Generative AI will Boost Corporate Profits Predicts Bank of America Survey

Bank of America (BofA) has published a survey that implies there will be a massive boost to corporate profits because of generative artificial intelligence (Gen AI).

The survey suggests AI implementations are moving from pilots to production, which could boost S&P operating margins by 200 basis points over the next five years, equivalent to approximately $55 billion in cost savings annually.

The survey, AI: From evolution to revolution?, was conducted in August and posed questions to 130 of BofA's equity research analysts, the individuals who compile financial projections for publicly traded companies. 

The analysts covered over 3,400 companies in 25 industry sectors from software to insurance to food and beverage.

The survey includes examples such as insurance companies expediting the process of underwriting a property by replacing manual internet searches with AI-powered aerial imagery and web scraping to determine the condition of a roof or if nearby hazards exist.

Another example includes an e-commerce service provider using an AI-powered customer service bot to reduce the need for 700 human customer service agents, which might increase its profits by $40 million this year.

Software is the industry that may see the greatest product margin expansion (5.2%) due to Gen AI, followed by the semiconductor and energy sectors.

The least likely sectors to benefit are healthcare equipment and services and telecommunications, which may see a deterioration of profit margins, according to the bank.

The survey cautions that a lot of infrastructure has to be built out, which will take time, before profits materialize in every industry.