Apollo economist Torsten Slok: weak S&P 493 margins put Big Tech valuations at risk

Torsten Slok, chief economist at Apollo Global Management, warns that companies outside a handful of the largest tech giants aren't showing profitability gains from their artificial intelligence investments, and that this creates risks for Big Tech valuations. Bloomberg Tech reported the remarks, citing Slok's appearance on the Open Interest show.

What the warning is about

Torsten Slok leads economic analysis at Apollo Global Management, one of the world's largest alternative asset managers. He says the so-called "S&P 493" has yet to show any meaningful return on AI spending. In other words, massive AI investment across the US economy isn't translating into measurable margin growth beyond a narrow group of market leaders.

What is the S&P 493?

"S&P 493" is common Wall Street shorthand for the S&P 500 excluding the so-called "Magnificent Seven": Apple, Microsoft, Alphabet, Amazon, Nvidia, Meta, and Tesla. These seven companies drove most of the index's market-cap gains in recent years, largely on the back of the AI boom, while earnings growth at the remaining 493 companies has been far more modest.

• The term "S&P 493" refers to the S&P 500 without the "Magnificent Seven"
• The warning came from Torsten Slok, chief economist at Apollo Global Management
• At issue is the gap between AI spending and profit growth at companies outside Big Tech

Why this is a risk for Big Tech

If Slok's thesis holds, a small group of companies keeps ramping up capital spending on data centers and chips, betting on future demand from the rest of the economy. But if AI doesn't turn into profit for most companies, investor enthusiasm could fade, and Big Tech's high valuations could come under pressure.

What it means

Slok's warning feeds into a broader debate over whether the AI market has inflated a bubble of expectations: tech giants are spending record sums on infrastructure, but there is still little evidence that these investments are paying off across the economy as a whole.