The AI boom is happening at seven companies, the rest of the S&P 500 isn't seeing it

The AI revolution is currently confined to seven companies within the S&P 500, while the rest of the index is experiencing stagnation, according to Torsten Slok, chief economist at Apollo Global Management. Slok's analysis suggests that AI has yet to deliver any financial benefits outside of the tech sector, despite the significant investments and hype surrounding large language model research.

The Magnificent 7, a cluster of Big Tech companies including Nvidia, Tesla, Amazon, Microsoft, Google/Alphabet, Apple, and Meta, are the only ones witnessing notable returns due to their AI efforts. These companies have seen rising inflation-adjusted revenue per worker and profit margins, while the remaining 493 companies in the S&P 500 are flat on both metrics.

Slok does not see any evidence that AI is boosting productivity growth, claiming that Generative AI and Large Language Models (LLMs) are having no impact on mainstream companies' bottom lines. Venture-backed firms continue to invest heavily in AI, but mainstream organizations are wary of these costs, viewing AI spending as a potential drag on profit margins.

Slok warns that if AI remains confined to a small slice of the economy, its macroeconomic effects will be minimal. He argues that businesses ultimately rely on human judgment, cultural sensitivity, ethical considerations, and trust, factors that AI cannot replicate. If AI stays limited to a small portion of the economy, its impact could be limited, and its costs could eventually become too high.

However, some analysts remain optimistic, with Goldman Sachs economist Jan Hatzius predicting that AI investment will ultimately lead to higher productivity and economy-wide profits.