HSBC exec says there’s a lot of AI ‘success theater’ happening in finance
Big technology companies are betting that a new wave of smaller, more precise AI models will be more effective when it comes to the needs of businesses in sectors like law, finance, and health care.
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LONDON — Increasingly many financial services firms are touting the benefits of artificial intelligence when it comes to boosting productivity and overall operational efficiency.
Despite bold statements, a lot of companies are failing to produce tangible results, according to Edward J Achtner, the head of generative AI for U.K. banking giant HSBC.
“Candidly, there’s a lot of success theater out there,” Achtner said on a panel at the CogX Global Leadership Summit alongside Ranil Boteju — a fellow AI leader at rival British bank Lloyds Banking Group — and Nathalie Oestmann, head of NV Ltd, an advisory firm for venture capital funds.
“We have to be very clinical in terms of what we choose to do, and where we choose to do it,” Achtner told attendees of the event, held at the Royal Albert Hall in London earlier this week.
Achtner outlined how the 150-year-old lending institution has embraced artificial intelligence since ChatGPT — the popular AI chatbot from Microsoft-backed startup OpenAI — burst onto the scene in November 2022.
The HSBC AI leader said that the bank has more than 550 use cases across its business lines and functions linked to AI — ranging from fighting money laundering and fraud using machine learning tools to supporting knowledge workers with newer generative AI systems.
One example he gave was a partnership that HSBC has in place with internet search titan Google on the use of AI technology anti-money laundering and fraud mitigation. That tie-up has been in place for several years, he said. The bank has also dipped its toes deeper into genAI tech much more recently.
“When it comes to generative artificial intelligence, we do need to clearly separate that” from other types of AI, Achtner said. “We do approach the underlying risk with respect to generative very differently because, while it represents incredible potential opportunity and productivity gains, it also represents a different type of risk.”
Achtner’s comments come as other figures in the financial services sector — particularly leaders at startup firms — have made bold statements about the level of overall efficiency gains and cost reductions they are seeing as a result of investments in AI.
Buy now, pay later firm Klarna says it has been taking advantage of AI to make up for loss of productivity resulting from declines in its workforce as employees move on from the company.
It is implementing a company-wide hiring freeze and has slashed overall employee headcount down to 3,800 from 5,000 — a roughly 24% workforce reduction — with the help of AI, CEO Sebastian Siemiatkowski said in August. He is looking to further reduce Klarna’s headcount to 2,000 staff members — without specifying a time for this target.
Klarna’s boss said the firm was lowering its overall headcount against the backdrop of AI’s potential to have “a dramatic impact” on jobs and society.
“I think politicians already today should consider whether there are other alternatives of how they could support people that may be effective,” he said at the time in an interview with the BBC. Siemiatkowski said it was “too simplistic” to say AI’s disruptive effects would be offset by the creation of new jobs thanks to AI.
Oestmann of NV Ltd, a London-based firm that offers advisory services for the C-suite of venture capital and private equity firms, directly touched on Klarna’s actions, saying headlines around such AI-driven workforce reductions are “not helpful.”
Klarna, she suggested, likely saw that AI “makes them a more valuable company” and was consequently incorporating the technology as part of plans to reduce its workforce anyway.
The result Klarna is seeing from AI “are very real,” a Klarna spokesperson told CNBC. “We publicize these results because we want to be honest and transparent about the impact genAI is having in the real world in companies today,” the spokesperson added.
“At the end of the day,” Oestmann added, as long as people are “trained appropriately” and banks and other financial services firm can “reinvent” themselves in the new AI era, “it will just help us to evolve.” She advised financial firms to pursue “continuous learning in everything that you do.”
“Make sure you are trying these tools out, make sure you are making this part of your everyday, make sure you are curious,” she added.
Boteju, chief data and analytics officer at Lloyds, pointed to three main use cases that the lender sees with respect to AI: automating back office functions like coding and engineering documentation, “human-in-the loop” uses like prompts for sales staff, and AI-generated responses to client queries.
Boteju stressed that Lloyds is “proceeding with caution” when it comes to exposing the bank’s customers to generative AI tools. “We want to get our guardrails in place before we actually start to scale those,” he added.
“Banks in particular have been using AI and machine learning for probably about 15 or 20 years,” Boteju said, signaling that machine learning, intelligent automation and chatbots are things traditional lenders have been “doing for a while.”
Generative AI, on the other hand, is a more nascent technology, according to the Lloyds exec. The bank is increasingly thinking about how to scale that technology — but by “using the current frameworks and infrastructure we’ve got,” rather than by moving the needle significantly.
Boteju and Achtner’s comments tally with what other AI leaders of financial services have said previously. Speaking with CNBC last week, Bahadir Yilmaz, chief analytics officer of ING, said that AI is unlikely to be as disruptive as firms like Klarna are suggesting with their public messaging.
“We see the same potential that they’re seeing,” Yilmaz said in an interview in London. “It’s just the tone of communication is a bit different.” He added that ING is primarily using AI in its global contact centers and internally for software engineering.
“We don’t need to be seen as an AI-driven bank,” Yilmaz said, adding that, with many processes lenders won’t even need AI to solve certain problems. “It’s a really powerful tool. It’s very disruptive. But we don’t necessarily have to say we are putting it as a sauce on all the food.”
Johan Tjarnberg, CEO of Swedish online payments firm Trustly, told CNBC earlier this week that AI “will actually be one of the biggest technology levers in payments.” But even so, he noted that the firm is focusing more of the “basics of AI” than on transformative changes like AI-led customer service.
One area where Trustly is looking to improve customer experience with AI is subscriptions. The startup is working on an “intelligent charging mechanism” that would aim to figure out the best time for a bank to take payment from a subscription platform user, based on their historical financial activity.
Tjarnberg added that Trustly is seeing closer to 5-10% improved efficiency as a result of implementing AI within its organization.
Charles Liang, chief executive officer of Super Micro Computer Inc., during the Computex conference in Taipei, Taiwan, on Wednesday, June 5, 2024. The trade show runs through June 7.
Annabelle Chih | Bloomberg | Getty Images
Super Micro investors continued to rush the exits on Friday, pushing the stock down another 9% and bringing this week’s selloff to 44%, after the data center company lost its second auditor in less than two years.
The company’s shares fell as low as $26.23, wiping out all of the gains for 2024. Shares had peaked at $118.81 in March, at which point they were up more than fourfold for the year. Earlier that month, S&P Dow Jones added the stock to the S&P 500, and Wall Street was rallying around the company’s growth, driven by sales of servers packed with Nvidia’s artificial intelligence processors.
Super Micro’s spectacular collapse since March has wiped out roughly $55 billion in market cap and left the company at risk of being delisted from the Nasdaq. On Wednesday, as the stock was in the midst of its second-worst day ever, Super Micro said it will provide a “business update” regarding its latest quarter on Tuesday, which is Election Day in the U.S.
The company’s recent challenges date back to August, when Super Micro said it would not file its annual report on time with the SEC. Noted short seller Hindenburg Research then disclosed a short position in the company and wrote in a report that it identified “fresh evidence of accounting manipulation.” The Wall Street Journal later reported that the Department of Justice was in the early stages of a probe into the company.
Super Micro disclosed on Wednesday that Ernst & Young had resigned as its accounting firm just 17 months after taking over from Deloitte & Touche. The auditor said it was “unwilling to be associated with the financial statements prepared by management.”
A Super Micro spokesperson told CNBC that the company “disagrees with E&Y’s decision to resign, and we are working diligently to select new auditors.” Super Micro does not expect matters raised by Ernst & Young to “result in any restatements of its quarterly financial results for the fiscal year ended June 30, 2024, or for prior fiscal years,” the representative said.
Analysts at Argus Research on Thursday downgraded the stock in the intermediate term to a hold, citing the Hindenburg note, reports of the Justice Department investigation and the departure of Super Micro’s accounting firm, which the analysts called a “serious matter.” Argus’ fears go beyond accounting irregularities, with the firm suggesting that the company may be doing business with problematic entities.
“The DoJ’s concerns, in our view, may be mainly about related-party transactions and about SMCI products ending up in the hands of sanctioned Russian companies,” the analysts wrote.
In September, the month after announcing its filing delay, Super Micro said it had received a notification from the Nasdaq indicating that its late status meant the company wasn’t in compliance with the exchange’s listing rules. Super Micro said the Nasdaq’s rules allowed the company 60 days to file its report or submit a plan to regain compliance. Based on that timeframe, the deadline would be mid-November.
Though Super Micro hasn’t filed financials with the SEC since May, the company said in an August earnings presentation that revenue more than doubled for a third straight quarter. Analysts expect that, for the fiscal first quarter ended September, revenue jumped more than 200% to $6.45 billion, according to LSEG. That’s up from $2.1 billion a year earlier and $1.9 billion in the same fiscal quarter of 2023.
WATCH: I don’t know if Super Micro is guilty or innocent, says Jim Cramer
Amazon CEO Andy Jassy speaks at the Bloomberg Technology Summit in San Francisco on June 8, 2022.
David Paul Morris | Bloomberg | Getty Images
Amazon shares jumped 7% on Friday and neared an all-time high after the company reported better-than-expected earnings, driven by growth in its cloud computing and advertising businesses.
The stock is up about 32% for the year and touched $200.50 on Friday. Its highest close was $200, a mark the stock hit twice in July.
Revenue increased 11% in the quarter to $158.9 billion, topping the $157.2 billion estimate of analysts surveyed by LSEG. Earnings of $1.43 topped the average analyst estimate of $1.14.
Sales in the Amazon Web Services cloud business increased 19% to $27.4 billion, coming in just shy of analysts’ estimates, according to StreetAccount. That was an acceleration from 12% a year ago, but trailed growth at rivals Microsoft and Google, where cloud revenue increased 33% and 35%, respectively. Microsoft’s Azure number includes other cloud services.
Amazon’s capital expenditures surged 81% year over year to $22.62 billion, as the company continues to invest in data centers and equipment such as Nvidia processors to power artificial intelligence products. Amazon has launched several AI products in its cloud and e-commerce businesses, and it is also expected to announce a new version of its Alexa voice assistant powered by generative AI.
“Amazon has integrated AI into what is the most diverse tech footprint of any mega cap, with multi-billion revenue streams in e-commerce, advertising, subscriptions, online video, and cloud,” analysts at Roth MKM wrote in a note after the earnings report. They have a buy rating on the stock.
Brian Olsavsky, Amazon’s chief financial officer, said on the earnings call that the majority of the company’s 2024 capex spending is to support the growing need for technology infrastructure.
CEO Andy Jassy said the company plans to spend about $75 billion on capex in 2024 and that he suspects the company will spend more next year.
“The increased bumps here are really driven by generative AI,” Jassy said on the call. “It is a really unusually large, maybe once-in-a-lifetime type of opportunity,” he said, noting that shareholders “will feel good about this long term that we’re aggressively pursuing it.”
Advertising was another bright spot. Sales in the unit expanded 19% to $14.3 billion during the quarter, meeting expectations and outpacing growth in Amazon’s core retail business.
Amazon’s ad growth was about in line with Meta, which saw 18.7% expansion, and faster than growth at Google, which reported a 15% increase in ad revenue. Snap‘s sales also jumped 15% from a year earlier.
Amazon forecast revenue in the current quarter to be between $181.5 billion and $188.5 billion, which would represent growth of 7% to 11% year over year. The midpoint of that range, $185 billion, fell short of the average analyst estimate of $186.2 billion, according to LSEG.
— CNBC’s Ari Levy contributed to this report.
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