A new report has revealed that 8% of decision-makers in the UK and 7% of those in the US plan to invest more than $25m (£19.5m) in AI initiatives this year. This comes after many investors raised concerns about the technology’s capabilities and its potential return on investment.
According to the State of AI 2024 report from technology consultancy Searce, a quarter of decision-makers said their organisations would spend between $11m (£8.5m) and $25m (£19.5m) on AI in 2024.
The main reason for making these investments was to drive new business growth, as cited by 31% of UK respondents and 35% of US respondents, and this appears to be paying off from their perspective.
More than 90% of UK decision-makers surveyed consider their AI initiatives to be “successful” and almost a third plan to increase their AI spending by up to 50%. A further 8% said they would see investments increase by up to 100% or more.
The findings are based on a survey conducted in June and July this year of 300 senior executives and technology executives at organisations with at least $500m (£390m) in revenue.
The report notes that 70% of business decision-makers already have at least three generative AI use cases in place as a result of their investments. These include tools for customer service, internal research, content generation, marketing and sales, coding, analytics and data capture.
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However, while 51% of respondents considered their investments to be “very successful,” only 42% said they were “somewhat successful.”
“The disparity between highly and relatively successful initiatives suggests a maturity gap in AI implementation,” the report’s authors wrote.
“This represents an opportunity for organizations to focus on talent development, data quality and robust assessment metrics to improve their AI capabilities and achieve greater ROI.
Paul Pallath, vice president of applied AI at Searce, said in the report: “With AI, organizations often focus on short-term, easily achievable goals, resulting in substantial technology and process debt that becomes costly to manage as the organization grows.”
The authors added: “To generate a true return on investment, organizations must stop blindly investing in these initiatives and hoping for the best and instead adopt a results-focused approach supported by appropriate governance, measurable frameworks and change management processes.”
UK business leaders are concerned about the lack of AI talent to support their investments
Respondents were asked what challenges they are most concerned about when adopting AI. Among UK decision-makers, 19% cited a lack of skilled talent.
The level of “skills shortage vacancies” – where a job cannot be filled due to a lack of skills, qualifications or experience among applicants – is very high in the UK’s information and communications sector. The figure rose from an already high 25% in 2017 to 43% in 2022, the latest year for which data is available.
A recent report also found that the UK is the 25th most technically competent country in Europe, far behind other digital leaders in the region such as Germany, France and Spain.
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The UK government has identified a shortage of digital skills in the country and has made a number of key investments over the past year to try and address it. In November 2023, over £200m was announced to support universities and colleges to offer more training opportunities in sectors including digital.
In March this year, Science Secretary Michelle Donelan unveiled a further package of more than £1.1bn to fund 4,000 PhDs in engineering and physical sciences.
Microsoft has also made significant investments to close the digital skills gap in the UK. In December 2023, the tech giant announced a “multi-million pound investment” to provide AI skills training to over a million people.
US business leaders are concerned about the privacy and security of their AI data
According to Searce’s study, the biggest barrier to AI adoption was different for US decision-makers: 20% of respondents said it was data privacy and security. This is linked to apprehension about safeguarding sensitive information, ever-changing regulations, and maintaining customer trust.
“This skepticism may be due to high-profile failures or exaggerated expectations that are not met, leading to caution in AI investments,” the authors wrote. Among those high-profile failures are DPD’s chatbot insulting customers, Microsoft’s Twitter trolling bot, and Google’s Bard (now Gemini) model incorrectly answering a question at the time of its introduction, causing Alphabet’s stock to lose $100 billion.
There is also tangible evidence that the importance of AI capabilities has been overstated. A recent Stanford study concluded that AI is still not as good as humans at complex, advanced-level math problem-solving, common-sense visual reasoning, and planning.
A 2022 Deloitte report found that the percentage of organizations in the “low performer” category for AI (high implementation/low results) increased from 17% to 22% in one year, suggesting that results are lagging.
SEE: Data Scientist Survey: Do Tech Leaders Believe the AI Hype?
Investors are concerned about the return on investment in AI, and companies should be too
Julian Mulhare, Managing Director for EMEA at Searce, said in the report’s press release: “As global investments in AI continue to rise, as our research has shown, it is critical that businesses focus not just on spending, but on the tangible returns these investments can generate.”
This point has been emphasized by investors who have expressed concerns about when, or if, the huge cash injections into tech companies developing AI models will bear fruit.
Goldman Sachs equity analyst Jim Covello wrote in a June report: “Despite its high price tag, the technology is far from where it needs to be to be useful… Overbuilding things that the world has no use for or isn’t ready for often ends badly.”
David Cahn, a partner at Sequoia Capital, argued in a blog post that the AI industry would need to generate a whopping $600 billion a year to pay for its hardware spending.
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According to S&P Global, combined capital expenditure by Microsoft, Alphabet and Meta is up 60% year-over-year as a result of AI investments. Alphabet alone spent $13 billion in the second quarter, up 91% from Q2 2023, putting pressure on profit margins.
However, Meta CEO Mark Zuckerberg said during the company's Q2 2024 earnings call that he expects it will be “years” before the company monetizes its AI products. Such discouraging comments from Zuckerberg helped the stocks of the “magnificent seven” American tech companies (NVIDIA, Meta, Alphabet, Microsoft, Amazon, Tesla and Apple) lose a total of $1.3 trillion in five days in early August.
And while business leaders may be excited about the prospect of increased internal efficiency thanks to AI, consumers don’t necessarily share this optimism. A new study from Washington State University found that the presence of the term “artificial intelligence” in a product description actually “decreases purchase intent.”
This is largely due to a lack of confidence in AI capabilities and the perceived risk associated with elements such as loss of control and privacy. Companies must therefore be aware of the return on investment of applying AI to their products, as well as its internal implementation.
