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

Adam Dumey leads enterprise frontier lab strategy at World Wide Technology (WWT), a privately held technology firm. WWT sells the enterprise AI integration work this piece recommends and partners with NVIDIA, Dell, Cisco and Microsoft. He holds no positions in the companies mentioned.

Apollo Global Management chief economist Torsten Slok wrote on Oct. 24 that outside the technology sector, AI has delivered zero financial payoff. Revenue per worker and profit margins are rising at the Magnificent 7 and flat across the other 493 companies in the S&P 500. Outside tech, he writes, token spending is a cost center weighing on margins. The AI story “will be decided in the S&P 493, not the Mag 7.”

Slok has the beneficiaries right. Thus far, the value has sat with the companies selling AI infrastructure, not the enterprises consuming the technology. The Oct. 28 earnings reports made the point: for the quarter ended Sept. 30, Azure revenue grew 48% and Google Cloud 103%, driven in large part by AI demand. The buyers of that capacity reported job cuts, not margin gains. The more interesting discussion is what is happening inside those companies that keeps their spend from converting to realized gains, what has to change, and when it will.

The payoff is landing in people, not in companies

Surveys this year from the St. Louis Fed and the Census Bureau put work use of generative AI at about 40% of workers and adoption at about a quarter of firms. Individuals are running ahead of their employers. Employees are saving real hours with AI. Some teams, and sometimes whole divisions, are seeing real benefit too. But those gains are not adding up across the enterprise, because the core operating model has not changed. The workflows, the processes and the decision approvals were built around people doing the work, and the reviews,........

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