The launch of ChatGPT by OpenAI last year triggered a wave of optimism that artificial intelligence (AI) will transform the economy for the better. Companies which are best placed to exploit the new technologies have seen their share prices go through the roof as investors bet that they will make huge profits.

Often the hype surrounding new inventions is overdone. It is only a few years ago we were told 3D printing would transform the world, but that hasn’t happened, and self-driving vehicles have supposedly been imminent for many years now.

But there is little doubt AI will make a big difference to the world in the coming decade or two. Its potential applications are almost unlimited and many have already been proven.

The future’s here

It’s worth listing a few examples. AI is expected to lead to cheaper and more accurate ways to deliver professional services. It should help identify the best pesticides for the agriculture sector, the best metals for construction, and the best compounds to absorb pollution. AI is already being used to find new uses for existing medicines and for medical diagnostics. And it is central to the design of driverless vehicles.

On top of this AI may accelerate the pace of innovation itself, because it should be able to sift through evidence faster than we mortals. And paradoxically, machines could be better than humans at “thinking outside the box”.

Boost to growth

The closest historical parallel to AI is probably the ICT revolution of the late 1990s and early 2000s when personal computers and the internet were adopted. This suggests countries which fully embrace the new technologies could see their growth rate increase by 1 per cent or more per year for several years.

That said, the AI revolution will not happen overnight. It took only a few days for ChatGPT to reach millions of people but companies will not move as quickly. It takes time and money to roll out new technologies. And regulations may restrict the use of AI or the pace at which machines can replace humans.

So the benefits from AI will probably ripple through the world in the late 2020s and 2030s rather than appearing in a flash over the coming weeks or months.

What’s more, not all countries will embrace AI with equal enthusiasm. Personal computers and software were adopted rapidly in the US but more slowly elsewhere. And if anything, there is likely to be more resistance to the adoption of AI because of the legal, ethical and regulatory concerns it raises.

Robots taking jobs?

Not surprisingly, much of the commentary about AI has focused on the risk it poses to jobs. After all, many workers and some entire professions will become redundant. Studies estimate between 20 per cent and 50 per cent of full-time jobs in the US are exposed to automation.

The job categories which are at greatest risk include “business professionals”, “managers” and “science and engineering professionals”. Even Hollywood actors fear for their future. In contrast, jobs such as “cleaner”, “nurse” and “carer” are much less vulnerable.

Nonetheless, fears of a big rise in unemployment look misplaced. There will be new AI-related roles such as for developers, supervisors, managers and regulators of AI. And AI will in many cases complement, rather than replace, existing jobs.

Also, the AI revolution will boost demand and free up people to take on new jobs throughout the economy. This is what has always happened in response to technological progress in the past.

Winners and losers

As with any new technology there will be winners and losers. Not surprisingly, it looks as if the US will be the biggest winner while China is not far behind – though it remains to be seen how far the Chinese political system restricts the use of AI.

Elsewhere, the economic benefits of AI will depend on how fully governments and companies embrace it. In the past information technology was adopted rapidly by the Netherlands, Sweden and the UK whereas southern Europe and much of the emerging world benefited less.

As for the stock market, current valuations of AI-related companies are high by any standards and reminiscent of those during the dotcom boom, which ended in tears for many. It is always difficult to predict which companies will succeed and which will fall by the wayside – and I doubt that AI will be able to help us decide.