The AI Daily Brief: Artificial Intelligence News and Analysis - 473.5% Increase in Fortune 500's Citing AI as a Business Risk

Episode Date: August 21, 2024

A recent report reveals a 473.5% increase in Fortune 500 companies citing AI as a business risk in their SEC filings. This episode explores the growing concerns around AI’s impact on various industries, from competitive risks to regulatory challenges. Discover how businesses are moving into the acceptance phase of AI adoption and what it means for the future. Concerned about being spied on? Tired of censored responses? AI Daily Brief listeners receive a 20% discount on Venice Pro. Visit ⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠https://venice.ai/nlw ⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠and enter the discount code NLWDAILYBRIEF. Learn how to use AI with the world's biggest library of fun and useful tutorials: https://besuper.ai/ Use code 'podcast' for 50% off your first month. The AI Daily Brief helps you understand the most important news and discussions in AI. Subscribe to the podcast version of The AI Daily Brief wherever you listen: https://pod.link/1680633614 Subscribe to the newsletter: https://aidailybrief.beehiiv.com/ Join our Discord: https://bit.ly/aibreakdown

Today on the AI Daily Brief, the Fortune 500 is fully grocking just how disruptive AI could be. And before that in the headlines, does the CEO of Amazon Cloud think that AI is going to take over the role of developers? The AI Daily Brief is a daily podcast and video about the most important news and discussions in AI. Join the conversation, follow the Discord link in our show notes. Welcome back to the AI Daily Brief Headlines edition, all the daily AI news you need in around five minutes. One of the debates that occasionally pops up on Twitter or some other place is whether AI will kill coding. The idea being that AI is getting very good at coding and so perhaps we won't need coders in the same way in the future. Well, the latest in this debate comes from Business Insider who says in a leaked recording, Amazon Cloud CEO Matt Garman

told his employees that most developers could stop coding as soon as AI takes over. At a fireside chat, he said, if you go forward 24 months from now or some amount of time, I can't predict exactly where it is, it's possible that most developers are not coding. Now that said, there is a lot of nuance here, more certainly than the headline would suggest. The point that Garman was trying to make came out better in this section where he said, coding is just kind of like the language that we talk to computers. It's not necessarily the skill in and of itself. The skill in and of itself is like, how do I innovate? How do I go build something that's interesting for my end users to use?

In other words, this suggests that the job of a software developer won't go away, but will simply change. He continued, It just means that each of us has to get more in tune with what our customers need and what the actual ending that we're going to try to build, because that's going to be more and more of what the work is as opposed to sitting down and actually writing code. Business Insider also went to pains to be clear that Garman was sharing advice, rather than, quote, issuing a dire warning that developers would go extinct. Simply put, being a developer in 2025 may be different than what it was being a developer in 2020. Now, I've talked about this a lot on this show and elsewhere.

The biggest reason that I'm not worried about things like there being fewer developers is that I think in a world where coding gets 10 times as easy, we don't have one-tenth of the developers. We have 10 times the amount of code. We simply build more stuff. Now, trying to put a little bit of data around these transformations, we head over to the GitHub blog, where they surveyed 2,000 people from software development teams around the world.

More than 97% of the respondents reported having used AI coding tools at work. However, there is a huge range of how supportive their companies are of that behavior. On the low end, 59% of German developers say that their company actively encourages AI tool adoption, all the way up to 88% in the U.S. saying that their company encourages AI adoption. So what are the actual benefits from this? GitHub writes that there were a number, including improvements in code quality, development efficiency, and streamlined workflows. They also noted that AI coding tools helped facilitate upskilling and onboarding, basically easing the transition to new programming languages and making it easier to understand

existing codebases. In the U.S., for example, 90% of respondents said that they believed there was an increase in code quality when using AI coding tools, and 60 to 71% of respondents said that AI tools make it easy to adopt a new programming language or understand an existing codebase. And when GitHub asked what they used that saved time on, the tasks that respondents were able to spend more time doing after using AI coding tools, included collaborating with other team members, designing systems and customer solutions, more time for learning and development, more time for researching and experimenting with emerging technology, more time for code review and refactoring, and yes, 34% of developers in the U.S. said that there was also more time for taking breaks.

Really interesting survey, there's a lot more to dig into here. I love that we are moving into a phase where we're getting actual data around how people are using AI rather than just subjective opinions. Another bit of welcome news for developers, OpenAI announced that fine tuning is now available for GPD 40. OpenAI writes that fine-tuning for their most powerful model has been one of their most requested features from developers. With this announcement, GPT40 fine-tuning became available to all developers on all paid usage tiers. A couple other bits of OpenAI news. First, they revealed their first federal agency customer for their Chad GPT enterprise tools, with USAID planning to use chat

GPT to help reduce administrative burden, as well as, quote, make it easier for new and local organizations to partner with the agency. OpenAI. I also announced another publisher partnership this time with Condé Nast, which follows the pattern of most of the partnerships that they've announced like it. The biggest difference here is that for the first time they're discussing their new search GPT tool, which creates more of a context for these publications, which include Vogue and the New Yorker, to show up as an identified source as part of a query with search GPT. For those keeping track at home, OpenAI's publisher partnerships now include the Associated Press, Axel Springer, The Atlantic, Dat Dash, Meredith, Financial Times, Lamon NewsCorp, Prisma,

Fox Media and others. Lastly, today, competition continues to heat up in the generative video space with Luma Labs announcing its Dream Machine 1.5 update. It feels like we are at the beginning of a golden experimental age with generative video, although the question for many speaking of OpenAI is where the heck is SORA. For now, though, companies like Luma are giving us lots of great alternatives at a pace that seems to be increasing rather than decreasing. That's going to do it for today's AI Daily Brief Headlines edition.

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for Superintelligent between now and the end of the month using code so back you will get your first month 100% free. Go to be super.aI and check it out today. Welcome back to the AI Daily Brief. Today we are discussing a recent report showing the significant increase in Fortune 500 companies talking about generative AI and SEC filings, particularly in the context of identifying risks. We're going to get into that report, but the broader context that I want to present this in is a trend that I'm seeing emerging of something of an acceptance phase on the part of businesses when it comes to AI.

We're going to talk a little bit about recent market news. Like I said, we're going to discuss this report. and we're going to situate it in this larger context, and for this, I want to kick off, actually with the same report that I featured in yesterday's episode, but particularly in this first line. After nearly two years of debate, the verdict is in. Genitive AI is here to stay, and its business potential is massive. I think the way that McKinsey chose to frame this is notable, that perhaps there was some room for debate, but at this point, it's just very clear that Gen AI is not going anywhere, and it is going to have a big impact on how people do business.

Now, it's worth noting that this is not a universal perspective. You can still find pieces like this one that ran in The Economist this week that actually goes so far to argue that not only is Gen A.I. not just in its Gardner trough of disillusionment phase, but that it's more likely that it's nothing at all and that it never comes out of that phase. Perhaps a bold prediction, but then again, the economist doesn't make anyone put their name on anything, so we're not going to be able to harang them for years and years and years about this terrible prediction. Still, I really don't believe that that's the dominant narrative right now. In fact, what I'm seeing much more are pieces like this one from Mark Minovich and Forbes.

The real AI revolution has just begun. You're starting to see this notion that perhaps, yes, we are moving past the peak of inflated expectations to use the Gardner term, but in this trough of disillusionment, we're already seeing glimpsons of where people start to figure out what it really means to integrate AI. And so keep that in mind as we look at some of these recent stories. First of all, there's something of a normalization, I think, when it comes to analyst expectations. One of the things that I've talked about a lot is that it's really important to be able to separate

Wall Street questions of AI valuations and AI's hype as a business tool and as a powerful technology in general. These are two separate things. Still, when it comes to the market side of things, this Reuters piece is titled S&P 500 to end 2024 near current levels, suggests AI rally fizzling out. And I think it's important to remember here that literally since the tightening cycle began, which coincided with ChatGBTBTBT being released, AI-related excitement has been the thing keeping the stock market afloat. It has been the bulwark against larger stock instability, and at some point it was inevitable that it was going to wane. We've seen that waning for a couple months now, but this is sort of a softer framing. This isn't about some

big bubble bursting. It's about fatigue with enthusiasm, which I think is a much more likely outcome. The story focuses on a Reuters poll of market strategists that effectively says that the focus of investors is moving away from AI and what it's doing, and towards the beginning of Federal Reserve rate cuts. Once again, this makes sense if you view the boom in AI stocks as somehow tied to the tightening cycle. Now that we're returning to a rate cutting period, emphasis is moving back in that direction. Of course, one of the big questions when it comes to Wall Street and AI is how much the big tech hypers are spending on infrastructure and AI buildout, as opposed to how much money they're making. But even this is a somewhat confusing story. On the one hand, it is

undeniable that these companies are spending gobs and gobs of money, and are doing so fairly unrepentantly, basically all arguing some version of the same thing, that it's a lot more dangerous to underspend right now than it is to overspend. At the same time, it's not like we're seeing no results. The most recent example is summed up by Axios who writes meta's ad biz booms with AI. In the first half of 2024, each meta employee, on average, accounted for more than a million dollars in revenue, which was a company record. In the Wyatt Matter section, Axios writes, made steep cuts in late 2022 and early 2003, but they haven't impacted its business growth,

thanks in large part to AI-driven improvements to the social media giant's recommendation system and ads platform. There is a sense that in the three years, subsequent to Apple's privacy changes in 2021, META made a big bet on changing the nature of its ad business. Axios writes that today all of META's millions of advertising clients use at least one of their AI-driven ad tools called Advantage Plus, which help advertisers choose targets, optimize placements,

and increasingly also, even help with content. creation. Since 2022, there's been a 12% increase in the return on ad spend for meta advertisers. The bottom line, according to Axios, and something that Wall Street has to take into consideration, is, quote, meta's business might never have recovered from Apple's 2021 changes in 2022's advertising industry slowdown if it hadn't rebuilt its recommendation engine and ad platform around AI tools. And clearly, this is just the beginning, as their big Gen AI buildout on AI creative content for advertising continues. Set Zuckerberg back in July. Over the long term, advertisers will basically be able to just tell us a business objective and a budget,

and we're going to do the rest for them. Now, speaking of the company on the other side of that story, Apple, part of the reason that analysts anticipate a sideways sort of movement for the end of the year is that markets have had a chance to digest some key information including Apple's launch of Apple intelligence. Yahoo Finance writes Apple has enormous expectations in its AI-tied valuation, which basically highlights that analysts have priced in Apple's AI initiative being a big success, which creates a lot of pressure on them to perform. What you'll notice from all of this analysis is that it's much more specific, it's much more discrete, it's much more middle of the road, it's much less focused exclusively on AI as opposed

to a combination of factors, and all of that, like I said, leads to something of a feeling of a normalization when it comes to the AI narrative on Wall Street. Behind the scenes, however, speaking of normalization, it's very clear that the Fortune 500 is taking the changes that are being wrought by AI very seriously. Fortune highlighted this arise study, the rise of generative AI in SEC filings, calling out the fact that the number of Fortune 500 companies flagging AI as a risk has soared by nearly 500%. 56.2% of companies in the Fortune 500, 281 companies in total, have highlighted AI as a possible risk factor to their business. That's up from just 49 companies last year. So which companies

have most identified AI as a risk? At the top of the heap is media and entertainment, where 91.7% of the Fortune 500 in that area flagged AI as a risk. That was followed by software and technology, where 86.4% categorized it as a risk. 70% for telecom, 65% for healthcare, 62.7% for financial services, and so on and so forth down the line. Automotive was the company that least identified AI as a risk with only 18.8%. Now, what were the types of risks identified? The report suggests that they fall roughly into four categories. The first is competitive risks, basically failing to keep pace with competitors or achieve AI goals. So, for example, Netflix wrote, new technological developments, including the development

and use of generative AI, are rapidly evolving. If our competitors gain an advantage by using such technologies, our ability to compete effectively, and our results of operations could be adversely impacted. A second category is general harms. This includes things like ethical issues or controversy that arise from the use of AI. A third category is regulatory risk, which basically all reflects the fact that there aren't necessarily clear rules yet, and the unknowns there create their own type of risk. And finally, there are new security risks. Now, interestingly, even though such a significant

number of companies are identifying the risks from AI, a much smaller percentage are citing the benefits. Only 30.6% of companies that mention generative AI cited its benefits or use outside of that risk factor section. The Arise report points out that in general, part of these filings is to err on the side of disclosing more rather than fewer risks, but that this still seems like a missed opportunity. I think it's more than a missed opportunity. I think it reflects the fact that on the one hand, companies have embraced the idea that AI is going to change things, but haven't yet got to the point of actually figuring out what to do with it. This gets back to that report that we described in detail yesterday about how basically employees are racing out ahead of

their firms when it comes to using AI, and that the obvious next development is for firms to try to actually get value on organization-wide business-level objectives. So the point that I'm trying to make with this, is that when you have a 500% increase in the number of firms that are discussing AI with their investors and recognizing its real potential to change the nature and context of the business environment they work in, we may be quote unquote beyond the hype, but that's really only because we are fully into the acceptance phase. Anyway, interesting stuff here, I will continue to track these narrative trends. For now that that is going to do it for the AI Daily Brief. Thanks for listening or watching as always, and until next time, peace.