Apollo's Chief Economist Looked at 493 of America's 500 Biggest Companies and Found AI Has Paid Off for None of Them. The Seven Selling It Took the Whole Gain, and Wall Street Spent the Week Dumping the Builders
Minds, Bodies, and TerawattsSummary
A recent analysis by Torsten Slock, chief economist at Apollo, reveals that artificial intelligence has yet to yield financial benefits for the majority of American companies outside the tech sector. Slock's examination of the S&P 500 highlights a stark contrast between the "Magnificent Seven" tech giants, whose revenue per worker and profit margins are rising, and the remaining 493 companies, which include airlines, insurers, and grocery chains, that show stagnant financial performance. Despite significant investments in AI, these mainstream firms have not seen improvements in their margins, leading Slock to characterize AI as a cost center for many businesses.
Slock's findings indicate that the top 10% of firms account for nearly all spending on AI models, with venture-backed startups being the primary contributors. This concentration of investment raises questions about the broader impact of AI on the economy, particularly as Wall Street expresses concerns over the sustainability of such spending. The analysis suggests that while the tech giants benefit from AI advancements, the majority of companies are not reaping the rewards, with many failing to invest in necessary infrastructure changes to leverage AI effectively.
The discussion also touches on historical parallels, noting that transformative technologies often take time to show productivity gains. However, Slock emphasizes that without significant investment in rebuilding operations, the anticipated benefits of AI may not materialize. As major tech companies prepare to report their earnings, attention turns to whether any of the 493 companies can demonstrate improved margins as a result of their AI investments.
Show Notes
In a note published Saturday, October 24, Apollo Global Management chief economist Torsten Slok wrote that AI 'has delivered zero financial payoff to corporate America outside of tech': revenue per worker and profit margins are rising for the Magnificent 7 and flat for the other 493 S&P 500 companies, and total factor productivity growth sits near zero. His charts show AI spending is overwhelmingly concentrated in a thin, venture-backed top tier, while mainstream firms treat token spending as a cost center and pull back. The note landed in a week when the Nasdaq fell 694 points on doubts AI capex will pay off and data-center builders dropped a median 23% from their October 6 peak.
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