Here’s a rewritten version of the text with minimal loss of volume: --- This is The Takeaway from today’s Morning Brief, which you can subscribe to receive in your inbox each morning, along with: - The chart of the day - What we're keeping an eye on - What we're reading - Economic data releases and earnings updates The rapidly evolving field of generative AI has been filled with bold predictions about its potential as a groundbreaking technology. However, recent months have seen a rise in skepticism. Nvidia, widely considered a star in the generative AI arena, has struggled to regain the peak values it reached in June. The New York Times featured a profile on Goldman Sachs' AI skeptic and head of research, Jim Covello. Now, Bain & Company, a leading consulting firm, has made a significant new prediction: “The market for AI-related hardware and software is projected to grow annually by 40% to 55%, reaching between $780 billion and $990 billion by 2027. ” David Crawford, chairman of Bain’s Global Technology & Cloud Services practice and co-author of the report, shared with Yahoo Finance that firms of all sizes are investing in AI, not just the major tech players. “We were surprised by the speed at which the number of companies allocating over $100 million of their annual IT budgets to AI has doubled, especially among large enterprises, ” Crawford noted. He emphasized that this trend spans the entire business spectrum, with smaller enterprises also increasing their expenditure significantly. “Regardless of the spending category or IT budget threshold, expenditures are rising almost uniformly, ” he added. Bain’s projections, alongside Micron's optimistic outlook for robust demand for its AI-enhancing high-bandwidth memory chips, have provided a boost to the generative AI market this week. BlackRock’s Kate Moore remarked to Yahoo Finance, “I don’t think we are even close to reaching the midpoint of the AI spending cycle. ” Most investors who are bullish on the overall AI narrative seem to concur, despite some figures reflecting a pullback after substantial initial growth.

This year has shown a pattern of AI stocks surging and then retrenching as traders reassess valuations and potential returns on investment, only to surge again and repeat the cycle. Moore made an analogy to constructing infrastructure in a new city, stating, “A city can't thrive without roads, sewers, and public transport. The same holds true here. I believe these tech giants are aware of what they’re doing and consider their current spending just a fraction of their total possible return. ” However, the volatile stock movements may persist, as Bain’s report also warns of potential hurdles ahead. The authors suggest that revenue growth among software companies is slowing, as they face pressure to showcase greater efficiency driven by generative AI. Additionally, rising AI demand could lead to a semiconductor shortage. Of course, some investors believe the current levels of spending are already factored into the prices. Michael Darda, chief economist and macro strategist at Roth Capital Partners, voiced his views in an interview, saying, “I don't doubt that these innovations are revolutionary. However, there's a significant amount of hype. Historically, periods of innovation tend to correlate with what appear to be bubbles or mini-bubbles. Typically, one doesn’t see just a stabilization at historically high valuations indefinitely; rather, things usually start to decline. ” Click here for the latest technology news that could influence the stock market.