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Apollo’s Torsten Slok finds Magnificent Seven revenue per employee surged 20% to $270,000 since 2023, while Russell 2000 firms dropped 14% to $122,000.
Magnificent Seven profit margins are expanding while the other 493 S&P 500 firms see none, suggesting AI spending isn’t converting to broader profitability.
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Artificial intelligence has become the defining investment theme of the decade. Trillions of dollars have flowed into data centers, semiconductors, cloud infrastructure, and software. The stock market has rewarded companies tied to the AI boom with soaring valuations, while the largest technology firms continue to post eye-catching revenue growth.
Yet beneath the surface, a less encouraging story is emerging. The gains from AI appear highly concentrated among a handful of mega-cap companies. While investors have been told that AI would eventually lift productivity across the entire economy, the latest data suggests that trickle-down effect has yet to arrive. In fact, one disturbing statistic points to a widening divide between the market’s biggest winners and everyone else.
According to a recent analysis from Apollo Global Management Chief Economist Torsten Slok, revenue per employee at the Magnificent Seven has climbed to roughly $270,000, the highest level in at least three-and-a-half years. Since the start of 2023, that figure has risen by approximately $45,000, or 20%.
The picture looks very different for smaller companies. Over the same period, revenue per employee among Russell 2000 companies declined by about $20,500, or 14%, to just $122,000 — the lowest reading in at least three-and-a-half years.
Here’s what the numbers tell us:
The result is striking. Each Magnificent Seven employee now generates more than twice the revenue of the average Russell 2000 employee and about 38% more than employees at the other 493 companies in the S&P 500.
Let’s call this what it is: productivity is becoming concentrated at the very top of the market.
Part of this divergence comes from aggressive workforce reductions among large technology companies. After the hiring binge of 2020 through 2022, firms such as Microsoft (NASDAQ:MSFT | MSFT Price Prediction), Meta Platforms (NASDAQ:META), and Alphabet (NASDAQ:GOOG) cut headcount while continuing to grow revenue.
That combination naturally boosts revenue per employee.
Smaller businesses have not enjoyed the same advantages. Higher interest rates continue to pressure borrowing costs, while many small companies lack the financial resources needed to invest heavily in AI infrastructure or proprietary models. Apollo’s analysis concludes that there are still few signs AI is boosting revenues outside the largest technology firms.
In other words, the economy may be experiencing an AI boom, but much of the benefit remains trapped within a relatively small group of companies.
Surprisingly, even the broader large-cap market is not seeing major margin expansion.
Apollo says profit margins are rising for the Magnificent Seven while remaining largely flat for the other 493 companies in the S&P 500. The data suggests that outside the AI leaders, businesses are not yet converting AI spending into higher profitability.
That matters because productivity gains eventually need to show up in earnings. If companies spend billions on AI tools without generating higher margins, the economic payoff becomes harder to justify.
Granted, AI’s long-term impact could still be enormous. New technologies often take years before their benefits spread throughout the economy. Electricity, personal computers, and the internet all followed similar adoption curves.
But investors should pay attention to where the gains are actually appearing today, not where they may appear someday.
In short, the troubling statistic is not that AI spending is slowing. It’s that AI-driven productivity gains remain concentrated among the market’s largest companies.
Revenue per employee has surged 20% at the Magnificent Seven since early 2023 while falling 14% at Russell 2000 companies. Profit margins are improving for Big Tech but remain largely unchanged elsewhere.
That doesn’t mean AI is making the economy sick. It does suggest the benefits are not yet spreading broadly enough to improve efficiency across corporate America. Until small and mid-sized businesses begin seeing the same productivity gains as the tech giants, investors should view the benefits of the AI boom as a story of narrow concentration rather than economy-wide transformation.
After two decades of patrolling the dark corners of suburbia as a police officer, Rich Duprey hung up his badge and gun to begin writing full time about stocks and investing. For the past 20 years he’s been cruising the markets looking for companies to lock up as long-term holdings in a portfolio while writing extensively on the broad sectors of consumer goods, technology, and industrials. Because his experience isn’t from the typical financial analyst track, Rich is able to break down complex topics into understandable and useful action points for the average investor. His writings have appeared on The Motley Fool, InvestorPlace, Yahoo! Finance, and Money Morning. He has been featured in both U.S. and international publications, including MarketWatch, Financial Times, Forbes, Fast Company, and USA Today.
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