Apollo Global Management Inc.‘s chief economist, Torsten Slok, said AI has produced substantial financial benefits mainly for large technology companies, while its broader impact across corporate America remains difficult to detect.
Slok published his analysis on Saturday, examining AI’s economic effects across sectors. He compared the Magnificent Seven stocks, which include Alphabet Inc. (NASDAQ:GOOG), Amazon.com Inc. (NASDAQ:AMZN), Apple Inc. (NASDAQ:AAPL), Meta Platforms Inc. (NASDAQ:META), Microsoft Corp. (NASDAQ:MSFT), Nvidia Corp. (NASDAQ:NVDA) and Tesla Inc. (NASDAQ:TSLA), with the other 493 companies in the S&P 500.
He found that technology companies’ revenue per employee increased from roughly $550,000 in 2022 to almost $800,000. The figure stayed near $550,000 for the remaining S&P 500 companies during the same period.
“The bottom line is that the AI story will be decided in the S&P 493, not the Mag 7, and so far, there is no evidence that revenue growth or margins are improving outside the tech sector,” Slok wrote.
Technology profit margins also widened after 2022, while margins for other companies remained close to 10%. Apollo said it found no significant economywide productivity increase attributable to AI. Slok also said AI has yet to deliver the major productivity gains optimists predicted.
“Despite massive investments and widespread hype about artificial intelligence, the technology has delivered zero financial payoff to corporate America outside of tech,” Slok said.
The Apollo chief economist said mainstream companies increasingly treat AI spending as a cost center that pressures margins, while questioning whether lower-cost tools can eventually generate stronger revenue growth and profitability. “That may be harder than it sounds,” he said.
AI Boom Raises Crowding-Out Concerns
The findings arrive amid broader concerns that AI investment is concentrating economic gains while diverting capital from other priorities. Earlier this month, economist Paul Krugman said that the AI boom poses an immediate economic risk by driving up interest rates and crowding out other investments. He says data center construction is diverting capital from housing, offices and factories, a trend visible in FRED data since early 2023.
A previous analysis by JPMorgan warned that the U.S. economy and stock market are increasingly dependent on AI, with 42 AI-related stocks driving 60% to 80% of S&P 500 earnings growth, price returns and capital spending since January 2024.
Meanwhile, 60% of S&P 500 stocks are down at least 20% from their highs, only 30% are outperforming the index, AI gains are concentrated among suppliers rather than adopters, technology’s contribution to GDP growth has risen to about 33%, and only 20% of states are growing faster than the national average.
On the other hand, veteran technology investor Paul Wick has drawn parallels between today’s AI surge and the dot-com era, while saying today’s AI boom differs from the dot-com bubble because IPO activity and dramatic first-day stock surges remain muted, while enterprise AI spending and recent tech earnings remain resilient.
Disclaimer: This content was partially produced with the help of AI tools and was reviewed and published by Benzinga editors.
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