Investors Believe in AI, but Want Results Without Weaker Financial Discipline

BCG published its fourteenth global investor survey since 2009. More than 500 institutional investors from sixteen countries responded, together managing about $35 trillion. Eighty-seven percent expect AI to improve company financial performance substantially within two years. At the same time, 56 percent believe the current market is too optimistic about the technology. Investors expect the greatest effect on labour productivity, cited by 74 percent of respondents. Sixty-nine percent expect margins to rise, 66 percent expect investment to increase, and 62 percent expect higher revenue. The largest benefits are expected in healthcare, cited by 83 percent, followed by technology at 80 percent, financial institutions at 76 percent, and industry at 72 percent. More than half expect the first significant impact within twelve months. Optimism does not mean confidence in a lasting competitive advantage. Only 22 percent of investors see AI as a source of long-term differentiation. Thirty-nine percent expect all major competitors eventually to obtain similar savings, while 27 percent foresee only a temporary first-mover advantage. A company must therefore explain why its data, distribution, product, or workflow will create an advantage that rivals cannot quickly copy. Pressure is also shifting to disclosure. Seventy-seven percent of investors already examine a company’s AI strategy when assessing it. Only 57 percent consider current reporting sufficient, and 58 percent believe market valuations accurately reflect the quality of companies’ approaches. BCG warns: “The window to demonstrate results is narrowing quickly.” An unclear list of projects without costs, deadlines, or accountability can therefore increase the risk premium. Capital markets also do not want management to sacrifice financial health. Thirty-seven percent of respondents consider current AI spending too aggressive, while 22 percent consider it too cautious. Only 41 percent would accept a margin decline of more than one to two percentage points for one to two years. Seventy-eight percent avoid companies whose net debt exceeds three times operating profit before depreciation and amortisation. For boards, this means linking technology strategy to the capital plan. Every major investment should include the expected effect on revenue, costs, working capital, and margin, a date for the decision to continue, and an exit scenario. Management must also explain which capabilities the company owns and which it buys from suppliers. “Investors will support bold strategic choices, but not at the expense of financial discipline,” BCG concludes. It is therefore not enough to cite the number of tools, trained employees, or pilot projects. Investors need to see whether the sales cycle has shortened, output per employee has risen, complaints have fallen, or new revenue has emerged. Companies that do not disclose such indicators may be valued on their costs and risks, while the market gives them no credit for expected benefits. BCG therefore recommends publishing priorities, trade-offs, milestones, and expected returns. Terms explained Institutional investor: An organisation managing clients’ capital, such as a pension fund, insurer, or investment company. Margin: Profit, or the difference between revenue and costs, expressed as a share of company sales. Risk premium: Additional return demanded by an investor as compensation for greater uncertainty. Competitive differentiation: The ability to offer an advantage valued by customers and difficult for rivals to imitate.

Investors Believe in AI, but Want Results Without Weaker Financial Discipline

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