Chipmaker Nvidia’s blockbuster earnings report last week showed that companies are willing to spend big money on artificial intelligence (AI). Within a company, this part of the funding is usually allocated directly by the top management.
Unlike previous waves of innovation fueled by internal budgets within IT departments, some companies are setting up budgets specifically for AI. These funds are typically earmarked by the CEO, meaning that using AI technology is a priority at the top.
Nvidia chips power all the most advanced AI systems, and the company’s market share is estimated to be higher than 80%. The power of this wave of AI was fully demonstrated last Wednesday, when Nvidia announced that its sales for the fiscal quarter ended January 28 reached 22.1 billion U.S. dollars, and it expected sales for the current fiscal quarter to be 24 billion U.S. dollars, both three-month highs for the same period last year. More than double, exceeding Wall Street’s optimistic expectations.
A large part of the demand comes from technology companies, which use Nvidia’s graphics processing units (GPUs) to build physical AI infrastructure to meet the growing needs of enterprise customers.
But as Nvidia CFO Colette Kress pointed out, “Building and deploying AI solutions has touched almost every industry.”
Diogo Rau, Eli Lilly’s chief information and digital officer, said he sensed enthusiasm for AI technology during the drugmaker’s annual budget planning cycle. “I got twice as much money from my boss and other members of the executive committee because everyone wanted us to invest in AI,” he said.
Rau, who reports directly to the CEO, said Eli Lilly has set up a pool of funds specifically for AI projects. Rau is somewhat of a trustee for the allocation of funds, but the pool does not take money away from other investments being made in the technology sector. Rau declined to disclose how much money would be invested in the AI project, saying only that it was “very large.”
“We always want more money, or we thought we always wanted more money, but now we have more money than we know what to do with,” Rau said. He also said: “We are facing a big challenge. pressure to innovate.”
Professional services firm KPMG surveyed 400 U.S. CEOs last year, and 72% of respondents said generative AI was a top investment priority.
Generative AI can create a variety of content including text, images, videos, and audio based on user prompts. After OpenAI released its chatbot ChatGPT at the end of 2022, the popularity of generative AI surged.
“In the last year, we’ve seen generative AI truly become a new application area and a new way of computing,” Nvidia co-founder and CEO Jensen Huang said last Wednesday. “A whole new industry is taking shape, and that’s what’s driving our growth.”
What AI can do
Bill Nash, CEO of CarMax, the largest used car retailer in the United States, said that the company has applied machine learning (a branch of AI) to its business strategy of combining branches and physical stores.
“Generative AI is something new and we’ve started to leverage it in a number of ways to support the business, and I’ve set aside budget to look at how we can incorporate generative AI into services to further improve the customer and employee experience,” Nash said.
For example, CarMax executive vice president and chief information and technology officer Shamim Mohammad said last year that the company used AI to create a virtual “cleaner” that could inspect photos of cars and retouch imperfections in the background, such as a dirty garage floor. The company also uses AI to provide near-instant quotes to used car owner customers.
Nash said CarMax has taken steps to ensure the technology is used responsibly and with appropriate safeguards in place. He said he has made it a priority to educate himself and his board about opportunities in generative AI.
Alan Schnitzer, chief executive of insurance company Travelers, said the company’s total technology spending has grown over the past five years, reaching more than $1.5 billion in 2023. The company said it expanded spending on strategic technology initiatives by nearly 70% during that time. “This includes a significant increase in investments to develop or acquire cutting-edge AI capabilities based on modern cloud technologies,” Schnitzer said during an earnings call last July.
Schnitzer said the potential uses of AI technology in the insurance industry are diverse.
He said on this conference call that some of Travelers’ current AI applications are aimed at improving efficiency through automation and enhancing business capabilities such as underwriting, claims processing, and service delivery.
“In terms of the most advanced applications, we are leveraging large language models for generative AI, and we have been doing this for several years,” he said. Large language models are deep learning algorithms that are trained on massive amounts of data, Ability to summarize, create, predict, translate, and synthesize text and other content.
Across the company’s bonds and specialty businesses, proprietary large language models have processed hundreds of thousands of broker submissions, allowing the company to reduce processing times from hours to minutes, he said.
“Importantly, we did all of this while significantly improving our expense ratio, thanks in large part to our successful investments in technology,” Schnitzer said.
opportunity
Consulting firm AlixPartners surveyed about 3,000 executives around the world, asking them what they saw as their biggest challenges and opportunities. “Frankly, I thought they were going to say generative AI was the biggest challenge,” said Simon Freakley, CEO of Arrow. “In fact, it’s not in their top five challenges, but it’s the number one opportunity.”
The question is why this conclusion is reached. According to Freakley, the efficiency implications are obvious, and it’s well understood how call centers and supply chains can work better with generative AI. “The less obvious question is, how does AI drive growth?” he said. “My personal opinion is that the person who will win in the future is not the person with the best large language model, but the person with the best data set.”
Data is key to the development of ChatPG, a generative AI platform owned by consumer products company Procter & Gamble. Vittorio Cretella, the company’s chief information officer, said the platform launched last year is used to summarize consumer research and development ideas that are helpful for product development. Cretella said the platform helped reduce “idea generation” time from weeks to hours.
He said the launch of ChatPG reflected preparations over the past four years, including investments in a data foundation, an “AI factory” and the recruitment and development of the right talent.
“Our leadership understands how investing in AI can create superior solutions for our consumers,” Cretella said.
At The Wall Street Journal’s CIO Network Summit this month in Menlo Park, Calif., Cisco CIO Fletcher Previn said he was working to start from the top of the company Fight for more AI funding there.
“Like everyone else, we have no money because we are an IT department and every penny is earmarked,” he said.
Previn said he has been communicating with senior leaders to explain the opportunity costs of not introducing generative AI sooner. “You don’t want to miss out on possibly the most important technology of the last 100 years because you can’t meet your fourth quarter budget,” he said.
2024-02-28 03:15:00
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