Companies Are Starting to Reconsider Their AI Spending

As the technology has yet to deliver clear financial returns for them, plenty of businesses outside the technology industry are starting to reconsider how much they spend on artificial intelligence.

Key points

• This is according to a new analysis by Apollo Global Management chief economist Torsten Slok, published on October 24.
• According to Slok, the AI story will be decided by the S&P 493, not the Magnificent Seven.
• In 2025, a report from MIT's NANDA initiative discovered that concerning 95% of generative AI pilot projects at firms were delivering no measurable impact on profits.
• Apollo's analysis is based on the S&P 500, split into two groups.
• Slok remarked mainstream corporate America is pulling back on AI as the technology has had no visible impact on its bottom line.

Instead of seeing AI as a source of expansion, a growing number of businesses now view it as an extra cost that weighs on their profit margins.

This is according to a new analysis by Apollo Global Management chief economist Torsten Slok, published on October 24. Why Firms Are Pulling Back.

As a cost center rather than an investment that drives expansion, firms are increasingly treating token spending, the capital paid to employ AI models.

According to He additionally, most businesses outside the tech sector do not need the latest and most advanced AI models, and they are unwilling to pay premium rates for them.

In contrast, startups backed by venture capital continue to spend more and more on AI services.

Data from fintech firm Ramp, cited in the analysis, indicates that AI spending is heavily concentrated. The top 10% of firms account for 95.6% of spending on OpenAI and Anthropic, and 99.5% of spending on model serving and inference.

According to Slok, as long as AI apply and spending stay confined to a small part of the economy, the broader economic effects of AI will remain particularly limited.

This comes as some of the biggest tech firms continue to pour funds into the technology. Earlier this year, Meta's AI spending wiped out 91% of its free cash flow. AI Cannot Replace Human Judgment.

Slok additionally questioned whether cheaper and more capable AI models will automatically assist businesses earn more.

He described AI as a great calculator but remarked that, in business, intelligence is mostly concerning judgment. That judgment depends on context, and the answer can vary depending on which person or which model is asked.

According to Slok, AI does not understand accountability, trust, workplace culture, unwritten rules, ethical trade-offs, or fairness.

These factors shape a company's reputation and, in the end, its revenue expansion and profit margins. Consequently, turning increasingly cheap AI into higher revenue and profits may be harder than it sounds. Previous Research Raised Similar Reservations.

For context, the findings echo earlier research that questioned whether the rush to adopt AI is paying off.

Other studies have additionally raised doubts concerning whether widespread AI adoption is improving productivity at work, even as firms keep investing in AI tools and automation. No Extra Profit Outside Major Tech.

Apollo's analysis is based on the S&P 500, split into two groups. The first is the Magnificent Seven: Alphabet, Amazon, Apple, Meta, Microsoft, Nvidia, and Tesla. The second is the remaining 493 firms in the index.

Revenue per worker and profit margins are rising for the Magnificent Seven. For the other 493 firms, both measures have stayed flat.

Slok additionally stated there are still no signs of AI boosting productivity expansion throughout the economy.

We documented earlier that businesses are spending billions on AI without making any extra funds from it.

According to Slok, the AI story will be decided by the S&P 493, not the Magnificent Seven. So far, he remarked, there is no evidence that revenue expansion or profit margins are improving outside the tech sector. Stay Connected with ProPakistani.

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For now, companies Are Starting to Reconsider Their AI Spending remains the part of the story worth watching, and further updates are likely as more details are confirmed.