In The Economist’s future-gazing segment, The World Ahead 2024, technology is featuring heavily in predictions for transformation as we move into a new year. In particular, analysts note that generative AI holds significant potential for business use next year; and that simultaneously, the transition towards a carbon-neutral world will transform our global economic systems. Technology will play a crucial role in this transformation – both enabling the reduction of carbon emissions, and providing the fintech solutions to capture economic growth throughout the transition to green.
Spending on tech will grow in 2024
There’s no getting away from the fact that all industries are operating in an unpredictable geo-political landscape, and markets may continue to be volatile. But analysts are positive about the potential for tech in 2024 – with a cooling trend in inflation in many areas pointing to a supportive environment for spending and investments.
In Europe, Gartner predicts that IT spending will grow by a record 9.3% to a total of USD $1.1 trillion in 2024. John-David Lovelock (VP Analyst at Gartner) said in a press release:
“Despite a conflated economic situation, IT spending in Europe continues to be recession-proof. CIOs in Europe who pursued the ‘growth at all costs’ strategy for over a decade, are now shifting the emphasis of ongoing IT projects toward cost control, efficiencies and automation, while curtailing IT initiatives with longer ROIs.”
Within companies, Gartner predicts that software and IT services will be the focus of spending for CIOs in the region – particularly cloud operations, cybersecurity in the cloud, and planning for AI and generative AI adoption and security.
Generative AI will remain a focus for business development and for investors
Following the boom of GenAI use over the last 12 months, it will remain a key growth area for businesses (working to understand and adopt generative AI tools) and for investors. According to McKinsey, three quarters of use cases for AI in business will come under four categories:
- Marketing and sales
- Customer operations
- Software engineering
- Research and development
And AI could increase business profits by $4.4 trillion annually. McKinsey’s research suggests that GenAI will probably deliver the biggest impact in life sciences, high tech, and banking; but other industries have the potential to yield significant ROI from this technology too.
A large proportion of the value delivered by GenAI will come from growth in productivity, as it enables employees to engage in new work activities while lower-level or repetitive tasks are handled by tech. McKinsey estimates that generative AI could increase labour productivity by up to 0.6% per year through to 2040.
According to The Economist, generative AI will ‘go mainstream’ in 2024 – but ‘data-savvy firms’ will be the first to experience real benefits.
And innovative tech firms will lead the investments market
Stocks analysts at barchart predict that tech growth stocks will keep climbing in 2024 – including companies like Nvidia (up 227% YTD at time of writing in 2023), Palo Alto Networks (up 89% YTD), and Teledyne Technologies.
The risk of recession remains strong in some regions around the world, but tech growth stocks offer high returns potential in spite of uneasy markets. Tech analysts at Fortune predict a “tidal wave” of spending driven by AI, fuelling a busy and competitive market.
And after a tough 2023, startups are looking at a brighter year ahead as well. While it’s reasonable to assume that venture capitalists will remain cautious of radical and untested new ideas, the undeniable shifts towards carbon reduction and AI adoption mean that investments in startups that innovate in these areas will continue.
According to the Boston Consulting Group, “to be an industry leader in five years, you need a clear and compelling generative AI strategy today.” So failure to invest in such a strategy now is widely regarded to be a mistake – giving AI startups an important market opportunity during this precarious economic period.
Economic conditions are tough across industries right now. But with certain technologies that are critical to the future of business growth, the tech market is expected to show resilience – and be a core driver of economic stability for regional markets around the world.