Apollo economist warns AI profit gains outside tech could take "well beyond" what Wall Street expects

Outside tech, there's no sign AI is boosting profit margins, writes Torsten Slok, chief economist at US financial firm Apollo. AI company valuations rest entirely on the promise of rising margins at S&P 493 companies (the index minus "the magnificent seven"). In regulated industries like healthcare, banking, energy, pharma, and manufacturing, process overhauls and privacy requirements could delay productivity gains "well beyond what the market currently projects." Markets are pricing in fast earnings growth, but real cash flows could trail far behind, Slok says. If the productivity bump takes five years instead of five months, many AI stocks face a painful repricing. Falling token costs could also cap hyperscaler revenue.

There's another problem: Even where individual employees are already more productive, the gains are hard to measure in knowledge work. Without clear metrics, management can't act, and productivity improvements don't show up on the balance sheet. They get absorbed into daily operations. We broke this down in Frontier Radar #3.