Now Reading: AI spending boom lifts tech margins, not others yet: Apollo economist
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AI spending boom lifts tech margins, not others yet: Apollo economist
AI spending boom lifts tech margins, not others yet: Apollo economist
Net profit margins for the Mag Seven tech giants have risen to about 25 percent since late 2022, when ChatGPT launched, while margins for the other 493 S&P 500 companies have stayed…
The Story in Brief
Net profit margins for the Mag Seven tech giants have risen to about 25 percent since late 2022, when ChatGPT launched, while margins for the other 493 S&P 500 companies have stayed flat or fallen, according to Apollo chief economist Torsten Sløk. The AI capital expenditure boom is benefiting sellers like Nvidia and hyperscalers, not buyers in healthcare, consumer staples, energy, or materials. Sløk warns that the longer it takes non-tech firms to generate returns on AI investment, the greater the downside risk to the economy and the market, which is heavily concentrated in the AI trade. Investors expect tangible benefits by 2028.
The Indian Opinion
The narrative that AI will transform every industry overnight is crashing into cold numbers. The Mag Seven's margins have jumped to 25 percent; the other 493 firms are stuck near 10 percent. This is not a bubble story yet, but a patience test. The real question is not whether AI works, it is whether buyers of AI tools can show profit improvements by 2028 as investors expect. If they cannot, the whole market rally rests on just a few names.
Source: livemint.com
This story was synthesised by AI from the source linked above.
