Apollo’s Slok says AI has delivered 'zero payoff' outside tech

Artificial intelligence has yet to translate into measurable productivity gains or stronger financial performance for most companies outside the technology sector, Apollo Global Management Chief Economist Torsten Slok said.

“Despite massive investments and widespread hype around artificial intelligence, the technology has delivered zero financial payoff to corporate America outside of tech. Revenue per worker is rising for the Mag 7 but is flat for the S&P 493,” Slok wrote in a note published Saturday.

Profit margins show a similar divergence, while there is little evidence that AI has boosted productivity growth. “Profit margins are rising for the Mag 7 but are flat for the S&P 493 ….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 said.

Investors are scrutinizing AI spending and returns on investment as companies ramp up infrastructure spending. Meta Platforms' (META) plans to increase capital expenditures intensified concerns last week, sending its shares lower and pushing its credit risk gauge to a record high.

Concerns over debt-funded infrastructure investments and lofty valuations have also mounted, with Australian data center company Firmus Grid abandoning its IPO plans after investors balked at its proposed $30B valuation. Gartner has estimated that more than $3.5T in AI infrastructure spending could be at risk of impairment by 2030 if revenue fails to justify the investment.

Meanwhile, Elon Musk also warned of mounting financial pressure on AI infrastructure companies, saying SpaceX (SPCX) had secured $40B in debt financing to purchase graphics processing units. He said credit markets had largely shut out companies without substantial revenue independent of AI data centers, predicting widespread failures and consolidation among smaller artificial intelligence infrastructure companies. Musk predicted particularly severe consequences for so-called neocloud companies.

Slok said venture capital-backed companies are increasingly spending on AI tokens, while mainstream businesses remain reluctant to pay for the latest models.

“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,” he wrote.

AI also lacks the ability to understand accountability, ethical trade-offs and trust, “all of which shape reputational risk and ultimately drive revenue growth and profit margins,” Slok added.

“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.

Artificial Intelligence/Robotics ETFs: (AIQ), (BOTZ), (DTEC), (WTAI), (XAIX), (WISE), (GINN), (ROBT), (TECB), (XT), (THNQ), and (CHAT).