The digital revolution has accelerated

Artificial intelligence (AI) has animated this year's markets and it is a truly revolutionary development.

| 6 min read

US President Joe Biden has issued another caution about the rise and rise of artificial intelligence (AI). Meeting some of its critics, he said he wishes to safeguard Americans’ rights and safety whilst protecting privacy. He wants to address bias and misinformation, and make sure AI systems are safe before they are released.

That will take some doing, as lawmakers consider what new legislation may be needed. AI has its own speedy trajectory of growth. Much of what the president wishes to achieve will need to be done by those installing and using AI systems. No sensible company wants to run on bad data or biased interpretation. Fraud, impersonation and libel are already against the law, whether a computer helps or not.

The digital revolution we have long seen unfolding has accelerated this year. In 2020-21, the big surge forwards came from the results of Covid-19 lockdowns. As central banks pushed money into asset markets to offset some of the impact of all the closures, digital companies were there to provide some life and service to the millions huddled at home against the virus. People bought new and additional smart phones, computer pads and laptops.

Amazon built an amazing extended delivery service to supply so much more to more people who had to order on line. Netflix blossomed with many more film downloaders, social media mushroomed as people separated from friends and family needed new ways to keep in touch, and services such as Zoom and Teams became a normal part of family and business life. People who had been shy about mastering technology or hostile to the idea of remote anything had to adjust and take up the internet offers to have any kind of life. It was bonanza time, and shares responded accordingly.

AI has fuelled a tech recovery

Last year, the ending of central bank bond buying and the sharp rise in interest rates hit technology stocks hard as people rushed to take some profits made in the glory days of lockdown. This year has brought recovery. After the Covid-19 surge came a slowdown in sales and rental of devices and use of online services. Now another set of powerful growth forces has emerged. We have lived through the dramatic rise of the cloud and are entering the AI wave.

The more people and businesses rely on the internet, modern fibre networks and computing power to shop, meet, transact and be entertained, the more storage and processing capacity is needed. Data is expanding all the time as governments publish more statistics and laws, as businesses keep more records and as people expand their photo and video albums.

Most of this must be stored, with customers told they can keep a great deal rather than having to spend time with the delete button. Businesses have sprung up to offer large data stores with fast processing and transmission when required. They try to offer good cyber security, back up and protections against damage, fire, theft and other hazards. Far from being up in the clouds, these services are provided from modern warehouse buildings on business parks often close to major cities.

The US giants have so far controlled the growth and dominated the market. Amazon has 33% of the cloud storage market, Microsoft 23% and Google 11% – making a total of two thirds. The US is way out in front, with 2,701 data centres to Germany's 487, the UK's 456 and China's 443. The demand for more storage is likely to continue to grow with people just assuming they will have easy access to historic data, old photos and movies, social media comments and emails. The arrival of AI will lift again the amount of data businesses will want to access easily and to have on tap for executives and customers to be able to see.

Monetising the revolution

AI will prove to be a wide-ranging set of applications of much faster processing power for yet more data and language. It will be enhanced search, machine learning, machine designed software from lay instructions and much else. Many varied businesses will need to use it and adapt to what it offers. It provides scope for considerable improvements to productivity and quality of work in a wide range of professional services, teaching, healthcare and other areas.

The main service providers will find ways to remunerate their companies. What is beginning as a free service through ChatGPT and Bard will probably evolve. There will be business services that require fees and protected access. There will be improved consumer services that require fees or user charges. There may be additions to software payments when a consumer buys a new machine, or monthly subscriptions to get the full service.

The more the AI does, the more it will be subject to attack.

There will be money to be made from using data as well as its collection and storage. Many companies will continue to hold proprietary data and will have varied permissions from their customers over whether and how they can use it or sell it on. There are clear business needs to offer enhanced cyber protection. The more the AI does, the more it will be subject to attack and there will be an increasing need for electronic and physical protections of the processors and stores. There will be a requirement for better programmes and screens to avoid AI offering advice based on false sources, and to allow a more direct and tailormade relationship between AI service and the user. AI may well adapt to offer materials and research related to the person's interests and style.

Life will not be the same again, as these greatly enhanced processing and storage capabilities give many an AI Assistant to help them do their jobs and lead their lives. Just as the printing press and the mobile phone were truly revolutionary developments that changed a great deal, so will AI, enhanced search and machine learning work their way through transformations of many businesses.

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