if AI enables more efficient dissemination of
information and best practices.

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2 April 2024 19
 Goldman Sachs Global Economics Analyst

Conclusion
We draw three broad conclusions from these patterns.

First, the large increase in AI-related investment and promising evidence of significant
productivity gains among early adopters reinforces our confidence that generative AI will
eventually provide a meaningful boost to economic growth.

Second, still relatively limited adoption rates a year and half after generative AI became a
major market theme and a year since we first flagged its enormous economic potential
supports our long-standing view that any productivity growth boost won’t exceed 0.1pp
until 2027 in the US and 2028 in other DMs, with the bulk of the boost to global GDP
occurring after 2030.

Third, although still very early, the limited number of AI-related job losses so far and
expectations of many employers that generative AI will lead to a net increase in hiring
adds to our confidence that the macroeconomic impact of generative AI will primarily
come via a productivity boost for employed workers rather than widespread job loss.

Of course, the AI transition is still in its early days and there is tremendous uncertainty
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around the impact of AI on investment, the labor market, productivity, and financial
markets, so these views could change as more information and data become available.
We will therefore update this analysis on a quarterly basis going forward to help track
the effects of generative AI on the US and global economy.

Joseph Briggs

Devesh Kodnani

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2 April 2024 20
 Goldman Sachs Global Economics Analyst

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