CEOs extol benefits of AI on earnings calls but not in official filings

The rapid rise of artificial intelligence has sparked excitement in industries from fast food to theme parks, with executives rushing to show how they will be among beneficiaries of the new technology.

Analysis of their regulatory filings, however, suggests much of the talk is only talk.

Almost 40 per cent of companies in the blue-chip S&P 500 index have mentioned AI or related terms in earnings calls in the latest financial quarter, according to data from Alphasense.

Fewer than one in six — 16 per cent — mentioned it in their corresponding regulatory filings, highlighting how AI has yet to make a material impact for the vast majority of companies.

“The joke out there was that all you had to do last quarter was say ‘AI’ and your stock would pop immediately,” said Bryant VanCronkhite, a senior portfolio manager at Allspring Global Investments, the $550bn asset manager.

“Some companies are saying they’re doing AI when they’re really just trying to figure out the basics of automation. The pretenders will be shown up for that at some point,” he said.

The motivation for executives to join the AI conversation is clear. The seven largest AI-linked tech groups have been responsible for the majority of the US stock market’s rise this year. Chipmaker Nvidia, due to report its latest results on Wednesday, has led the way with a gain of more than 200 per cent.

At the same time, investors are on the lookout for business models that could be disrupted by the new technology. Chegg sparked a sell-off across the education industry in May after the maker of online study guides warned that the growth of AI chatbots such as ChatGPT was hurting its sales.

The trends have sparked discussion even in industries not known for technological innovation.

The fashion and apparel company Ralph Lauren earlier this month described AI as “really an important part of our . . . revenue growth journey”. Restaurant chains such as KFC owner Yum Brands and Chipotle have touted AI-powered technology to improve the efficiency of ingredient orders or help making tortilla chips.

Several tourism-related businesses such as Marriott and Norwegian Cruise Line said they are working on AI-powered systems to make processes like reservation booking more efficient and personalised.

None of the examples above referenced AI in their most recent quarterly filings, though Ralph Lauren did note some initiatives in broad terms in its annual report in May.

The fact that companies have yet to see concrete financial impacts from their AI experiments does not mean they have simply been jumping on a bandwagon for attention. But it highlights the challenge for investors of separating hype from real potential, and the fact that it is likely to take a long time for the full impact of AI to emerge.

Allspring’s VanCronkhite said he had invested in fast-food chain Wendy’s, which is piloting new drive-through ordering machines that run on Google’s generative AI.

“If you think about the economics of that business, one of the key issues is labour availability and costs and quality,” VanCronkhite said. “You’re actually talking to a computer that sounds like a person. But the benefit is that ‘person’ is never crabby or late to work and is really good at cross-selling.” 

Rob Arnott, chair of asset manager Research Affiliates, said: “Do I believe the hype about AI? Yes I do. I think it’s absolutely going to rock our world. Do I believe it will happen overnight? Heavens no.”