No Signs of AI Payoff Outside the Tech Sector

Despite massive investments and hype around artificial intelligence, the technology has not brought financial gains to American corporations outside the tech sector, according to a recent analysis. Revenue per worker has risen for the "Magnificent Seven" but remains flat for the S&P 500, while profit margins are rising for the "Magnificent Seven" but flat for the broader market index, as shown in the accompanying charts.

There is also no evidence that AI is boosting productivity growth, the third chart reveals. As a result, mainstream corporate America is scaling back its spending on AI and viewing it more as a cost center than a growth driver.

Venture-backed companies are increasingly investing in AI, but traditional corporations are not compelled to follow suit, as they do not require the latest models and are unwilling to pay for them. The macroeconomic impact of AI will remain limited as long as agentic AI and token spending are restricted to a small segment of the economy, as indicated by the final two charts.

The future of AI's role in corporate America hinges on whether mainstream businesses can convert cheap intelligence into higher revenue growth and profit margins, even as models become more affordable. However, this may prove challenging, as AI is essentially a calculation tool, and business intelligence often relies on human judgment.

This judgment depends on context, and the outcome can vary depending on which human or AI model is consulted. Moreover, AI lacks essential human traits such as accountability, trust, culture, unwritten rules, ethical trade-offs, and fairness. These factors influence reputational risk and, ultimately, revenue growth and profit margins.

In summary, the AI story will be determined within the S&P 500, not the "Magnificent Seven," and thus far, there is no indication that revenue growth or margins are improving outside the tech sector.