The AI trade has been built on a powerful assumption: AI won’t just supercharge Big Tech earnings — it will eventually lift profitability across the entire economy.
The problem, according to Apollo chief economist Torsten Slok, is that the second half of that equation isn’t showing up yet.
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"So far there are no signs of profit margins rising outside the tech sector. This is ultimately what we are waiting for, because the value of AI companies today rests entirely on the promise that margins in the S&P 493 will eventually climb," Slok said.
S&P 493 Is the Real Test
The "S&P 493" — the index excluding the Magnificent Seven — is where the real test lies.
While companies like Nvidia Corp. (NASDAQ:NVDA) and Alphabet Inc. (NASDAQ:GOOGL) (NASDAQ:GOOG) are already seeing massive AI-driven demand and pricing power, the rest of corporate America has yet to translate AI spending into measurable margin expansion.
This gap is a valuation risk.
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AI leaders are being priced as if broad-based productivity gains are imminent, with markets effectively pulling forward years of expected earnings growth. But if adoption cycles and ROI timelines stretch longer than expected, those assumptions could prove premature.
"This creates a dangerous divergence between aggressive, front-loaded valuations today and a much slower cash flow reality, since equity markets priced for instant earnings growth will face a painful repricing if the productivity hockey-stick takes five years rather than five months," Slok warned.
In other words, the market is betting on speed — and the economy may be moving at a different pace.
ROI Delays Are the Risk
The mismatch is critical. Enterprise AI adoption requires major upfront investment, workflow redesign and time before efficiency gains begin to show up in margins.
If those gains take years to materialize, rather than quarters, the current premium baked into AI-exposed names could come under pressure.
"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 said.
Investors know AI works for enterprise — they are asking about when it pays. And right now, the broader market is not confirming the timeline priced into high-flying AI stocks.
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