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

2026-07-07 · Source: The Decoder · Field: Finance & Economics — Capital Markets & Investment Management, Economic Analysis & Policy · Depth: Intermediate, quick

Summary

Torsten Slok, chief economist at US financial firm Apollo, warns that AI-driven profit gains outside the technology sector could take significantly longer to materialize than Wall Street currently anticipates. He notes there is no current sign of AI boosting profit margins in the S&P 493 companies (excluding "the magnificent seven"), despite market valuations resting on this promise. Regulated industries such as healthcare, banking, energy, pharma, and manufacturing face substantial delays due to process overhauls and privacy requirements, potentially extending productivity bumps from months to years. This divergence between market-expected earnings and actual cash flows could lead to a painful repricing of many AI stocks. Additionally, measuring productivity gains in knowledge work remains challenging, preventing these improvements from appearing on balance sheets.

Key takeaway

For investors evaluating AI-driven growth, you should re-evaluate timelines for AI-driven profit growth in non-tech sectors. The market's current projections for rapid earnings increases may not align with the slower reality of AI integration in regulated industries. Consider the risk of significant repricing for AI stocks if productivity gains materialize over five years instead of five months, impacting your portfolio strategy.

Key insights

Market expectations for AI-driven profit growth in non-tech sectors are likely overoptimistic due to adoption hurdles and measurement challenges.

Principles

• AI profit gains are not yet visible outside tech.
• Regulated industries face significant AI adoption delays.
• Unmeasurable productivity gains don't impact balance sheets.

In practice

• Monitor AI adoption rates in regulated sectors.
• Develop metrics for knowledge work productivity.
• Assess AI stock valuations against long-term ROI.

Topics

• AI Adoption
• Profit Margins
• Market Expectations
• Regulated Industries
• Productivity Measurement
• AI Stock Valuation
• S&P 493

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Editorial summary, takeaway, and curation by AIssential. Original article published by The Decoder.