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Companies with a large number of employees have a big problem. Quite simply, they fail to extract as much value from each staff member as do low-staff firms. Indeed, labour-intense firms tend to have a lower market cap, thinner margins, and lower growth rates.
AI may be the way forward. In this piece, we argue that AI will make workers more productive, particularly in high-staff firms. The reason is that the profitability of high-staff firms has the highest leverage to the performance of their labour force. AI will help upskill them and streamline repetitive and mundane tasks that are more prevalent in high-staff companies. [mehr]

Ist grüner Wasserstoff ein Allheilmittel gegen die Energiekrise? Nicht kurzfristig, sagt Eric Heymann, Senior Economist für Branchen, Technologie und Ressourcen bei Deutsche Bank Research. Die mittel- bis langfristigen Aussichten sind allerdings gut. [mehr]

Next week will mark six months since the launch of ChatGPT, the chatbot based on OpenAI’s GPT-3.5 large language model. There has been an extraordinary flurry of launches, hype and activity since then. Even in the past week, OpenAI, Google and Meta announced fresh products, OpenAI’s CEO testified in Congress, and the G7 called for “guardrails” on AI, among many other developments. [mehr]

The AI hype cycle is in overdrive. It feels like the volume of text generated by ChatGPT over the past six months has almost been matched by the volume of hyperbole about how foundation models will change the world. For once the hype is (mostly) justified. Generative AI is not another metaverse or, for that matter, another crypto currency. But it will change the world – for better and for worse. [mehr]

Traditional Value and Quality investing is well understood, but how well does it translate to financial firms? In this video analyst Clayton Gillespie discusses the quant team’s latest research, which uses accounting, valuation and corporate finance insights to generate appropriate alphas for financial firms. Together they generate Value and Quality strategies that exhibit robust through-cycle behaviour and combine well with Value and Quality factors in the rest of the universe. [mehr]

With the rapid growth in AI, and the likes of ChatGPT taking the world by storm in recent months, we have seen renewed fears that human labour will be increasingly replaced over the years ahead. But this refrain has been heard regularly before over the last several centuries. [mehr]

Mallika Sachdeva shares some quick takeaways about why she thinks that this time it's different for Asian currencies compared to the Global Financial Crisis of 2008 when Asian currencies came under extreme stress. [mehr]

Banks’ domestic sovereign exposures in the euro area ballooned during the financial and European debt crises but have markedly declined since then. Still, with 5% of total assets and 76% of capital, they remain considerable and a risk on bank balance sheets, especially in light of the general exemption from capital requirements and concentration limits. Risk parameters differ between national banking markets, and the home bias remains high, at around 80%, as banks hardly diversify into other euro-area debt. The cross-country differences make it difficult for policymakers to agree on a fully mutualized European Deposit Insurance Scheme and thus complete the Banking Union. [mehr]

Please watch Deutsche Bank senior US economist Brett Ryan break down the latest US consumer price index report with Americas communications head Brian Blackstone. [mehr]

The new edition of our Germany: Economic Chartbook provides an overview of key data on current economic developments. The winter dip in the German economy has not been as severe as feared. Nevertheless, the picture at the current margin is rather divergent. While headline inflation is likely to subside further, core inflation might prove sticky. Private household demand is still under pressure, despite strong inflation-related one-off payments. Corporate lending slows after a long boom. Overall, we expect only a shallow recovery for the rest of the year, so German GDP is likely to stagnate on average in 2023. Last but not least, we also update you on our recent thematic research on the German housing market, progress with the energy transition and the German position on the recent EU fiscal rules proposal. [mehr]