New Delhi
According to a report by HSBC, increasing adoption of artificial intelligence (AI) by businesses could play a key role in reducing the impact of tariffs imposed by the US and helping businesses overcome these challenges.
The report highlighted that of the 44 S&P 500 companies in the sample, management reported a median operating cost reduction of 1.5% and an average increase in efficiency of 24%.
HSBC said that if adoption of AI across the S&P 500 can save 1% cost savings overall, it can offset almost a quarter of the burden from the 20% effective tariff if it can provide a scenario that it considers feasible.
“While tariffs are a margin headwind, it could also be a catalyst for businesses to quickly adopt AI to reduce costs,” he said.
The report highlighted that one of the big stories for the coming months is how broader adoption of AI will support earnings per share (EPS) growth, while simultaneously providing an undervalued offset to the tariff shocks of US companies now.
It compared the potential impact of tariffs on corporate innovation to the Covid-19 pandemic, which served as a structural catalyst for businesses to rewire their businesses.
“Just as Covid-19 has forced businesses to adapt and innovate, tariffs may provide a driving force for wider AI adoption,” HSBC said.
It also suggests that AI adoption between US companies is already beginning to accelerate.
The Census Bureau survey data said since President Donald Trump's election victory, the share of companies reporting AI use has increased by 50%, up from 6-9%.
However, HSBC also noted that this figure is likely to underestimate recruitment among large companies. In fact, 60% of S&P 500 companies said they were using AI in their businesses during their second quarter revenue calls.
While the accelerated adoption of AI is encouraging, it also raises concerns that the push could be driven by companies seeking to oust and cut labor costs.
Labor remains a major component of costs, accounting for 17% of the total operating expenses of S&P 500 companies.
This burden is even higher in certain industries, including software services, commercial, professionals and consumer services, where workers make up 51% of the cost.
According to the report, these sectors are considered ripe for automation through AI.
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Therefore, the report outlined that the recent surge in AI adoption could mark a focused effort for businesses to manage costs and protect themselves from tariff shocks, while simultaneously restructuring future operations.
