Are We Overestimating The Impact Of AI?

According to a report put out by the US Bureau of Labor Statistics, how AI will impact long-term job growth ‘It depends’!

Are you worried that AI might someday take your current job? I am, a bit. But also, like a lot of the claims around tech trends, it feels like hype. Who profits from replacing workers with AI? Big tech companies, for one, who are also building or investing in a lot of these tools, and thus behind a lot of the hype.

I also happen to believe that meaningful writing requires humanity but that’s a conversation for a different article.

So how real is the threat Artificial Intelligence (AI) poses to human jobs? The U.S. Bureau of Labor Statistics just put out a report on how AI will impact long-term job growth, and their answer is: “It depends”! They predict “occupations whose core tasks can be most easily replicated by GenAI in its current form” (like medical transcriptionists and customer service representatives) are likely to be affected, but also that employment in professional, scientific and technical services will rise 10% over the next eight years. “Although it is always possible that AI-induced productivity improvements will outweigh continued labor demand,” the report laments, really wringing its hands, “there is no clear evidence to support this conjecture.”

In Saudi Arabia, the perspective on AI’s impact on jobs is mixed. According to Kaspersky research, there are concerns among employees in Saudi Arabia in regards to robots and automation systems used by companies. Around half (48%) are afraid of losing their job to robots, and almost one out of four employees, reported that they heard of cybersecurity incidents with robots or automated systems in their company. At the same time, many employees see the positive aspects that robotization brings to them.

To establish a robust regulatory framework, the Saudi Data and Artificial Intelligence Authority (SDAIA); the KSA regulator of data and AI including big data issued 14 regulations and policies related to data and AI in 2024. It also established 245 data management offices in the public sector by 2024. Government spending on emerging technologies, including AI, grew at a compound annual growth rate of 59% between 2019 and 2023, as per the Digital Government Authority’s 2023 report.

Crunchbase data indicates that the total attracted funds in Saudi AI companies reached $1.7 billion in 2023.

In terms of AI infrastructure, the Kingdom ranked second in the Middle East in terms of the number of colocation data centers, with 22 active ones and 40 under development, in 2023. The Kingdom boasts 10 supercomputers in 2024, eight of which are among the world’s top 500. The public cloud services market in the Kingdom experienced a 30% growth in 2023 compared to 2022, according to IDC reports. In 2024, SDAIA integrated 320 government systems into the National Data Lake, resulting in over 100TB of total stored data volume provided by over 60 government entities.

So how did Saudi Arabia embark on such an exciting transformative journey in the field of technology and AI that almost the entire regulatory landscape was changed during the last couple of years when SDAIA was only established in 2019? The answer lies in the journey that started in 2016, when Saudi Arabia launched Vision 2030 to diversify its economy by increasing non-oil revenues and improving sovereign wealth management. The pursuit of economic diversification, alongside broader cultural and social reforms, marked a positive structural shift from past fiscal and oil-revenue management practices. Most notably, the government has prioritized long-term investment over procyclical public spending since the negative shock to oil prices and revenues in 2014. As of 2024, significant progress has already been made, with the defining feature being that oil revenues are being now channeled into transformational domestic investments, representing a quintessential “Big Push” across the Saudi economy (Saudi Arabia: from the Big Push to the Long Push, Building Resilience Beyond Vision 2030, published by the Centre for Sustainable Development and Global Competitiveness at Stanford University, 1 August 2024).

Sovereign Wealth Investments in Innovation and Technology

The Public Investment Fund (PIF) identified early on that achieving economic diversification—marked by a reduced fiscal reliance on oil and increased domestic investment—would be crucial for transformation and high performance. Consequently, PIF has focused on investment opportunities within Saudi Arabia, particularly in AI, renewable energy, and strategic foreign commercial partnerships to expedite innovation and productivity growth. Most of PIF’s assets remain domestically invested to support the Vision 2030 initiative.

While this strategy is sound, it is important to contemplate how the domestic investment drive might evolve over the next decade. Besides large-scale investments in infrastructure and energy production, an increasing proportion of PIF’s investment portfolio is dedicated to advancing cutting-edge innovations and technology.

Recently, PIF announced plans to establish a fund between $40 billion to $100 billion focusing on AI, aiming to position the Kingdom as a leading global investor in this field. Beyond AI, PIF has shown a keen interest in sectors such as biotechnology, automated manufacturing, and information technology. These investments aim to create mutually beneficial joint ventures for both foreign investee - companies and domestic enterprises.

PIF’s strategy of partnering with foreign companies through strategic investments to unlock opportunities in Saudi Arabia is distinctive. By connecting foreign entities possessing valuable, world-class skills and intellectual property (IP) with domestic companies requiring these assets, PIF is forging commercially advantageous deals. This strategy promises to expedite the growth of foreign companies within Saudi Arabia. While other investors, such as those in China or Abu Dhabi, have also engaged in similar partnerships, no other sovereign development funds (SDFs) have formalized an investment approach designed to generate substantial risk-adjusted returns for all involved parties.

PIF’s capability to implement this strategy stems from its nature as a diversification fund rather than a pure development fund. Both the country and PIF possess considerable resources to invest in new industries. Other SDFs and their sponsoring emerging countries typically need to attract foreign investment capital before enticing foreign companies to set up domestic operations. This requirement is especially true for knowledge-intensive sectors, such as AI, telecommunications, media and entertainment, and healthcare. Goldman Sachs believes that the use of AI will increase global GDP by 7% in 10 years (almost $7 trillion). PIF, therefore, holds a unique opportunity to transform the Saudi economy.

Disclaimer – The views expressed in this article are the personal views of the author and are purely informative in nature.