Big banks are diving headfirst into the artificial intelligence race. Over the past year, Wall Street's biggest firms – including Goldman Sachs, Bank of America, Morgan Stanley, Wells Fargo and JPMorgan Chase – have stepped up efforts to generate artificial intelligence to boost profits. Some companies are striking deals and partnerships to quickly get there. All of these companies are hiring specialized talent and creating new technologies to transform their once stagnant businesses. It's still early days in the game, but the stakes are high. In his annual letter to shareholders, JPMorgan CEO Jamie Dimon compared artificial intelligence to “the printing press, the steam engine, electricity, computing and the Internet.” Banks that can do this should increase productivity and reduce operating costs—both of which will boost their profits. In fact, according to research by Citi analysts, the adoption of artificial intelligence has the potential to increase bank profits by $170 billion, or 9%, to more than $1.8 trillion by fiscal 2028. Alexandra Mousavizadeh, co-CEO and co-founder of Evident Insights, an AI benchmarking and intelligence platform, said early generative AI use cases are often about “making your employees faster, stronger, and better.” “Over the next 12 to 18 to 24 months, I think we'll see (generative AI) move along a maturity journey from internal use cases into production (to more) testing external-facing use cases.” Companies are only beginning to realize the promise of this technology. After all, it wasn’t until the viral release of ChatGPT in late 2022 that the world outside Silicon Valley became aware of the promise of generative AI. OpenAI's ChatGPT, backed by Microsoft and powered by Nvidia chips, has triggered a rush of investors into the artificial intelligence field. The AI industry is also driving corporate boardroom development in three ways: finding use cases for the technology, building partnerships to implement the technology, and hiring professional staff to build and support the technology. MS YTD mountain Morgan Stanley YTD's main business artificial intelligence use cases Morgan Stanley was one of the first companies on Wall Street to openly embrace this technology, launching two financial advisory artificial intelligence assistants powered by OpenAI. Launching in September 2023, the AI@Morgan Stanley Assistant provides advisors and their staff with quick answers to questions about markets, investment recommendations and various internal processes. Its purpose is to free employees from administrative and research tasks to interact more with customers. Morgan Stanley launched another assistant this summer called “Debrief,” which uses artificial intelligence to take notes in client meetings on behalf of financial advisors. The tool can summarize key discussion topics and even draft follow-up emails. Jeff McMillan said: “Our current focus is on using artificial intelligence to increase the time employees spend with customers. This means using artificial intelligence to reduce time-consuming tasks such as answering emails, preparing for customer meetings, finding information and analyzing data. ” Head of corporate artificial intelligence at Morgan Stanley. He made the comments in a statement emailed to CNBC last week. “By freeing up this time, our people can focus more on building relationships and innovating.” In the long term, artificial intelligence could help Morgan Stanley’s wealth business get closer to achieving management’s goal of exceeding 10% in client assets. trillion dollar target. In July, the company reported $7.2 trillion in client assets. To be sure, Macmillan said in June it would take at least a year to determine whether the technology improves advisers' productivity. If true, it would be good news for shareholders after second-quarter revenue at Morgan Stanley's wealth unit missed analysts' expectations. WFC YTD Mountain Wells Fargo YTD It’s not just Morgan Stanley. Another one of our holdings, Wells Fargo, has its own virtual AI assistant. Called Fargo, it helps retail customers get answers to banking questions and perform tasks such as opening and closing debit cards, checking credit limits and providing transaction details. Fargo is powered by Google Cloud artificial intelligence and will launch in March 2023. The consumer, banking and lending segment accounted for about 43% of the company's total revenue of $20.69 billion in the second quarter. Closing AI deals, building partnerships None of this would be possible without partnerships. Big banks have tapped startups and tech giants alike to access their large language models (LLMs) to build their own AI products. In addition to Morgan Stanley's OpenAI deal and Wells Fargo's partnership with Google, Deutsche Bank is also partnering with club name Nvidia in 2022 to help develop fraud protection applications. BNP Paribas announced a deal on July 10 with Mistral AI, often seen as the European alternative to OpenAI, to embed the company's LL.M. program into its customer service, sales and IT operations. Shortly thereafter, TD Bank Group signed a deal with Canadian AI unicorn Cohere to leverage its LL.M. suite. “We're focusing on these (deals) because it means they're getting a lot of this capability,” Evident's Mousavizadeh said. Big AI hiring at Wall Street's top firms Banks are also having to hire heavily to realize their AI dreams – Poaching a large number of data scientists, data engineers, machine learning engineers, software developers, model risk analysts, policy and governance directors. According to July data from Evident, which tracks the world's 50 largest banks, while layoffs are happening across the banking industry, But the bank’s artificial intelligence talent has grown by 9% in the past six months. This is twice the growth rate of the entire industry’s total headcount. Mousavizadeh said, “One of the main characteristics of the leading banks in artificial intelligence is that they will not stop hiring. The leading banks are the banks that hire the most artificial intelligence talent.” In July, Wells Fargo appointed Tracy Kerrins as new consumer Technical lead, overseeing the company's new generative artificial intelligence team. Morgan Stanley's McMillan was promoted to head of artificial intelligence in March after serving as a technology executive in the wealth unit. He helps oversee Morgan Stanley's OpenAI-related initiatives. JPMorgan Chase also appointed Teresa Heitsenrether as its chief data and analytics officer last year, responsible for the adoption of artificial intelligence. Bottom line The more we see these companies spending and investing in AI talent, the more serious they seem to be about the future of the emerging technology. We don’t expect these third-party partners, new use cases, and large workforces to create exponential returns overnight. However, as long as these costs do not exceed the return on investment (ROI), we are comfortable with Wells Fargo and Morgan Stanley's innovative initiatives. “We are in the early stages of this trend and by 2025 we will see AI use cases generating more ROI,” Mousavizadeh said. “However, I think 2026 is where you will see a real turning point. ” (Jim Cramer’s Charitable Trust is a long-term holding of NVDA, WFC, GOOGL, MSFT, MS. See here for a complete list of stocks.) 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Pedestrians walk along Wall Street near the New York Stock Exchange (NYSE) in the United States on Tuesday, August 27, 2024.
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Big banks are diving headfirst into the artificial intelligence race.
