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The ascent of generative AI — What investors should know

Wells Fargo Investment Institute discusses its view on how investors should navigate the generative artificial intelligence (AI) landscape.

Key takeaways

  • Wells Fargo Investment Institute believes AI in general has the potential to transform broad swaths of the economy outside of the software industry.
  • We think it is too early to tell how much traction companies will gain in terms of monetizing consumer interest and how quickly enterprises will broadly adopt generative AI going forward.
  • We favor a clear-eyed evaluation of risk and reward in every investment decision, and that remains true in the early stages of a transformative technology.
  • We expect the Information Technology and Communication Services sectors to benefit the most from the modern evolution of AI — particularly in the semiconductor and application software industries.

What could happen next?

We believe that generative AI has the potential to profoundly enhance human creativity in ways that accelerate innovation, improve productivity in the workplace, and drive faster economic growth and social change in the coming decade.

Yet, markets often price in potential technological advances well in advance of adoption, and in this case, there are several evolving risks that need to be understood. The pace of innovation and adoption is unknown and may be slower than the market is currently expecting. The rise of generative AI could lead to significant white-collar job losses that could dampen economic growth and raise social tension in the short term. Investors also should note that government regulation so far has been uneven across global regions. That regulation is likely to accelerate and may need time to balance economic growth and social concerns.