You’re Wrong About AI
You’re probably using AI wrong – that’s the message that MIT gave us after their report that 95% of companies in the dataset, generative AI implementations are falling short.
Despite the rush to integrate powerful new models, about 5% of AI pilot programs achieve rapid revenue acceleration.
This pours cold water on the concept that AI will become that force multiplier for everyone and anyone.
That’s why we are seeing this sideways “toppy” price action in the Nasdaq (COMPQ) lately.
The truth is that AI will only be deployed successfully by a small group and could expand to the low teens in percentage in the future.
There is still a lot that is not understood about Generative AI, but to believe that it will cause all boats to rise with the tide is foolish.
Glorious blow-ups are still something very real, and that could easily happen by misusing AI or misinterpreting the value of an AI tool to one’s business.
Over half of generative AI budgets are devoted to sales and marketing tools, yet MIT found the biggest ROI in back-office automation—eliminating business process outsourcing, cutting external agency costs, and streamlining operations.
What’s behind successful AI deployments?
How companies adopt AI is crucial. Purchasing AI tools from specialized vendors and building partnerships succeed about 67% of the time, while internal builds succeed only one-third as often.
The MIT report suggests that successful AI adoption requires empowering line managers, selecting adaptable tools, and focusing on high-ROI applications like automation of repetitive tasks.
Companies that pivot to these strategies could drive significant productivity gains, potentially boosting earnings and stock valuations. McKinsey predicts AI could contribute $15.7 trillion to global GDP by 2030, with tech giants like Microsoft, Alphabet, and Meta well-positioned to capitalize due to their scale and infrastructure.
However, the “trough of disillusionment” predicted by Gartner for 2026 suggests a period of tempered enthusiasm before AI matures into a proven productivity tool.
The big takeaway from this report is that there will be a moderate pullback in AI stocks at some point, but probably not the Mag 7 stocks, which are harvesting most of the AI gains. Therefore, the indices could power ahead.
Another takeaway is that it will be almost impossible for a small, unknown company to take a big piece of the AI pie.
The forces that be won’t let it happen.
Most of the gains will head to Nvidia and the Mag 7, who are harvesting those leading infrastructure through data centers.
AI will need a lot of data centers, but at a software level, it becomes harder to decipher if managers will be able to implement it properly.
The report referenced marketing as the main target for AI, but that has shown no fruit.
If backend efficiencies are the best ROI for AI, then what to do next if that’s taken care of?
It appears that there seems to be a limit in which AI will help, and that means long-term, many smaller companies will run up against the limit while the Mag 7 keep rolling on.
Avoid the smaller AI plays for now and focus on larger companies that move the needle. Moving the needle is what count,s and not some designer tech with any numbers behind it.
