Gen AI: Too Much Spend, Too Little Benefit?

. In the Web 1.0 tech cycle, the Netscape web browser debuted in the mid- 1990s and the market peaked in March 2000, but the return on capital only turned positive in the late 2000s/early 2010s as consumers were slow to embrace the technology. The payback period was much shorter in the Web 2.0 tech cycle that began in 2006, with most companies calling themselves mobile-first companies by 2012/13.

AI technology is undoubtedly expensive today. And the human brain is 10,000x more effective per unit of power in performing cognitive tasks vs. generative AI. But the technology's cost equation will change, just as it always has in the past. In 1997, a Sun Microsystems server cost $64,000.

But it's not just the timing of returns that matters—if firms continue running at current levels of annualized spend over the next several years, the magnitude of returns will need to be outsized to justify the costs.