AI pulse check: Is the AI hype train going off the rails or just picking up speed? 

The ever-mounting billions pouring into artificial intelligence and the hype-inflated valuations of associated companies are raising the spectre of a new .com-style tech stock crash. 

A top analyst for Goldman Sachs recently warned in the NYT that overinvestment in AI could lead to a stark course correction in markets.

In early August, these fears were buoyed when a bloodbath in the so-called ‘magnificent seven’ tech stocks (Apple, Microsoft, Amazon, Nvidia, Meta Platforms, Tesla, and Alphabet) caused them to collectively shed over a trillion in value. 

But is this just part of the normal hype cycle, and what should New Zealand startups pay attention to regarding AI investment and adoption? 

Caffeine caught up with AI Forum Chair Madeleine Newman to get a pulse check on the New Zealand ecosystem and whether comparisons to previous crashes are justified.

 “I don’t think you should say dot com bubble. Yes, probably to a certain extent, because whenever there’s a big hype bubble, things like that happen. But it won’t go away; it’s the real deal.”

Newman points to recent research from the AI forum conducted across New Zealand businesses asking what level of AI they have integrated into their businesses and what results they found. 

“96% of respondents who have adopted AI said that they had gained efficiencies from it,” said Newman.  

“Conversely, only 8% said that they had reduced staffing levels as a result of that and that points to improved productivity on the basic level.” 

Newman acknowledges that the survey results could show a bias towards companies who are most likely to engage with an AI survey also being those most likely to engage with AI. 

But she’s not alone in her optimism. This year, a report by consultancy firm PWC argued that AI could contribute up to $15 trillion USD to the global economy in 2030, more than the current output of China and India combined.

Another report from Microsoft, New Zealand’s Generative AI Opportunity, says generative AI adoption could add $76 billion to New Zealand’s economy by 2038, more than 15 percent of GDP. 

It could also increase worker productivity by 15% in the same time frame. In the best-case scenario, the report argues, the potential gains could reach $102b. 

Being one of the largest players in the space, a report from Microsoft on how fantastic AI is should be taken with a grain of salt, but there is seemingly consensus among experts that AI will boost productivity. The only question is how much and how quickly. 

Kiwi businesses seem to be responding to these trends and are rapidly moving to adopt AI tools. 

Datacom’s recent “State of AI Index: AI Attitudes” research surveyed 200 senior managers across Aotearoa and found AI usage at their companies has surged to two-thirds, up from 48 percent last year. 

That increase reflected a broader trend of rapid AI uptake, with almost 90% of AI adopters 

surveyed introducing the technologies within the last two years. 

Datacom also found a marked increase in the number of respondents describing AI as 

‘exciting’ and who were strongly supportive of its use, up by nearly a quarter on last year. 

But even if a major stock crash doesn’t come and adoption continues at current rates, a more difficult problem to discount is what happens to workers made redundant by increases in productivity. 

As an NZ Treasury analysis noted in July: “AI’s disproportionate impact on higher-skilled tasks might mean employment in higher-skilled, advanced economies like New Zealand is more exposed to the impacts.”

Newman understands those concerns but says reskilling after technology shifts is nothing new and stresses that, based on survey results, AI used in Kiwi businesses is leading to increased productivity with minimal job loss. 

“So the things that businesses in New Zealand have actually done, like implementing a customer service chatbot and some of the cost savings they’ve made, are quite dramatic.” 

“What they don’t talk about in terms of people leaving, what they talk about is in terms of the level of customer service they’re able to give and that call times and the wait times have both reduced dramatically.” 

While AI adoption is undoubtedly increasing, New Zealand still has a relatively high percentage of businesses who want nothing to do with it. 

According to the AI forum’s research, 15% of survey respondents say that they would ‘never’ use AI in their organisation. Newman says this is a statistic we should really be worried about. 

“It’s a very dangerous position to take. Because if you ban the use of AI if you don’t address it from a business perspective, you won’t give your people the tools to be able to engage with it effectively.”

She compares this attitude to how the education sector is grappling with AI, where a consensus is building that banning AI tools isn’t a practical fix and could be counterproductive.  

“So you can try and ban it in schools as much as you like, but the kids are still going to use it. They’re just not going to tell you about it. And I think you’ll send those kids into the workforce less prepared. Even with the existing workforce, that’s what will happen. ‘Never going to use it’ is not a healthy position.”

So while the headlines can sometimes seem apocalyptic, at least here in New Zealand, any AI bubble seems far from bursting. 

Newman says her focus isn’t on potential losses in our future but tangible gains in our present.

“That’s why we keep talking about the real use cases out there and telling stories about how real businesses are using it and how it’s helping those in the knowledge market change the game completely.”