Big banks are jumping headfirst into the AI race. Over the past year, Wall Street’s biggest names – including Goldman Sachs, Bank of America, Morgan Stanley, Wells Fargo and JPMorgan Chase – have ramped up their efforts in generative artificial intelligence with the aim of boosting profits. Some are high-profile deals and partnerships to get there quickly. They are all hiring specialized talent and creating new technologies to transform their once struggling businesses. The competition is still in its early stages, but the stakes are high. In his annual shareholder letter, JPMorgan CEO Jamie Dimon compared artificial intelligence to the “printing press, the steam engine, electricity, computers and the Internet.” The banks that can do well should increase productivity and reduce operating costs – both of which would improve their bottom lines. According to research from Citi analysts, AI adoption has the potential to increase bank profits by as much as $170 billion (or 9%) to over $1.8 trillion by fiscal year 2028. Generative AI use cases in early stage are often intended to “make your workforce faster, stronger and better,” says Alexandra Mousavizadeh, co-CEO and co-founder of AI benchmarking and intelligence platform Evident Insights. “Over the course of the next twelve to eighteen to twenty-four months, I think we’ll see [generative AI] join the maturity journey, from the moment internal use cases are put into production [to more] testing externally-facing use cases.” Companies are only just beginning to understand the promise of this technology. It wasn’t until ChatGPT’s viral launch in late 2022 that the world outside Silicon Valley woke up to the promise of generative applications. AI, OpenAI’s ChatGPT , backed by Microsoft and powered by Nvidia chips, created a rush of investors in all things AI to build and support it MS YTD mountain Morgan Stanley YTD AI use cases for key companies Morgan Stanley was among the. first on Wall Street to publicly embrace the technology, unveiling two AI assistants for financial advisors, powered by OpenAI AI @ Morgan Stanley Assistant provides advisors and their associates with quick answers to questions about the market, investment recommendations, and various internal processes It has to aim to free employees from administrative and research tasks, so that they can communicate more with their customers. Morgan Stanley this summer introduced another assistant called Debrief, which uses AI to take notes on behalf of financial advisors during their client meetings. The tool can summarize key discussion topics and even create follow-up emails. “Our immediate focus is on using AI to increase the time our associates spend with customers. This means using AI to reduce time-consuming tasks such as responding to emails, preparing for customer meetings, finding information and analyzing data,” said Jeff McMillan, head of enterprise AI for Morgan Stanley. He made the comments in a statement emailed to CNBC last week. “Freeing up this time allows our employees to focus more on building relationships and innovating.” In the long term, AI could help Morgan Stanley’s wealth sector move closer to management’s goal of more than $10 trillion in client assets. In July, the company reported client assets of $7.2 trillion. To be fair, McMillan said in June that it would take at least a year to determine whether the technology increases advisor productivity. If so, it would be good news for shareholders after Morgan Stanley’s wealth segment missed analysts’ second-quarter revenue expectations. WFC YTD Berg Wells Fargo YTD It’s not just Morgan Stanley. Our other bank holding company Wells Fargo has its own AI virtual assistant. Called Fargo, it helps retail customers get answers to their banking questions and perform tasks such as switching debit cards on and off, checking credit limits and offering details for transactions. Fargo, powered by Google Cloud’s artificial intelligence, launched in March 2023. For a large money center bank like Wells Fargo – a bank that has traditionally focused on Main Street – the Fargo Assistant could strengthen the bank’s largest reporting segment. The consumer, banking and credit division accounted for about 43% of the company’s $20.69 billion in revenue in the second quarter. Standout AI Deals, Forming Partnerships None of this would be possible without partnerships. Major banks have asked startups and tech giants to access their large language models (LLMs) to build their own AI products. In addition to Morgan Stanley’s OpenAI deal and Wells Fargo’s ties with Google, Deutsche Bank also teamed up with club name Nvidia in 2022 to help develop fraud protection apps. BNP Paribas announced on July 10 a deal with Mistral AI – often seen as the European alternative to OpenAI – to integrate the company’s LLMs into its customer service, sales and IT operations. Shortly afterwards, TD Bank Group signed an agreement with Canadian AI unicorn Cohere to also use its range of LLMs. ‘We pay attention to this [deals] because that means they have a large part of that capacity on board,” says Evident’s Mousavizadeh. Big AI Hires for Top Wall Street Firms Banks have also had to hire big to make their AI dreams come true – poaching large numbers of data scientists, data engineers, machine learning engineers, software developers, model risk analysts, policy and board managers Despite layoffs in the banking sector, AI talent at banks has grown 9% over the past six months, according to July data from Evident. That was double the growth rate of the total workforce across the sector. Mousavizadeh said one of the key features of the leading banks in AI is that they do not stop hiring. The leading banks are the [ones] that are hiring the most AI talent.” In July, Wells Fargo named Tracy Kerrins as its new head of consumer technology to oversee the company’s new generative AI team. And Morgan Stanley’s McMillan was promoted to AI in March head after serving as technical director in the wealth division, he helped oversee Morgan Stanley’s OpenAI-related projects. JPMorgan also appointed Teresa Heitsenrether as chief data and analytics officer, responsible for AI adoption, last year. The more we see these companies investing in AI talent, the more serious they seem to be about the future of the emerging technology. However, we don’t expect these third-party partnerships, new use cases and a slew of new hires to happen overnight other day will deliver exponential returns greater than return on investment (ROI), we welcome Wells Fargo and Morgan Stanley’s moves to innovate: “We’re in the tail end of this and we’ll see a lot more ROI which is generated by the AI use cases. by 2025,” Mousavizadeh said. “But I think you’ll see a real tipping point in 2026.” (Jim Cramer’s Charitable Trust is long NVDA, WFC, GOOGL, MSFT, MS. See here for a full list of the stocks.) As a subscriber to the CNBC Investing Club with Jim Cramer, you will receive a trade alert before Jim makes a trade. 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Pedestrians walk along Wall Street near the New York Stock Exchange (NYSE) in New York, US, on Tuesday, August 27, 2024.
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Big banks are jumping headfirst into the AI race.
