AI Adoption Across Industries
February 28, 2025
– AI is expected to revolutionize the business landscape by enhancing productivity, offering improved services, and providing insights.
– Health care, banking, and retail are likely among the early adoption industries outside technology.
– Utilizing the full potential of AI will take time as companies navigate the complexities associated with integrating AI.
Artificial intelligence is expected to revolutionize the business landscape by enhancing productivity, helping to offer improved services, and providing insights from vast amounts of data. The majority of the AI attention has been concentrated among mega-cap technology companies and the firms that support their data center build out for AI computing power. Participation in this long-term theme may begin to gradually broaden this year as AI gets implemented as a value-adding and productivity-enhancing tool across a range of industries. Health care, banking, and retail are likely among the early adoption industries outside technology that could experience the biggest near-term AI impact. However, utilizing the full potential of AI will take time as companies navigate the complexities associated with integrating AI into their business processes and technology systems.
According to the World Intellectual Property Organization, a United Nations agency, developing a pharmaceutical drug that reaches regulatory approval takes on average over a decade of research and more than $2 billion dollars. Expectations for AI to drastically reduce the drug research and development timeline and cost have led to announcements related to AI development from most of the top pharmaceutical companies. Many of these announcements include partnerships with young biotechnology and pharmaceutical companies specializing in AI that are already seeing improvements in efficiency and cost. The most promising impact of AI on drug research is preclinical development, which accounts for around one-third of development costs. In the preliminary lead identification stage, AI’s ability to quickly process large amounts of data is being used to analyze thousands of treated cell culture images to more precisely identify the most promising compounds for further analysis. Better optimization with AI could reduce the lead identification step from several months to weeks. A remarkable example is Insilico Medicine, which utilized its AI software to identify and design a novel drug ready for clinical trials in only 18 months and a meager cost of $2.7 million. AI is also being deployed to determine if it can increase clinical trial success rates by analyzing the medical histories of patient cohorts and identifying patterns to more accurately match drugs with the most appropriate patient groups based on their symptoms, diseases, or circumstances. According to Boston Consulting Group, nearly 70 AI designed drugs were in human clinical trials in 2023.
Number of AI Discovered Drugs in Clinical Trials
Source: Boston Consulting Group
Beyond its transformative role in drug discovery, AI is also being leveraged across the health care industry for a variety of nonpharmaceutical applications. One prominent use case is in medical imaging, where AI is trained on vast datasets to analyze X-rays, CT scans, and MRIs with greater speed and accuracy than human practitioners. This technology shows immense promise in diagnosing conditions such as cancer, bone fractures, and neurological disorders, often detecting subtle abnormalities that might be missed by the human eye. Additionally, AI is being employed to streamline administrative tasks, such as automating documentation and reducing the time doctors and nurses spend on paperwork. By alleviating this time-intensive responsibility, AI enables healthcare professionals to dedicate more time to patient care.
In the banking industry, AI is being implemented to address critical needs in risk management, compliance, and regulatory oversight. AI can enhance fraud detection by monitoring real-time transaction patterns to identify and flag suspicious activities, significantly improving the accuracy of fraud signals and reducing false positives. Additionally, generative AI-powered customer facing chatbots can streamline interactions by assessing customer inquiries and connecting them with the most suitable service representative or providing information directly. AI can also automate routine operations, such as compliance monitoring and data collection, reducing manual effort and ensuring adherence to regulatory standards.
“A remarkable example is Insilico Medicine, which utilized its AI software to identify and design a novel drug ready for clinical trials in only 18 months and a meager cost of $2.7 million.”
AI is poised to transform the retail and consumer packaged goods industry, impacting various business functions including customer service, marketing, and product development. AI-powered chatbots can handle routine inquiries like order tracking and returns, freeing human agents to focus on more complex issues. According to IBM, customer service chatbots can reduce expenses by 30% and boost customer satisfaction by 25%. Retailers are also leveraging AI to personalize marketing efforts based on individual consumer behavior and preferences. For example, the grocer Kroger uses AI to analyze customer purchase histories from its loyalty program and deliver customized digital coupons. In addition to optimizing customer interactions and marketing, AI can accelerate product development by generating new designs and suggesting multiple modifications faster than human designers. AI can further streamline the process by expediting production planning through tailored recommendations for materials, sourcing options, and manufacturing processes.
Sources: Bloomberg, Morningstar, Wall Street Journal, CFRA Research
by Dan Kupiec, CFA, Senior Investment Analyst and Jordan McGuire, Investment Analyst at MainStreet Advisors.
