Summary
President Joe Biden signed an executive order in 2023 establishing guidelines for artificial intelligence (AI). Experts say Biden’s order is just the beginning of regulating AI in the United States, which could affect companies developing the technology, with more expected in 2024. Regulators face the challenge of creating guidelines while the rapid evolution of AI technology and its capabilities continues. Major tech companies may be best positioned to benefit from regulation, according to Goldman Sachs research, with Wedbush Securities analyst hinting that Microsoft is leading the pack.
2023 Overview
President Biden took initial steps toward broad regulations on AI in 2023. Before issuing the executive order that outlines general controls for AI use, Biden relied on voluntary agreements from major companies leading technological development, including parent company of Google, Alphabet Inc. (GOOGL), parent company of Facebook, Meta Platforms Inc. (META), Amazon.com (AMZN), Microsoft (MSFT), OpenAI Inc., and Nvidia Corp. (NVDA).
U.S. Regulation Could Lead the Way
Companies around the world are working to develop AI, but regulation in the United States, in particular, could serve as a global standard. “Right now, it’s an American technology,” said Haim Israel, head of global research at Bank of America, noting that AI regulation is something the bank is watching in 2024. Biden’s executive order is a step toward comprehensive regulation, but it is not the only way the government is working to implement AI guidelines.
Regulators May Struggle to Keep Up with Advances
Those involved in AI policy-making are facing significant difficulties in keeping pace with rapidly evolving technology. Biden’s executive order for 2023 offers flexibility for adjustments, according to White House AI adviser Ben Buchanan, “over time because we know that technology can develop in ways we do not expect.” “Self-regulation by the tech industry around AI will be critical,” said Dan Ives, a technology analyst at Wedbush Securities, stating that “regulators are moving at 25 miles per hour in the right lane while AI technology and major tech companies are moving at 100 miles per hour in the left lane.” Ives pointed out that the firm does not expect robust AI regulation until 2024 or even 2025, as AI appears to be “the biggest technological shift since the dawn of the internet.”
Big Tech Companies Positioned to Come Out Ahead
Giant tech companies may be poised to disproportionately benefit from broad regulation, experts suggest. Goldman Sachs research found that “the push for early regulation of AI technology could benefit large companies with significant capital.” Eric Sheridan, a senior research analyst at Goldman, stated in a report: “Regulation typically comes with higher costs and higher barriers to entry,” noting that “large tech companies can absorb the costs of building these large language models and bear some of the computing costs, as well as comply with regulation.” In 2023, shares of major tech companies experienced a rise that outpaced the overall market, reflecting “investors’ recognition of the potential these companies have to develop revolutionary AI applications,” according to Goldman’s research.
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