In 2024, the landscape of artificial intelligence (AI) continues to captivate global interest, AI focuses on growth. However, investors eyeing immediate financial gains may need to temper their expectations, barring a few notable exceptions.
Limited Direct Monetization, AI Focuses on Growth
Gil Luria, a managing director at D.A. Davidson, shared with Yahoo Finance that while AI adoption is on the rise, direct monetization remains elusive for most companies. Rather than offering AI as a standalone product, many software developers are integrating AI capabilities as enhancements to existing services or as incentives for upgrades.
Despite the nascent stage of generative AI tools and their ongoing refinement, companies prefer to bundle these offerings to encourage widespread adoption. This strategy, while delaying direct revenue generation, is pivotal in fostering AI’s material growth in the software industry.
AI Focuses on Growth: Investor Enthusiasm and Market Trends
Investor excitement in AI is undeniable, as evidenced by the impressive performance of the Software ETF IGV, outpacing both the Nasdaq Composite and S&P 500. This surge is largely attributed to the growing fascination with AI technologies. However, companies are under pressure to demonstrate tangible AI advancements to sustain investor interest and stock value.
Leading Players: Microsoft and Adobe
Microsoft and Adobe emerge as exceptions, according to D.A. Davidson’s analysis. Adobe has successfully integrated generative AI into its creative suites, offering a unique generative AI credits system. This model encourages users to invest more in these AI functions.
Microsoft stands out with its Copilot services, charging additional fees for AI assistant access within its Microsoft 365 and GitHub offerings. However, Azure, Microsoft’s cloud service, remains a cornerstone for AI revenue, providing developers access to OpenAI’s large language models for application development.
Salesforce: A Model for Future Software
Software aiding client-facing roles shows great promise. Current generative AI applications excel in text generation, summarization, and text-to-image generation. Salesforce’s AI assistant, Einstein Copilot, capitalizes on these capabilities and is set for a public launch, backed by Morgan Stanley’s optimistic stock upgrade.
Data plays a crucial role in AI’s evolution. Companies with superior data access and integration capabilities, like Salesforce, are positioned favorably. Salesforce’s recent advancement in integrating unstructured data into its Data Cloud product highlights the importance of comprehensive data in enhancing AI accuracy and reducing errors.
Future Trends: Efficient AI Models and Interoperability
The focus is shifting from large, universal models to smaller, more efficient AI models tailored to specific business needs. Companies like Microsoft and Salesforce are pioneering these cost-effective models. For instance, Microsoft’s internal development of smaller AI models aims to reduce operational costs and dependency on larger models like those provided by OpenAI.
Looking ahead, the integration of AI across platforms suggests a future where AI assistants from different domains communicate, enhancing efficiency and user experience. The ultimate goal for these AI-driven platforms is not just operational efficiency but also profitability.
In summary, while 2024 may not be the year of substantial direct AI monetization, the groundwork laid by key players and emerging trends in AI efficiency and data integration signal a promising future for the industry. Investors and companies alike may find the long-term prospects of AI far more rewarding than immediate financial returns.
