Apollo finds no AI payoff in profit margins outside tech

Torsten Slok, chief economist at Apollo Global Management, looked at profit margins for the S&P 500 excluding the largest technology companies. Spending on AI is heavy, he wrote, but it does not show up in margins. Health care margins have halved since 2015, consumer staples are stuck near 6% and consumer discretionary near 8%. Energy and materials have given back most of their 2022–23 gains, and the few improvements look like an ordinary cyclical recovery.

His conclusion is that the AI investment boom so far shows up in the margins of the sellers, not the buyers. The longer the buyers take to earn a return, he argued, the larger the downside risk for an economy and a stock market this concentrated in the AI trade.