Early adopters look to cash in on AI hype

There is more to investing in technology than simply following the hype, according to a new study. Financial services organisations, technology, media and telecoms firms are all enjoying higher three-year returns thanks to AI technological developments, but ERP and IoT investments still offer a greater long-term financial impact – despite those forms of technology receiving comparatively little media coverage compared to cloud and machine learning.

An analysis by Deloitte and MKT MediaStats shows that public-company news mentions of AI has reached new frenzied levels in 2023. With the release of ChatGPT and Google Bard, hype has quickly grown around a ‘generative AI renaissance’ that promises endless possibilities for early adopters.

According to the research, using these news mentions as a baseline, the excitement around AI is having a knock-on impact on listed company’s share-price returns, when they announce new initiatives around the technology. The analysts found that financial services firms investing in AI have seen three-year returns that are 6% higher than market averages, while technology, media, and telecommunications companies have seen 12% higher three-year returns.

What’s more, the data suggests that organisations investing in AI outperform others in stock returns for as many as eight quarters after the investments. With AI investments still on the rise, the advent of generative AI alone has already seen hype eclipse talk of the cloud – with many calling it the next “iPhone moment” – impacting businesses and consumers alike in a way that will revolutionise how we live and interact.

This might also carry a note of caution, however. While the media coverage intensity of cloud, machine learning and wider AI changes remain at an all-time high, their long-run stock return seems to be eclipsed by another form of technology, which is much less eye-catching.

Enterprise resource planning (ERP) is a type of software system that helps organisations automate and manage core business processes for optimal performance. According to Deloitte’s study, media interest in the technology remains low – at a quarterly mean of less than 0.5% of technology media coverage, compared to cloud and machine learning, which have both hovered at 6%.

Despite this, the research suggests that long-term stock returns from ERP are more impactful than machine learning in the end. Over 12 quarters, ERP-related stock rises by 2%, while machine learning peaks at around 1.5% after six quarters. Similarly, investments in the Internet of Things (IoT) – which encompasses electronics, communication and computer science engineering, interlinking different machinery to optimise its performance – receives less media coverage, at around 1% of technology media coverage. But it can also deliver a 3% stock return over eight quarters.

Ultimately, Deloitte’s study concludes that getting the most out of technology investments comes down to “being intentional about aligning tech investments with your organisation’s strategy to create the future you imagined”, rather than chasing hype. AI investments ultimately need to follow this model, and be based according to need rather than fear of missing out, if they are to maximise their value.