By Kwami Ahiabenu Phd

Gold rushes are not new. A gold rush occurs when three key ingredients are present: information spreading, surprise, and impatient economic actors. History dates one of the oldest gold rush stories to 1848, when large numbers of people travelled to California in search of gold. Some people rushed to the site with pans to get the surface dust and wash it out to get to the gold; this group, known as “’49ers”, did not come across any significant finds and therefore gave up. However, those who followed the more traditional approach of digging for gold had better results.

That said, this traditional method was slow and had to be backed by significant financing and expertise, but it generated sustainable gold finds over time.

Another feature of a gold rush is the presence of actors who provide equipment to gold miners, the “picks and shovels” suppliers. They, of course, did well because they got paid whether gold was found or not.

The gold rush teaches us three economic lessons. First, only a few miners profited from it. Second, those who used traditional means, although time-consuming, achieved sustainable results. Third, one does not need to be at the front line of an opportunity to profit from it, since suppliers of critical equipment can do well if a sustainable business evolves.

Today, the world is experiencing another major gold rush in the context of artificial intelligence (AI). The ‘AI gold rush” is the unprecedented economic boom linked to the surge in AI as a value creator, driven in part by gargantuan expenditure on AI infrastructure, especially data centres, graphics processing units (GPUs) and energy networks, among others.

Like any gold rush, it is characterised by an army of winners and, unfortunately, a lot more losers. The AI gold rush is a race at both the state and corporate levels, with governments investing in AI infrastructure, talent and innovation to strengthen national competitiveness, while businesses are also racing to adopt and invest in AI to drive productivity, innovation and market advantage.

In both instances, whether at state or enterprise level, those that fail to jump on the bandwagon early in the race risk falling behind.

For example, a company that uses AI to automate routine processes, analyze data faster and improve customer service can reduce costs and serve more customers than a competitor that waits.

The winners

Gold rushes rarely reward everyone equally: a few miners strike it rich, many spend their days washing dirt for little or nothing, others burn millions digging holes that yield no gold, while the shovel sellers profit from the rush itself. Some likely winners could be companies and nations that are investing in AI infrastructure, which can be referred to as the “picks and shovels” of the AI gold rush. In this direction, actors investing in chips and semiconductor equipment, data centres, cloud/AI computing, networking and storage, cooling devices, massive electricity generation and transmission are leading the way.

AI is now on the record as a significant consumer of electricity, which makes power generation grids, transmission and potentially nuclear, hydro and natural gas strategically important.

Another winning proposition in the AI gold rush goes to entities that are able to successfully apply AI. In this direction, the biggest long-term productivity accrues to entities that are not only selling AI solutions or products but rather the ones that enable a drastic increase in productivity in diverse areas such as healthcare, agriculture, manufacturing, logistics, financial services, professional services and government services.

Another group of winners in the AI gold rush are entities or individuals who can combine subject matter expertise and AI capability. They are likely to have an advantage over others since they have AI skills combined with domain expertise, which will make them stand out. For example, an auditor who understands the ins and outs of auditing and knows how to use AI for auditing in a faster and more effective manner could become considerably more productive.

Who are being left behind?

One of the areas that are coming under a lot of significant strain is routine knowledge work that involves predictable digital tasks such as basic coding, data entry, basic research, routine content creation, translation, administrative work, customer support and some back-office functions. The prediction that these professions will disappear does not necessarily hold; however, it could mean that fewer people are required to produce the same quantity of work.

Another group of entities that cannot enjoy the full gains of the AI gold rush are entities that are merely “AI-washing”, that is, adding AI to existing products without any real or core changes. Also, some other types of potential losers are found in the bracket of investors and entities that assume that AI demand will grow indefinitely, putting them in an AI over-leveraged situation; spending billions of dollars on AI. A fundamental question to ask is whether AI produces measurable productivity, revenue or cost improvements in perpetuity.

Invariably, the guaranteed winners of the AI gold rush are the big players, that is, the “shovel sellers” who are at the forefront of building the models and infrastructure, and supplying semiconductors, cloud, hardware and related data, whereas the startups are at extremely high risk of losing out, as are entities, especially IT services providers, who are merely trying to jump on the AI bandwagon without converting their business to AI first and providing value anchored on AI as the core differentiator. Hence, in the AI gold rush, the first wave sells the shovels, and the second wave is expected to use the shovels to provide value addition, generate productivity gains and significant transformation.

There are millions of entities searching for AI gold, including startups and even established, mature companies churning out incredible AI innovations. Some of them, the “shovel sellers” are making financial gains; huge profits because of their ability to invest billions of dollars into the AI “gold mine”.

In conclusion, to win in the AI gold rush, you need to be in the realm of shovel sellers. Even for shovel sellers, however, the returns from the AI gold rush are still a little opaque, understanding its complexity and evolving landscape will be essential to positioning them on the right side of the gold rush and benefiting from the opportunities it creates.

Dr Kwami Ahiabenu is an AI and technology consultant. He can be reached at [email protected].