Businesses are betting big on generative AI to gain an edge despite hurdles to adoption and M&A challenge, said EY recently.
This is a result of businesses anticipating higher levels of growth. According to an EY quarterly survey of 1,200 global CEOs, a significant number of respondents anticipate higher levels of growth (66%) and profitability (65%) in 2024 compared with 2023.
Survey results indicated that 70% of CEOs see the need to act quickly on generative AI (GenAI) to gain edge over their competitors while a similar proportion (68%) also report being stymied by uncertainty around this space, which makes it challenging to act quickly.
- Conscious of its potential to disrupt their own business models, almost all CEOs (99%) are making or planning significant investments in GenAI.
- To fund these investments, 69% are re-allocating capital from other investment projects or technology budgets and 23% are raising new capital.
- But investing in an AI-enabled future is easier said than done: more than a quarter (26%) of CEO respondents say the rapid pace of GenAI progress is the biggest challenge to making capital allocation decisions on GenAI initiatives.
- Two-thirds (66%) also believe a surge in companies claiming to have AI expertise complicates decisions about identifying and implementing credible ecosystem partnerships and acquisition targets.
- Despite challenges, CEOs are investing in the future of the workforce to accelerate GenAI initiatives — a majority (87%) have either completed or are in the progress of hiring new talent with relevant GenAI skill sets.
- As business leaders continue to grapple with macroeconomic headwinds, regulatory changes and geopolitical volatility, many still anticipate high levels of growth in the near term and are doubling down on investments in R&D and capex.
- The EY survey reveals that CEOs continue to be on the offense when investing for the future, with a clear majority (89%) planning some kind of transaction in the next 12 months.
- However, M&A deal intentions dipped to the lowest level since 2014 with only 35% of CEOs planning M&A in the next 12 months.
- This can be attributed to the current geopolitical and macroeconomic uncertainty and also reflects the confusion on AI targets and the real-world drop-off in AI-focused M&A following a surge earlier this year.
- The appetite to pursue M&A is far higher in the Americas region (47%) than in EMEA (29%) or Asia Pacific (25%), reflecting the strong uptick in dealmaking seen in the region in 3Q23, especially deals involving US companies.
- Half of CEOs (50%) plan to expand operations in the next 12 months outside of their headquartered location.
- Despite lower-than-expected growth in China, Asia-Pacific has emerged as a prominent destination, with China, Australia, India, Japan and Singapore emerging as they top five destinations when asked where they would look to outside of their headquartered market.