Apollo Chief Economist: AI Dividends Currently Captured Only by Tech Companies
Apollo Chief Economist Torsten Slok noted in a report that AI has not brought profit benefits to large enterprises outside the tech industry, and that only tech giants such as Nvidia and Meta have achieved revenue growth amid the AI boom. He focused on analyzing the S&P 493 constituents—the S&P 500 excluding the seven major tech stocks—and found that their profit margins and per-capita revenue were essentially flat, with no evidence that AI is raising productivity. Data shows that since 2022, per-capita revenue at tech companies has risen from $550,000 to nearly $800,000, while other companies have hovered around $550,000 for the past seven years, with profit margins also holding at around 10%.
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Apollo's chief economist uses per-capita revenue and profit margin data for the S&P 493 to show that AI investment has not yet translated into economic returns outside the tech industry.
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Apollo chief economist Torsten Slok pointed out in his latest report that artificial intelligence (AI) has not brought benefits to the earnings of any large companies outside the technology sector.
He noted that although the "Magnificent Seven" tech giants, including Nvidia and Meta, have achieved revenue growth amid the AI boom, other industries have not shared in this growth dividend. In other words, only the tech giants are currently reaping the benefits of the AI boom.
Slok focused on what he calls the S&P 493 index—that is, the constituents of the S&P 500 excluding Alphabet, Amazon, Apple, Meta, Microsoft, Nvidia and Tesla—and found that profit margins and revenue per employee appear to be flat, with no evidence that artificial intelligence is raising productivity.
"Despite the enormous investment and intense hype in artificial intelligence, this technology has not delivered any economic returns for American companies outside the technology sector. Mainstream American companies are cutting back on spending and beginning to view token spending as a cost center that drags down profit margins rather than a source of growth," he wrote.
Slok focused his analysis on three main indicators: revenue per employee, profit margin and productivity growth. These indicators have soared for technology companies, but not for ordinary companies.
Specifically, the report says that since 2022, revenue per employee at technology companies has soared, rising from $550,000 to nearly $800,000 at present. At the same time, this indicator for other companies in the S&P 500 has changed little, hovering around $550,000 for the past seven years.
Moreover, since 2022, profit margins at technology companies have climbed sharply, while profit margins at other companies have stagnated, remaining at around 10%.
Slok further asked whether this is simply a matter of non-tech companies lagging behind the tech giants. He is skeptical, believing that it is difficult for American companies to "translate increasingly cheap intelligence into higher revenue growth and higher profit margins."
"AI may be a great calculator, but in business, intelligence is mainly a matter of judgment," he wrote, later adding, "AI does not understand accountability, trust, culture, unwritten rules, moral trade-offs or fairness, all of which affect reputational risk and ultimately drive revenue growth and profit margins."
As the earnings season gets under way, investors are closely watching companies' AI spending and whether the related investments can deliver the expected returns.
Last week, Meta was the first to disclose developments related to the technology sector's earnings, saying it plans to bet more aggressively on artificial intelligence and increase its capital expenditure plans. The statement unsettled the market, causing Meta's stock price to fall and its credit risk indicator to rise to a record high.
(Source: Cailian Press) Middle of the article Embedded advertisement