AI won’t pay off for the S&P 493 until CEOs rebuild the work

For the S&P 500 excluding the technology sector, AI has not yet yielded any financial returns, according to Apollo Global Management chief economist Torsten Slok. Revenue per employee and profit margins are rising in the Magnificent Seven, but flat among the remaining 493 companies. Slok suggests that the value is currently with the firms providing AI infrastructure rather than the companies using the technology.

This appears to be the case, as Azure and Google Cloud's AI-related revenue saw significant growth in the fourth quarter of 2023, while the enterprises using the technology reported job cuts rather than margin gains. The real gains are being realized by individuals, not companies, as they are leveraging AI to save real hours. However, these gains are not being translated across the enterprise because the core operating model has not changed.

Executives are still relying on processes built around human work, and the workflows, processes, and decision approvals have not been updated to accommodate AI. For companies to see widespread benefits from AI, they must change their operating model, with the CEO owning the initiative, identifying the right problems to solve, rebuilding the work around those problems, and measuring the results.

This process is complex and costly, with most companies still in the early stages of realizing the potential benefits of AI. As such, widespread acknowledgment of specific, measurable AI benefits is unlikely to be seen before the end of 2027.