[Chris Hyzy and Haim Israel speaking throughout]
On screen disclosures:
Please read important information at the end of this program. Recorded on 09/02/2025.
Chris Hyzy:
Hello, I'm Chris Hyzy here to discuss artificial intelligence with Haim Israel. With lightning speed, AI has moved from being a what-if to a subject that's dominating conversations on everything from business investment to geopolitics. Yet the rise of AI has hit some speed bumps in 2025.
On screen copy:
AI Headwinds
Skeptics ask: Are Large Language Models (LLMs) hitting a wall?
Study finds: 95% of companies investing in AI have not realized returns
Source: MIT Nanda, The GenAI Divide: State of AI in Business 2025, July 2025.
Some suggest: AI excitement has created a market bubble
Chris Hyzy:
For example, some skeptics are questioning the efficacy of large language models. A new study finds that 95% of companies investing in AI have yet to realize returns, and even some within the industry are suggesting that over excitement about artificial intelligence has created a market bubble. So, what should investors make of these developments, and what's the overall outlook for artificial intelligence?
On screen copy:
Chris Hyzy
Chief Investment Officer
Merrill and Bank of America Private Bank
Let's get started. Let's go right to it, Haim. You've heard this a lot. You've studied it a lot. You were early in this a few years back. As you've seen these developments, where do we stand with some of the headwinds within generative artificial intelligence?
On screen copy:
Haim Israel
Head of Global Thematic Research
BofA Global Research
Haim Israel:
I think it's human nature, Chris, to doubt some of the new technologies that are coming. But, for me, to go out and say, no, AI is a hoax or AI is just a bubble, it's like saying back in 2001, after the internet bubble, you know, it's never going to fly. This is exactly where we are.
On screen copy:
78%: Amount of businesses reporting using AI in 2024.
Source: The 2025 AI Index Report, Stanford University.
Haim Israel:
The market understood one thing. The picture is so much bigger. Organizations are starting to understand that we have tools to completely change everything.
Chris Hyzy:
When you dive into the amount of capital investment that's already been announced, and then we've heard that that announcement was growing, what's your thinking around that in terms of the actual build out, data centers, etc.?
Haim Israel:
We didn't even start to scratch the surface about how much money we'll need for this revolution. Chris, we'll need more materials. We need more copper, more fiber, more nickel. For that, we'll need more water. We need more data centers. We need at least 50% more data centers than we have today on the planet. We'll have to move a lot of the current data centers and rebuild them. And I'm talking about huge, massive, data centers, bigger than Manhattan.
On screen copy:
$109 billion: Amount of private investment into AI in the United States in 2024.
Source: The 2025 AI Index Report, Stanford University.
Haim Israel:
In Dubai, they've announced they're going to start building a data center, which is going to be bigger than Monaco. And they're starting to build it already. When you sum up all the investment we'll need, and we didn't even start to talk about the energy, if we will rebuild all the data centers that I've talked about before that that we need, those data centers will require more energy than Japan.
Chris Hyzy:
So, it's the full chain, right?
Haim Israel:
Yes.
Chris Hyzy:
It's the full chain, not just the chip stack?
Haim Israel:
No.
Chris Hyzy:
Not just the technology stack itself, not just software around it. It's everything, all the components that go into it, to allow this to be pulled through?
Haim Israel:
Exactly. We have to start thinking about everything holistically. We can't just look at the chip. We can't just look at the model.
Chris Hyzy:
I want to talk a little bit on return on investment for a second, because as investors, right, if you don't have the ROI on the cost of capital that you're spending, why would you do it?
Haim Israel:
We have to stop thinking in the quarterly return on equity, return on EPS's, and all this stuff. This is very, very different in this case. If you think about in those terms, we never made a return on the internet investment 'til today. If we really think about it. But can you even imagine the world without it? This is exactly where we are right now.
On screen copy:
AI simulations discovered a new material that could cut lithium needs in batteries by 70%.
Source: Unlocking a new era for scientific discovery with AI, Dr. Nathan Baker. Microsoft Azure, Jan. 9, 2024
We can create drugs. We can increase life expectancy. We can create more materials. We can create everything today using AI. What is the ROI on that? I have no idea. But we can completely change the world if we're thinking in these ways.
Chris Hyzy:
You mentioned energy before. What types of new energy must we think about using to be able to generate the power that's needed to actually run these very massive digital highways?
Haim Israel:
We learned something in the last couple of years. We need energy, which is going to be independent, we need it to be cheap because we need a lot of it, and we need it to be scalable fast because the revolution is happening here and now. Nuclear is making a big comeback. The second one that we're seeing massive investments is renewables: wind, solar are the cheapest by far. Today, 25% cheaper versus fossils. But in the last two years, the extra energy that the U.S. have added to the grid, 85% of it was renewable energy.
Chris Hyzy:
Wow.
Haim Israel:
Even hydrogen is making a comeback. The one, natural gas, of course. Fast, cheap. Remember that 83% of the world is importing oil, are not exporting oil, and most countries do not want to go that way.
Chris Hyzy:
Let's talk about other advancements. What other use cases can you see out there? Is it robotics? Is it just automation? Is that the next level?
Haim Israel:
For me, the one that is probably going to change our life faster than everything is agentic AI.
On screen copy:
Agentic AI: Models that can act on instructions autonomously
Haim Israel:
Agentic AI, meaning AI agents, which are not just giving us the information, but actually doing tasks for us, which are communicating with other agents, which can be employees for 100% of the time; can build marketing campaign, can create models, can do everything for us without our intervention.
Chris Hyzy:
And with every great innovation we've seen over the course of, again, 100 years, 200 years, you see that J-curve effect where job displacement happens and then there's an outgrowth of job. Do you see this as well?
Haim Israel:
Yes, I do see that. And we need to think about the jobs of the future right now. Everything is about to change. I do need creativity. I do need social skills. I do need emotions. I need ethics. Those are the things I will need in the future, which will give me an edge. So, we need to think about the job market in a different way.
On screen copy:
According to the World Economic Forum, AI will create 170 million new jobs by 2030.
Source: Jobs and the Future of Work. April 30, 2025.
Haim Israel:
We are big believers that there will be more jobs than less jobs because the economy's about to boom. But they will be very different jobs.
Chris Hyzy:
So, Haim, you talked about a revolution, but also with some revolutions, there are risks. When it comes to risks, how do you talk about that in terms of this revolution?
Haim Israel:
Sure. So, first of all, we need to understand this revolution is happening whether we want it or not. The risks are huge, Chris. We need to understand that. They are not mitigated by regulation today, by governments today, they are just — technology is spreading and the risk with it. We are about — we talked about the agentic AI revolution, huge implementation or implication on the job market already today, and by the way, it's already happening today.
Today, lawyers are at all-time lows in terms of demand. Today, software engineer demand is at all-time low. You will think about it that you know this is an AI revolution, we will need more and more engineers. No, the other way around is happening because everybody can code today. I don't need coders anymore.
On screen copy:
AI risks:
- Job displacement
- Resource management
- Privacy and digital security
Haim Israel:
So, it has huge implications for the job market today. What we are seeing is that a lot of the world energy is being channeled to AI, it is not channeled to the population, water, resources, everything. And of course, the number one risk that I see over here, and that's privacy, cyber security and everything that relates to that — deepfakes. We are starting to see these hitting upon us and there are no solutions yet.
Chris Hyzy:
Moving on now to global dominance. With every new innovation, for the most part, dominating that next wave of innovation means you dominate, usually the global economic growth curve, etc. and also national defense. Let's talk about the race for global dominance. Where do we sit right now?
Haim Israel:
First of all, I think that everything that we're seeing geopolitically right now is connected to this point. The U.S. is trying to protect their advantage in AI, reshore everything, bring operation back home and protect the IP across the world. So, if we had this conversation roughly around a year ago, I would tell you that the U.S. has an opportunity of a lifetime to completely be dominant, as it is right now, because AI is first and foremost an American technology.
When we look at what is really needed to control the AI revolution — we spoke about it, we need more materials. But guess who controls most of the raw materials on the planet? It's China. We need more water? China has more water infrastructure build up than any country in the world. We need more energy. Did you know that every 18 months China adds more capacity of energy than the U.S.? And we need more human resources. We need more talents, 70% of the world AI talents are located in China. So, China has what it takes to dominate the race. U.S. is fighting back and I'm sure that this deglobalization trend we're seeing right now, which is really leading the AI revolution, that we're seeing, will continue and will expand.
Chris Hyzy:
Let's end on this, is the AI revolution rivaling what the Industrial Revolution did to the advancement of not just the United States, but the developing world and the developed world?
Haim Israel:
I'm a big believer it's so much bigger. The other thing that to show you, to compare the Industrial Revolution, is that if I compare the Moore's Law, which usually is how we measure technology to the development of the AI models.
On screen copy:
Moore's Law: The observation that computing power doubles roughly every two years.
Haim Israel:
Since 2018, that the LLM revolution have started, AI outpaced the Moore's Law by a factor of 3,000. It's jumping 3,000 times faster than the Moore's Law. We are in rates that we've never seen in the past, and the Industrial Revolution took bit by bit to get to every other industry. This is now spreading to every industry in warp speed.
Chris Hyzy:
Haim, thanks for all these insights.
We hope today's conversation gives you a better picture of the extraordinary changes underway in artificial intelligence, along with some risks. If you work with an advisor, they can help you consider whether and how to include potential AI related opportunities as part of a diversified long-term portfolio. As always, keep in mind that any investments or adjustments should be made with your own personal goals and situation in mind. Thanks for watching.
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[End of transcript]
It's been nearly three years since artificial intelligence (AI) appeared on the scene. In that time, its promise has grown every quarter across seemingly every sector of the economy. Yet, despite Big Tech's capital mobilization — over $300 billionFootnote 1 in planned spending in 2025 alone — those companies have yet to see a return on their investments. "We haven't even scratched the surface about how much money is needed," says Haim Israel, head of Global Thematic Investing for BofA Global Research.
In the video above, Israel talks with Chris Hyzy, Chief Investment Officer, Merrill and Bank of America Private Bank, about setbacks and risks that could slow the trajectory of the AI buildout, as well as the long-term potential for AI to transform everything about how we live and work. They delve into the race between the U.S. and China for AI dominance and identify potential long-term investment opportunities — from commodities such as copper, nickel and silicon to sectors including energy and transportation. And they answer the question top of mind for many investors: How should we think about AI as this tech revolution accelerates? Says Israel, "We are seeing rates that we've never seen in the past. This is now spreading to every industry in warp speed."