Apollo Economist Warns AI Boom Profits Funded by Investors, Not Customers

TL;DR. Apollo's Chief Economist Torsten Slok states that the AI boom's profits are investor-funded, not customer-earned, leading to an unsustainable industry model. - AI models and applications show negative operating margins despite high investment levels. - Silicon and equipment sectors, like chipmakers, retain the highest profit margins within the AI value chain. - The industry's stability faces risk if capital infusion slows before customer ROI materializes. - Economists note AI investments outpace earnings, causing companies to issue debt for financing.

• AI models and applications have significantly negative operating margins.
• Silicon and equipment companies (e.g., chipmakers) show the highest profit margins at 41%.
• Current AI growth relies on investor capital rather than revenue generated from end-customer demand.
• Goldman Sachs projects over trillion in AI investments by 2026, but economic productivity gains are minimal.
• The lopsided profit structure risks industry stability if investor funding declines before customer returns.
• Other financial institutions also highlight AI investment outpacing earnings and free cash flow.

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