AI Has Potential to Boost Industry Margins Significantly Over Five Years, Yet Adoption Remains Slow
According to the Census Bureau, only 5% of the American companies have adopted AI in the past two weeks which shows that many businesses do not seem quite enthusiastic with AI adoption. But AI can still boost the creativity of these businesses even if their progress is slow.
To find out how much AI can impact operating margins, around 3,400 companies were analyzed (by Bank of America Institute) which had the combined market cap of $90 trillion.
According to the analysis, AI can cover the operating margin of 23 out of 25 industries. In the next five years, AI can boost industry margin up to 5.2% in software firms while it can increase margin up to 4.8% in semiconductor industry.
Energy industry can have a 3.1% margin due to AI in the next five years and implementation of AI can be done in various sectors like pipeline monitoring, exploration and environmental monitoring. Many AI pilot programs are being launched by companies like GE Vernova, Shell and Schneider Electric.
Media and entertainment industry can also grow its margins by 2.6%, as generative AI is helping in content production and automating repetitive tasks.
All in all, AI can save up to $55 billion annually in different industries which shows that it has a potential of reshaping the industries and increasing productivity.
| Industry | Projected % change in margins over the next 5 years |
|---|---|
| Software | 5.2 |
| Semiconductors | 4.8 |
| Energy | 3.1 |
| Utilities | 2.9 |
| Media & Entertainment | 2.6 |
| REITs | 2.5 |
| Transportation | 2.4 |
| Commercial Services | 2 |
| Consumer Durables | 2 |
| Capital Goods | 1.9 |
| Consumer Discretionary | 1.8 |
| Consumer Staples | 1.7 |
| Consumer Services | 1.5 |
| Autos | 1.3 |
| Real Estate | 1.3 |
| Tech Hardware | 1.3 |
| Materials | 1.3 |
| Banks | 1.2 |
| Insurance | 1.1 |
| Food & Beverage | 1 |
| Household Products | 1 |
| Financial Services | 0.9 |
| Biopharma & Life Sciences | 0.8 |
| Telecommunications | -0.5 |
| Healthcare Equipment & Services | -1 |
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