Top economist says AI just hasn’t delivered on the productivity hype—and it means a ‘painful repricing’ of markets is very possible

The clock is ticking on AI to deliver on its promises of transformed workplace and economic productivity, and if lags in returns on investment continue, the markets are in for a rude awakening, according to one top economist.

Torsten Slok, the influential chief economist for Apollo Global Management, argued in a recent blog post that there’s a growing gap around AI-enhanced productivity. Basically, you can only see it at tech companies, not most of the Fortune 500. 

While some sectors like software and tech can easily integrate AI into their operations, Slok argued that deploying this technology is slow-going for the vast majority of the economy. It takes time and effort due to regulatory hurdles, data protection, and workflow integration, meaning structural productivity gains are slow, and returns of investment have yet to be seen. Slok said he thinks it may happen—eventually. And by that point, the stock bubble may have burst, because the market has priced in returns sooner rather than later. 

“The key issue is the length of the ROI runway outside the tech sector,” Slok said. “The bottom line is that a mismatch between current earnings expectations and the actual time firms need to generate ROI on AI investments could have significant implications for many AI company valuations today.”

Slok cites Bloomberg and Macrobond data indicating that despite profit margins for the Magnificent Seven increasing from around 15% to 25% between the first quarters of 2023 and 2026, profit margins for the rest of the S&P 493 have hovered around 10%. The Bloomberg 500 Index follows the same pattern as the S&P, remaining at a steady 12% profit margin over the same period of time. 

Most concerning to Slok is what happens if this gap grows as AI deployment and productivity gains continue to sputter. A seminal and controversial MIT study published last year found only 5% of companies saw a meaningful return in investment from generative AI pilot projects. The Apollo economist warned........

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