Bain & Co: Inside the US$4.7tn AI Profit Shift

Dunigan O’Keeffe, Partner in Bain & Company’s Strategy & Transformation practice and lead author of the report. Credit: Bain & Company

Bain & Company Partner Dunigan O’Keeffe explores the US$4.7tn AI profit shift across four sector clusters and explains why CEOs must look beyond productivity

A new report from Bain & Company reveals that AI puts US$4.7tn in profits at stake across 70% of sectors between 2025 and 2035 – which is more than triple the internet's impact (41% of sectors) – in half the time.

“Speed matters more than most CEOs realise. Move early and each deployment leaves you smarter than the last, with more data, workflows rewired around AI and results that keep improving,” says Dunigan O’Keeffe, partner in Bain & Company’s Strategy & Transformation practice and lead author of the report.

“None of that is for sale, so the company two years behind cannot buy its way back. The work is to figure out of what will matter in your industry a decade from now. Get that right and moving fast stops being a risk.”

When asked if the 'two-year lag penalty' is equally fatal across all four sector clusters that it studied, Dunigan told AI Magazine: “Urgency is important across all sectors. Frontier insights on how AI can improve what and how you deliver for customers matters everywhere.

"At the same time, the urgency is most acute in the types of businesses that are facing the most change. We see from all of the headlines that the ‘Foundation sectors’ have extreme urgency. But it can be higher elsewhere.”

Dunigan says: "The urgency is most acute in the types of businesses that are facing the most change." Credit: Getty Images

The US$4.7tn profit shift

“The US$4.7tn profit pool shift is real, revolutionary and already well underway. This is why, whatever sector companies are in, their CEO needs a clear prediction of where the industry is headed and a board-level commitment to act on it,” says Dunigan.

Bain found three driving forces that underlie the shift:

• Productivity gains: Beyond the benefits reaped by consumers from better or cheaper products, companies will keep about US$1.1tn in new profits as AI makes existing work cheaper, faster and more scalable. Yet those gains represent just 24% of the total profit pool shift. Roughly 75% lies beyond productivity, in gains from innovation and market share shifts.
• New innovation: Innovation among incumbents and new AI-enabled categories will generate US$2.2tn in new profits (at 47%, the largest share of the total shift). New players will emerge, as they did in the Internet era, but AI offers incumbents opportunities to innovate in their core business across a much broader swath of the economy than the Internet did. AI will pull much of the rest of the economy into the digital world.
• Market share shifts: US$1.3tn of the shift will result from an extensive redistribution of existing profits between competing businesses as AI upends who can compete best, what cost structures workand what capabilities matter. For many CEOs, the biggest risk and opportunity will be figuring out how to use AI better than their existing competitors.

Dunigan O’Keeffe, Partner in Bain & Company’s Strategy & Transformation practice and lead author of the report. Credit: Bain & Company

Sector clusters

Those profit pool shifts, made up of market share gains and losses, along with new profits from productivity and innovation, will not be evenly distributed among industries, according to the authors of the report.

The report separated industries into four clusters:

• Technology Foundation – With US$1.5tn of profits in play, explosive demand follows for cloud infrastructure, data centers, semiconductors, mobile devices, PCs and servers, and AI foundation models, as well as the energy and physical infrastructure that powers and supports it all.
  
• Rewired – an open race, the swift will win: With US$1.5tn of profits at stake, AI will rapidly rewire competitive advantage in the affected industries, with a leadership gap between fast and slow AI adopters opening up within a few years.
• Augmentation – With US$1.3tn of profits at stake, AI brings less dramatic changes to underlying business models while the critical question is who will win the race for AI-powered productivity gains.
• Revolution – With US$0.3tn of profits at stake, sectors affected, such as customer support, IT services and online tutoring and test prep –face replacement of their entire delivery model. The profit pool migrates to whoever owns the AI layer.

When we asked Dunigan, since roughly 70% (the US$3.3tn in brand-new profit from productivity and innovation divided by the US$4.7tn total) of the reported US$4.7tn is net-new profit, why are most CEOs still obsessed with the 24% productivity slice?

He highlighted: “The pursuit of productivity promises tangible actions that deliver quantifiable returns in a discrete period of time.

“Consequently, it’s easier to build conviction to get going. Reimagining your business for innovation is harder, more variable (not all bets will pay off) and has longer time frames, all of which makes it easier to postpone.”

Speed matters more than most CEOs realise

Dunigan O’Keeffe, Partner at Bain & Company

Bain’s key partners

Bain has grown its wider ecosystem to more than 700 partner organisations, including key alliances with:

• OpenAI: An American AI research organisation that develops generative AI models. Its products include the ChatGPT conversational interface and the GPT series of LLMs.
• Microsoft: A US multinational technology corporation headquartered in Redmond, Washington. It develops, manufactures and supports software products, consumer electronics, personal computers and cloud services.
• AWS: A subsidiary of Amazon that provides cloud computing platforms and application programming interfaces. It supplies on-demand digital infrastructure including computing power, database storage and content delivery networks.