Oct 30, 2026 · 33 min
AI spending grows faster than its economic payoff
AI’s Big Payoff? Apollo’s Top Economist Doesn’t See It Yet.
The episode tests whether the massive buildout around artificial intelligence is creating broad business gains or mainly benefiting technology leaders and infrastructure providers.
- 1AI adoption has yet to show clear earnings, revenue, and margin gains across ordinary businesses beyond major technology companies.
- 2Corporate AI use currently emphasizes cost savings, while its ability to generate new revenue remains unresolved.
- 3Higher rates reshape housing affordability and portfolio allocation even as AI investment supports economic growth.
Don't miss
Torsten Slok distinguishes AI’s visible cost savings from the still-unproven promise of broad revenue growth outside major technology companies.
The brief
Jack Hough opens with a tour of batteries, watts, volts, neoclouds, and 800-volt sidecars before connecting AI’s infrastructure demands to a larger economic question.
Apollo chief economist Torsten Slok asks when AI adoption will translate into higher earnings, revenues, and profit margins beyond the major hyperscalers.
The clearest current use case is cost reduction, Slok says, while AI still struggles with context, accountability, trust, culture, and ethical judgment.
Slok remains optimistic about the U.S. economy, citing AI spending as a major GDP tailwind, but housing supply constraints and high mortgage rates complicate the outlook.
The conversation ends with a practical market question: how should investors balance bonds and stocks, including a 60/40 portfolio, in a higher-rate environment?
What was said on this episode
25 statements · 10 positive · 9 negative · 1 mixed · 5 neutral
S&P 493 revenue per employee and profit margins have not increased.
“revenue per employee for the S&P 493 has not gone up. Profit margins for the S&P 493 have not gone up.”
Listen at 15:35
AI has not yet produced measurable benefits outside the technology sector.
“the key issue at this point, we have not yet seen any signs of AI showing up outside of the tech sector.”
Listen at 15:41
AI has not yet produced measurable benefits outside the technology sector.
“at this point, we have not yet seen any signs of AI showing up outside of the tech sector.”
Listen at 15:42
AI’s payoff will eventually arrive in some form.
“I do expect that it will come in some form.”
Listen at 18:10
AI is not yet structurally changing the economy.
“there is just not any sign at this point that AI is structurally changing the economy”
Listen at 18:51
AI mainly affects 70% of companies through cost savings.
“surveys show that the way AI is impacting corporates is mainly for 70% of corporate companies. It's basically through cost savings.”
Listen at 20:07
AI primarily affects about 70% of corporations through cost savings.
“the way AI is impacting corporates is mainly for 70% of corporate companies. It's basically through cost savings.”
Listen at 20:08
AI’s payoff will occur.
“The payoff will come. I'm 100% sure about that.”
Listen at 21:22
AI spending contributes roughly one percentage point to economic growth.
“roughly one percentage point, mainly half of growth comes from AI spending alone.”
Listen at 22:09
The economy will continue performing well over the next 12–18 months.
“we continue to expect the economy to do well for the next. 12 to 18 months.”
Listen at 22:26
Homeshoring adds approximately 0.3% to GDP.
“homeshoring is also adding to GDP. We calculated only adds about 0.3% to GDP.”
Listen at 22:56
Reshoring adds approximately 0.3% to GDP.
“We calculated only adds about 0.3% to GDP.”
Listen at 22:58
AI spending, reshoring, and the bill do not depend on interest rates.
“none of these things depend on interest rates.”
Listen at 23:19
Higher interest rates have negatively affected housing and autos.
“it has impacted very negatively those parts of the economy that are sensitive to interest rates, namely housing and autos.”
Listen at 23:26
Mortgage rates are currently 7.5%.
“Today, mortgage rates are 7.5.”
Listen at 24:32
High rates and prices have weakened new and existing home sales.
“You're also seeing, of course, weakness across the board when it comes to home sales, both new home sales and existing home sales.”
Listen at 24:58
Income and wage growth must outpace home-price growth to improve affordability.
“we need income growth and we need wage growth that can more than compensate for the rise in home price.”
Listen at 25:22
The housing market is not currently characterized by a destabilizing imbalance.
“there's no imbalance.”
Listen at 26:17
The housing market lacks the excess supply characteristic of a bubble.
“there's no imbalance. So it's not the case that we have a building too much”
Listen at 26:17
AI spending continues at full speed despite higher interest rates.
“AI spending is full steam ahead.”
Listen at 27:30
Higher rates are intended to shift investor money toward fixed income.
“The number one implication of that is that the Federal Reserve wants us to put more money into fixed income.”
Listen at 28:56
Inflation is 3.7%, above the Federal Reserve’s 2% target.
“Inflation, as we speak, is 3.7. It's supposed to be 2.”
Listen at 29:26
The ten largest stocks comprise 40% of the S&P 500.
“the 10 biggest stocks, they make up 40% of the index.”
Listen at 30:13
Investors expect AI-related equities to return 10–30% above the Fed funds rate.
“the expectation is that the returns in the equity market in the AI story will be much higher, 10, 20, 30% relative to the Fed funds rate at 4%.”
Listen at 30:30
AI is expected to deliver extremely good returns over the next 2–5 years.
“everyone expects AI to deliver extremely good returns over the next two, three, five years.”
Listen at 31:08
Statements are attributed to the speaker as said on the episode and reflect their view at the time, not PodLume's. They are not advice.
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