AI is being viewed as a transformative force akin to past technological revolutions, driving significant investment, reshaping industries, and presenting both opportunities and challenges in energy, regulation, and valuations as we head into 2025.
Comparing the current phase of AI to the early days of cloud computing, Matt Cioppa, portfolio manager at Franklin Equity Group, highlighted the substantial investments by major tech firms, the emergence of generative AI applications, and the energy challenges accompanying AI growth.
“In 2024, we have primarily been in the buildout phase,” Cioppa said. “It is reminiscent of the early era of cloud computing when major technology businesses invested heavily in infrastructure, initially pressuring margins but paving the way for substantial profitability. AI is a transformational shift in computing platforms, akin to the internet or mobile revolutions.” With over $200 billion invested by “Big Tech” this year, Cioppa sees a confident push toward long-term demand for AI solutions.
Generative AI applications are already making waves, with businesses reporting cost-saving benefits. “JP Morgan expects to save around $1.5 billion through AI-enhanced customer interactions and fraud prevention,” said Cioppa, emphasizing the productivity gains AI adoption could bring. However, he cautioned patience: “Major tech shifts take time. It took seven years after the iPhone launch for smartphones to achieve widespread adoption. Generative AI could similarly reshape existing industries and create entirely new ones.”
Addressing AI’s energy demands, Cioppa noted the importance of sustainable solutions. “Generative AI adoption accelerates energy requirements, calling for innovative solutions like nuclear power,” he said. Partnerships between tech giants and energy providers, such as Microsoft’s record power purchase agreement with Brookfield Infrastructure, highlight efforts to secure clean and stable energy supplies. “A diverse energy mix, along with advancements in chip and model architectures, will be crucial to meeting AI’s growing power needs,” he added.
The upcoming US election could also influence the trajectory of technology investments. “Donald Trump’s victory could bring lighter regulation, favouring large technology firms and accelerating mergers and acquisitions,” Cioppa observed. “If Trump reverses Biden’s executive order on AI safety, it could spur innovation as the US competes to maintain its global edge.”
