Recent advances in the development of Artificial Intelligence (AI) could lead to potentially disruptive changes across various industries and impact economic activity through multiple channels, believe experts. Amundi Asset Management uses the Cobb-Douglas production function to ascertain that “AI could impact growth not only through higher productivity but also through its direct impact on labour and capital inputs.” Notably, the French asset manager also reveals that the impact of AI in the short term may be significantly different from that of the long term.

According to Annalisa Usardi, Senior Economist at Amundi, capital investments are a key dimension in implementing AI. She cites a recent McKinsey report called ‘The State of AI’, which highlights that in 2022, AI adoption was 2.5 times more than in 2017.

Meanwhile, Bastien Drut, Head of Thematic Macro Strategy at CPR Asset Management, elucidates that the impact of AI on labour displacement remains uncertain. However, it has become increasingly important to reskill workers because some skills become obsolete, and they need to adapt themselves to work with AI. “While there will be some displaced workers, there will also be new jobs and new types of jobs,” Drut comments.

According to Amundi, it is difficult to estimate the potential impact of AI on productivity, which could be largely sector-specific. “Studies that focus on the most recent developments of generative AI – the impact on cognitive workers – find that AI could improve productivity by 10-20%,” reveals Usardi.

While discussing about ‘productivity paradox’, the asset manager highlights how social, political, and economic factors impact the pace of AI adoption. “The low take-up of technological innovations has often been cited as one of the main causes of the weak productivity performance at the beginning of the 21st century,” Drut explains. Amundi further states that public policies to deal with such hurdles could lead to faster adoption.

The asset manager also ascertains that the wider adoption of AI is inevitable and that it would positively impact productivity and economic growth. However, Amundi cautioned investors to be careful despite the fruitful prospects. “But investors also need to be mindful that AI will be disruptive in the short term and will adversely affect profitability and returns in a number of sectors,” argues Drut.

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