The AI Productivity Boom No One Is Talking About

The AI productivity revolution is already underway, but investors who focus on capturing the investment potential solely through tech companies and infrastructure providers may miss the bigger opportunity.

Jonathan Curtis, Chief Investment Officer, Portfolio Manager Franklin Equity Group, argues the market continues to significantly misprice generative AI’s potential value creation, particularly outside of the tech sector.

Report is part of FNArena's dedicated focus on GenAi, the fourth industrial revolution: https://fnarena.com/index.php/tag/gen-ai/

Key takeaways

Spoiler alert: AI is already everywhere

ChatGPT hit 100 million users two months after being released in the fall of 2022. It took PCs 15 years to reach that many people. The adoption of AI isn’t gradual change—it’s an explosion.

AI is already driving massive productivity inside many companies:

-Software developers write code more than 25% faster using AI assistants¹
-Banks process loans in 10 days instead of 45²
-Customer service reps handle 35% more calls³
-Salespeople find 35% more qualified leads⁴

And in our view, the real gen AI revolution is just getting started.

AI inside tech: Revenue and expense leverage

Tech companies have a secret advantage: they’re using AI to build better AI.

The world’s largest developer of office productivity tools uses AI to improve its productivity suite. That AI makes their developers more productive. Those developers build better AI tools.

Those tools make productivity even better. Round and round it goes, with productivity compounding like interest in your savings account—except the rate is much faster than 4%.

AI beyond tech: the S&P 493’s hidden superpower

Here’s what really makes me excited:

The last few years have seen intense focus on the Magnificent Seven,⁵ and rightly so. But let’s look beyond this small group of mega caps to the rest of the S&P 500—the S&P 493.

What portion of their employees are knowledge workers—people who think for a living, process data for a living and manipulate documents for a living?

Real world examples that will blow your mind

One of the world’s largest banks is using AI to read commercial loan documents in seconds. Previously, lawyers spent 360,000 hours per year on this. That’s 180 people working full-time, now replaced by software that never sleeps.⁶

Drug companies are using AI to find new medicines in 2-3 years instead of 12. Imagine the profit margins when you cut a decade from your development cycle.⁷

Accounting firms have junior staff who spend 80% of their time searching documents and checking numbers. AI can do this instantly. Those juniors can now do real analysis—or the firm needs fewer of them. Either way, profits will likely rise.⁸

AI productivity: a massive investment opportunity hiding in plain sight?

In our view, the stock market is still pricing the equal-weighted S&P 500 like it’s 2017. AI has the potential to transform productivity and efficiency levels of companies across virtually every sector. We expect this to create a fundamentally different playbook for valuations.

When a company can do significantly more work with the same number of people, one of two things can happen:

1. Revenue grows significantly faster without adding costs (profit growth).
2. It cuts staff significantly and pockets the savings (margin expansion).

Most companies will likely do both. The math is staggering.

The J-curve: AI’s potential to unlock profitability

Right now, companies are spending money experimenting on AI—buying tools, training people and reorganizing workflows. This temporarily hurts profits. It’s like renovating your kitchen while trying to cook dinner. Messy.

But once the renovation is done? You can cook faster, better and cheaper meals every night.

We’re in the messy phase. We believe that in the next few years, we’ll see today’s AI infrastructure investments translate into broad-based productivity gains.

For example, a smart, forward-thinking company currently trading at 18x earnings today could potentially trade much higher because it will be running AI compounding productivity algorithms that enable the company to grow faster with higher margins than most investors expect.

Your investment playbook: Be selective across the Magnificent Seven and the S&P 493

We believe growth investors should continue to have exposure to the highest-quality companies selling AI services and AI-powering infrastructure. Most analysts agree that there is a big revenue opportunity brewing here.

That said, we don’t think investors are fully accounting for the leverage these businesses will likely enjoy from using the AI they are building to operate more efficiently.

We also believe there is a significant opportunity in forward-leaning S&P 493 companies that use AI brilliantly.

Endnotes

1. Source: “AI now writes over 25% of code at Google” PC Mag. October 30, 2024.
2. Source: “From weeks to days: AI powered precision in load automation” Intelligence Automation. November 8, 2024.
3. Source: “How AI will become a superpower for customer service reps” Cognizant. September 3, 2024.
4. Source: “How to use AI for lead Generation.” Tidio. June 3, 2025.
5. The Magnificent Seven is Apple, Tesla, Amazon, NVIDIA, Alphabet, Meta and Microsoft.
6. Source: “An AI Completed 360,000 Hours of Finance Work in Just Seconds.” Futurism. March 8, 2017.
7. Source: “Why AI Driven Drug Findy is Revolutionizing Medicine.” Lifebit.
8. Source: “Reality Check: Still Spending More Time Gathering Instead of Analyzing.” Forbes. December 2019.

Views expressed are not by association FNArena’s. Re-published with permission.

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