'We're only in '1996': Why the AI boom is still in its earliest days, according to Bank of America

• The AI boom is still in its infancy, following the path of the internet in the 1990s, BofA said.
• AI's impact will be felt sooner than past tech booms, the bank says.

Bank of America says the artificial intelligence boom is in its early stages and it following the trajectory of the internet in the 1990s.

The bank's view comes as AI skepticism has been mounting after a long run of investors pouring money into the trade as they hope to see companies reap the efficiency and productivity gains promised by the technology.

"Skeptics declare that GenAI's revenue potential doesn't justify the current level of AI infrastructure investment," the report says.

"But remember that far more significant than the internet's initial consumer use cases were the thousands of use cases and companies that emerged because of the internet," the report adds.

The report from the bank, released Thursday, draws on a survey of equity analysts and macro strategists across more than 3,000 companies.

Those strategists say AI is the third major tech cycle in the past 50 years, and it started with the launch of ChatGPT in November 2022. AI follows the innovation waves of personal computing in 1981 and the internet in 1994.

But unlike those tech booms, which took 15-30 years to reach mainstream adoption, AI's impact will likely materialize sooner, the report says.

"GenAI may catalyze a technological evolution that disrupts every sector and transforms the global economy over the next five to 10 years," the report says.

Yet, investors are underestimating the long-term impact of the technology—and overestimating its near-term potential—which is typical of tech booms, the report says.

"AI capex could reach $1 trillion+ over the next several years, but we're only in 1996 relative to the internet," the report says.

It adds that the current level of investment in companies like OpenAI, Anthropic, and Inflection AI is merely a prerequisite for making GenAI apps, which are largely still in beta and will take time to develop and grow.

The strategists forecast AI will drive margin expansion for a majority of industry groups. Semis and software will see particularly large gains, with around 4.8% and 5.2% margin growth in the next five years, respectively.

The report comes amid mounting skepticism around AI as investors have yet to see meaningful returns on huge investments into the tech by companies.

On Tuesday, Morgan Stanley chief US equity strategist Mike Wilson said the AI investment theme has been "overcooked," and suggested investors should retreat into defensive stocks.