(Original Title: Wall Street Investment Bank: IBM's AI System Too Costly to Deliver Returns)
[Technology Web Report] July 17th - According to foreign media reports, despite IBM's long-term promotion of its Watson artificial intelligence system, James Kisner of Jefferies & Co., a Wall Street investment bank, stated that this technology is overly expensive and cannot effectively compete with products from companies like Amazon. As a result, it is unlikely to bring substantial returns to IBM's shareholders in a meaningful way.
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Kisner pointed out that tech giants such as Amazon, Microsoft, Apple, Facebook, and Alphabet, along with numerous startups, possess stronger capabilities to dominate the artificial intelligence market compared to IBM. During the initial stages of development, IBM's competitive edge was rooted in its relationships with Fortune 500 companies. Watson was essentially a consulting service where IBM signed lucrative contracts with corporate clients, applying Watson’s technology to specific business cases. However, it has proven challenging for IBM to ensure that their technology consistently meets client expectations.
Kisner personally evaluated Watson's performance and found it to be somewhat underwhelming for investors. He noted that even in the most optimistic scenarios, IBM struggles to recover the costs associated with developing and deploying this technology.
He explained in his report, "From an earnings per share perspective, Watson will likely fail to yield significant returns in the coming years."
"In our baseline forecast, Watson and its related revenues contribute only 3% to earnings per share in 2019; even in a bullish scenario, this figure rises to just 5%. This issue stems from aggressive marketing efforts, insufficient deep learning capabilities, reliance on outdated hardware such as GPUs, and the requirement for extensive prior data storage."
Public job postings indicate that IBM lags behind other tech companies in hiring machine learning developers. In the field of deep learning, IBM appears particularly weak. Here, IBM faces stiff competition with companies like Apple and Amazon when recruiting talent. (yoyo)
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As the AI landscape continues to evolve rapidly, IBM must address these challenges to maintain its relevance. Companies like Amazon have already established robust ecosystems around their AI offerings, which provide businesses with scalable and cost-effective solutions. IBM, on the other hand, seems to be struggling to keep pace, particularly in terms of innovation and attracting top-tier talent in the AI domain.
Despite these setbacks, IBM remains committed to its AI initiatives. The company recently announced several new partnerships aimed at enhancing Watson's capabilities and expanding its reach into industries such as healthcare and finance. However, whether these efforts will translate into tangible financial benefits remains to be seen.
For now, investors and analysts alike are keeping a close eye on IBM's progress in the AI space. While Watson has shown promise in certain niche applications, its overall impact on the company's bottom line appears limited at best. As the competition intensifies, IBM must find ways to differentiate itself and deliver real value to its clients if it hopes to remain competitive in the rapidly evolving world of artificial intelligence.
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