Microsoft CEO Satya Nadella is throwing cold water on AI, saying the tech has yet to live up to the hype or meaningfully contribute to the economy.

AI is the darling of the tech industry, with companies large and small investing billions to be the first to crack artificial general intelligence (AGI) and artificial intelligence (ASI). Unfortunately, despite the vast resources being put into its development, AI continues to suffer serious issues, with some studies showing that it continues to fall woefully short of the hype.

In an interview with podcaster Dwarkesh Patel, via Futurism, Nadella took a very realistic tone regarding AI’s current status and its future.

“Us self-claiming some [artificial general intelligence] milestone, that’s just nonsensical benchmark hacking to me,” Nadella explained.

The executive went on to compare AI with the Industrial Revolution and the impact it had on the economy.

“So, the first thing that we all have to do is, when we say this is like the Industrial Revolution, let’s have that Industrial Revolution type of growth,” he said.

“The real benchmark is: the world growing at 10 percent,” he added. “Suddenly productivity goes up and the economy is growing at a faster rate. When that happens, we’ll be fine as an industry.”

Obviously, as Nadella’s comments reveal, AI has yet to deliver any economic benefit even remotely rivaling the Industrial Revolution.

Nadella’s Not Alone

Nadella is not alone in his evaluation of AI. In mid-2024, Gartner analyst Arun Chandrasekaran said AI was not living up to the hype.

“The expectations and hype around GenAI are enormously high,” Chandrasekaran added. “So it’s not that the technology, per se, is bad, but it’s unable to keep up with the high expectations that I think enterprises have because of the enormous hype that’s been created in the market in the last 12 to 18 months.

“I truly still believe that the long-term impact of GenAI is going to be quite significant, but we may have overestimated, in some sense, what it can do in the near term.”

Similarly, Goldman Sachs Head of Global Equity Research Jim Covello said the cost of AI made it unlike any previous revolutionary technology—and not in a good way.

Many people attempt to compare AI today to the early days of the internet. But even in its infancy, the internet was a low-cost technology solution that enabled e-commerce to replace costly incumbent solutions. Amazon could sell books at a lower cost than Barnes & Noble because it didn’t have to maintain costly brick-and-mortar locations. Fast forward three decades, and Web 2.0 is still providing cheaper solutions that are disrupting more expensive solutions, such as Uber displacing limousine services. While the question of whether AI technology will ever deliver on the promise many people are excited about today is certainly debatable, the less debatable point is that AI technology is exceptionally expensive, and to justify those costs, the technology must be able to solve complex problems, which it isn’t designed to do.

Adding to concerns, Apple recently released a paper titled “The Illusion of Thinking,” calling into question the reasoning ability of frontier AI models. The research found that AI can lead to catastrophic errors when faced with complex scenarios that fall outside their training.

To make matters even worse, researchers warned in 2024 that AI models were vulnerable to what they termed “Model Autophagy Disorder” (MAD), a nod to mad cow disease. The researchers found that training AI models on AI-generated content lead to irreversible corruption of the models. In the intervening year, some believe AI models are already showing signs of just such a collapse.

Needless to say, AI’s future remains very much in question. Its proponents say it will revolutionize nearly all walks of life and lead to untold economic benefits. With the likes of scientists, Apple, Nadella, Goldman Sachs researchers, and Gartner analysts all questioning its future, AI has much to prove.