- Analyst note warns non-tech firms aren’t seeing much benefit from AI
- So-called “Mag 7” of tech giants is experiencing the biggest boost
- But non-tech companies need to see success before market can boom
A top economist has warned that utilizing AI is only helping the world’s biggest technology firms – with most of the other large organization’s yet to see any significant benefits.
Torsten Slok, the chief economist at private equity giant Apollo Global Management, has issued a new note cautioning against believing the hype around AI revolutionizing the world of work
“Despite massive investments and widespread hype around artificial intelligence, the technology has delivered zero financial payoff to corporate America outside of tech,” Slok’s headline reads.
“S&P 493” vs “the Mag 7”
Slok’s note addresses the impact of AI across what he calls the “S&P 493” – the majority of big firms in the S&P 500 index, minus the “Mag 7” of large technology giants, namely Alphabet, Amazon, Apple, Meta, Microsoft, Nvidia and Tesla.
He points out that while revenue per worker appears to be rising for the ‘Mag 7’, it is flat for the S&P 493 – and it’s the same story for profit margins at these huge companies, which are also failing to see any signs of AI boosting productivity.
“With no impact on the bottom line, mainstream corporate America is pulling back and starting to view token spending not as a source of growth but as a cost center that weighs on margins,” Slok notes, highlighting that while VC-backed companies are increasing their spending on tokens, the “mainstream corporate America” is “unwilling” to pay for the latest model as it simply doesn’t need it.
“As long as agentic AI and token spending are confined to a small part of the economy, the macroeconomic effects of AI will be very limited,” Slok warns.
Looking forward, Slok points out that things may change in the near future, as the variety and intelligence of models should bring costs down, offering big businesses the opportunity to “turn increasingly cheap intelligence into higher revenue growth and higher profit margins”.
However even this will still have its challenges – as Slok points out, the business world runs on judgment, which runs on context, and the answer you ask one AI model may be very different to that you get from a competitor.
“AI does not understand accountability, trust, culture, unwritten rules, ethical trade-offs or fairness, all of which shape reputational risk and ultimately drive revenue growth and profit margins,” Slok warns.
“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,” he concluded.
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