Finance

Jamie Dimon annual shareholder letter highlights AI potential

Published

7 months ago

April 9, 2024

Jamie Dimon, CEO of JPMorgan Chase, testifies during the Senate Banking, Housing and Urban Affairs Committee hearing titled Annual Oversight of Wall Street Firms, in the Hart Building on Dec. 6, 2023.

Tom Williams | Cq-roll Call, Inc. | Getty Images

Jamie Dimon, the veteran CEO and chairman of JPMorgan Chase, said he was convinced that artificial intelligence will have a profound impact on society.

In his annual letter to shareholders released Monday, Dimon chose AI as the first topic in his update of issues facing the biggest U.S. bank by assets — ahead of geopolitical risks, recent acquisitions and regulatory matters.

“While we do not know the full effect or the precise rate at which AI will change our business — or how it will affect society at large — we are completely convinced the consequences will be extraordinary,” Dimon said.

The impact will be “possibly as transformational as some of the major technological inventions of the past several hundred years: Think the printing press, the steam engine, electricity, computing and the Internet.”

Dimon’s letter, read widely in the business world because of his status as one of the most successful leaders in finance, hit a wide variety of topics. The CEO said that he had ongoing concerns about inflationary pressures and reiterated his warning that the world may be entering the riskiest era in geopolitics since World War II.

But his focus on AI, first mentioned in Dimon’s annual letter in 2017, stood out. The technology, which has gained in prominence since OpenAI’s ChatGPT became a viral sensation in late 2022, can generate human-sounding responses to queries. Enthusiasm for AI has fueled the meteoric rise of chipmaker Nvidia and helped propel tech names to new heights.

JPMorgan now has more than 2,000 AI and machine learning employees and data scientists working on 400 applications including fraud detection, marketing and risk controls, Dimon said. The bank is also exploring the use of generative AI in software engineering, customer service and ways to boost employee productivity, he said.

The technology could ultimately touch all of the bank’s roughly 310,000 employees, assisting some workers while replacing others, and forcing the company to retrain workers for new roles.

“Over time, we anticipate that our use of AI has the potential to augment virtually every job, as well as impact our workforce composition,” Dimon said. “It may reduce certain job categories or roles, but it may create others as well.”

Here are excerpts from Dimon’s letter:

Inflationary pressures:

“Many key economic indicators today continue to be good and possibly improving, including inflation. But when looking ahead to tomorrow, conditions that will affect the future should be considered… All of the following factors appear to be inflationary: ongoing fiscal spending, remilitarization of the world, restructuring of global trade, capital needs of the new green economy, and possibly higher energy costs in the future (even though there currently is an oversupply of gas and plentiful spare capacity in oil) due to a lack of needed investment in the energy infrastructure.”

On the economy’s soft landing:

“Equity values, by most measures, are at the high end of the valuation range, and credit spreads are extremely tight. These markets seem to be pricing in at a 70% to 80% chance of a soft landing — modest growth along with declining inflation and interest rates. I believe the odds are a lot lower than that.”

On interest rates & commercial real estate:

“If long-end rates go up over 6% and this increase is accompanied by a recession, there will be plenty of stress — not just in the banking system but with leveraged companies and others. Remember, a simple 2 percentage point increase in rates essentially reduced the value of most financial assets by 20%, and certain real estate assets, specifically office real estate, may be worth even less due to the effects of recession and higher vacancies. Also remember that credit spreads tend to widen, sometimes dramatically, in a recession.”

On a breakdown between banks and regulators:

“There is little real collaboration between practitioners — the banks — and regulators, who generally have not been practitioners in business…. Unfortunately, without collaboration and sufficient analysis, it is hard to be confident that regulation will accomplish desired outcomes without undesirable consequences. Instead of constantly improving the system, we may be making it worse.”

On rising geopolitical risks:

“Russia’s invasion of Ukraine and the subsequent abhorrent attack on Israel and ongoing violence in the Middle East should have punctured many assumptions about the direction of future safety and security, bringing us to this pivotal time in history. America and the free Western world can no longer maintain a false sense of security based on the illusion that dictatorships and oppressive nations won’t use their economic and military powers to advance their aims — particularly against what they perceive as weak, incompetent and disorganized Western democracies. In a troubled world, we are reminded that national security is and always will be paramount, even if its importance seems to recede in tranquil times.”

On social media:

“One common sense and modest step would be for social media companies to further empower platform users’ control over what they see and how it is presented, leveraging existing tools and features — like the alternative feed algorithm settings some offer today. I believe many users (not just parents) would appreciate a greater ability to more carefully curate their feeds; for example, prioritizing educational content for their children.”

An update on the First Republic deal:

“The acquisition of a major company entails a lot of complexity. People tend to focus on the financial and economic outcomes, which is a reasonable thing to do. And in the case of First Republic, the numbers look rather good. We recorded an accounting gain of $3 billion on the purchase, and we told the world we expected to add more than $500 million to earnings annually, which we now believe will be closer to $2 billion.”

JPMorgan acquired most of the assets of First Republic last year for more than $10 billion after regulators seized the firm amid the regional banking crisis.