Apollo analysis shows no one besides the biggest tech giants is seeing benefits from AI

Despite all the buzz surrounding AI investments, most American companies outside of the tech giants are yet to experience financial gains, according to an analysis by a major investment firm. The S&P 493, which excludes Alphabet, Amazon, Apple, Meta, Microsoft, Nvidia, and Tesla, has not reaped the benefits of AI investments, says Apollo Global Management analyst Torsten Slok.

While the so-called Magnificent Seven tech firms have seen profits rise from AI, other companies' profit margins and productivity growth remain unchanged. Revenue per worker at the tech firms has increased from $550,000 in 2022 to nearly $800,000 this year, but has remained stagnant at around $550,000 for the broader S&P 493 since 2019.

Profit margins have also stayed flat for non-tech companies, while soaring for the tech leaders since Q3 2023. Productivity growth, however, has been minimal for most firms, despite AI's potential. Some startups are bucking this trend by increasing AI spending, but established firms are hesitant to invest. Slok argues that while AI may boost productivity for a few companies, its impact on the broader economy is limited, as it requires more than just spending on AI to see tangible results.

The key challenge for mainstream corporate America is turning cheap AI intelligence into higher revenue growth and profit margins, something that may prove difficult given AI's limitations in understanding context, ethics, and business culture, which ultimately impact reputational risk and revenue growth.