Companies Are Drowning in Too Much AI

Businesses are facing an influx of new artificial-intelligence tools, many of which overlap and cause confusion for employees, as corporate-technology sellers race to capitalise on the generative AI trend.

“Since the ChatGPT excitement, I must have had at least 20 to 25 vendors in my portfolio reach out to me saying, ‘Hey, let us tell you about our generative AI co-pilot strategy,’” said Milind Wagle, chief information officer at Equinix, one of the world’s biggest data-centre landlords.

Generative AI features, which can respond to user prompts by generating images or text, often come in the forms of co-pilots, or virtual assistants that work in tandem with an IT seller’s offerings, sometimes automating certain tasks within that platform. Wagle said Equinix is drowning in a flood of co-pilots—and he is trying to figure out how, if at all, they should coexist.

“I feel like there’s a co-pilot war that needs to sort of happen,” he said.

The co-pilot proliferation is leading to confusion for employees who are looking for a single common interface to accomplish certain tasks, Wagle said. It can also create potential governance risks if there is a possibility that private data from a company that interacts with the co-pilots could make its way into public training models for generative AI tools.

Gartner analyst Arun Chandrasekaran said IT sellers are feeling pressure to move into the generative AI space or risk falling behind, meaning some half-baked features will be rushed out without the proper privacy and security guardrails in place. Established IT sellers also need to consider security concerns, including whether a customer’s data can be fed back to train the model, because this is uncharted territory, he added.

Chandrasekaran estimates that a fifth of independent software vendors have stepped into the generative AI space since ChatGPT was launched about seven months ago—a huge amount of growth in a short time, he said.

“I don’t think I’ve had a partner or vendor meeting this year where I wasn’t pitched a generative AI play,” said Brian Woodring, CIO of Rocket Mortgage, a nonbank mortgage provider.

Rocket Mortgage CIO Brian Woodring PHOTO: ISABELLE BOUSQUETTE / THE WALL STREET JOURNAL

Sometimes the co-pilots appear in system updates as a freebie, and sometimes they cost extra, Woodring said. He added that in some cases, the generative AI features are tacked on, despite not being compelling additions or the best tool for the job.

“Everyone’s trying to fit it in everywhere,” he said, adding, “It’s not something you can just spread around like peanut butter. It’s not a coat of paint you put on your product afterwards and say, now it’s AI.”

In other instances, the features are things that Rocket Mortgage could confidently and more cheaply build in house, Woodring said. For example, a number of tools on the market pull and analyse data from phone calls, a feature that Rocket Mortgage was able to build itself, he said.

Tech executives said they are looking critically at new generative AI tools to distinguish between the truly compelling ones and the ones that are just paying lip service to the hype. How well the tools will be able to integrate with each other is another consideration.

“We want clarity on how we can connect every single one,” said Noé Angel, CIO at agriculture company NatureSweet. When tools are too fragmented, it ends up creating more work for those who have to manage them, he said.

Jim Stratton, chief technology officer of Workday, a provider of enterprise cloud applications for finance and human resources, said that longer term, he expects consolidation and clearer winners to emerge when it comes to certain AI capabilities, which could simplify things for companies.

But nearer term, navigating the complexity of the landscape remains a challenge. “There’s still a lot of noise at the moment,” he said.

Berkshire began liquidating its big stake in the banking company in mid-July—and has already unloaded about 15% of its interest. The selling has been fairly aggressive and has totaled about $6 billion. (Berkshire still holds 883 million shares, an 11.3% interest worth $35 billion based on its most recent filing on Aug. 30.)

The selling has prompted speculation about when CEO Warren Buffett, who oversees Berkshire’s $300 billion equity portfolio, will stop. The sales have depressed Bank of America stock, which has underperformed peers since Berkshire began its sell program. The stock closed down 0.9% Thursday at $40.14.

It’s possible that Berkshire will stop selling when the stake drops to 700 million shares. Taxes and history would be the reasons why.

Berkshire accumulated its Bank of America stake in two stages—and at vastly different prices. Berkshire’s initial stake came in 2017 , when it swapped $5 billion of Bank of America preferred stock for 700 million shares of common stock via warrants it received as part of the original preferred investment in 2011.

Berkshire got a sweet deal in that 2011 transaction. At the time, Bank of America was looking for a Buffett imprimatur—and the bank’s stock price was weak and under $10 a share.

Berkshire paid about $7 a share for that initial stake of 700 million common shares. The rest of the Berkshire stake, more than 300 million shares, was mostly purchased in 2018 at around $30 a share.

With Bank of America stock currently trading around $40, Berkshire faces a high tax burden from selling shares from the original stake of 700 million shares, given the low cost basis, and a much lighter tax hit from unloading the rest. Berkshire is subject to corporate taxes—an estimated 25% including local taxes—on gains on any sales of stock. The tax bite is stark.

Berkshire might own $2 to $3 a share in taxes on sales of high-cost stock and $8 a share on low-cost stock purchased for $7 a share.

New York tax expert Robert Willens says corporations, like individuals, can specify the particular lots when they sell stock with multiple cost levels.

“If stock is held in the custody of a broker, an adequate identification is made if the taxpayer specifies to the broker having custody of the stock the particular stock to be sold and, within a reasonable time thereafter, confirmation of such specification is set forth in a written document from the broker,” Willens told Barron’s in an email.

He assumes that Berkshire will identify the high-cost Bank of America stock for the recent sales to minimize its tax liability.

If sellers don’t specify, they generally are subject to “first in, first out,” or FIFO, accounting, meaning that the stock bought first would be subject to any tax on gains.

Buffett tends to be tax-averse—and that may prompt him to keep the original stake of 700 million shares. He could also mull any loyalty he may feel toward Bank of America CEO Brian Moynihan , whom Buffett has praised in the past.

Another reason for Berkshire to hold Bank of America is that it’s the company’s only big equity holding among traditional banks after selling shares of U.S. Bancorp , Bank of New York Mellon , JPMorgan Chase , and Wells Fargo in recent years.

Buffett, however, often eliminates stock holdings after he begins selling them down, as he did with the other bank stocks. Berkshire does retain a smaller stake of about $3 billion in Citigroup.

There could be a new filing on sales of Bank of America stock by Berkshire on Thursday evening. It has been three business days since the last one.

Berkshire must file within two business days of any sales of Bank of America stock since it owns more than 10%. The conglomerate will need to get its stake under about 777 million shares, about 100 million below the current level, before it can avoid the two-day filing rule.

It should be said that taxes haven’t deterred Buffett from selling over half of Berkshire’s stake in Apple this year—an estimated $85 billion or more of stock. Barron’s has estimated that Berkshire may owe $15 billion on the bulk of the sales that occurred in the second quarter.

Berkshire now holds 400 million shares of Apple and Barron’s has argued that Buffett may be finished reducing the Apple stake at that round number, which is the same number of shares that Berkshire has held in Coca-Cola for more than two decades.

Buffett may like round numbers—and 700 million could be just the right figure for Bank of America.

Companies Are Drowning in Too Much AI

IT sellers are rolling out an avalanche of new generative AI features, leaving CIOs overwhelmed and workers confused

When will Berkshire Hathaway stop selling Bank of America stock?