No signs (yet) that AI is driving higher margins for anyone except people selling AI
byu/JuliusCaesar121 inEconomyCharts
The S&P 500 is spending heavily on AI. But it is not showing up in profit margins since 2022.
Looking at the individual sectors of the S&P 500 outside tech shows that the picture is flat, cyclical or worse, see charts 2, 3 and 4.
Health care margins have halved since 2015; consumer staples are stuck near 6% and consumer discretionary near 8%; energy and materials have given back most of their 2022-23 gains; real estate is going sideways; and the only genuine improvements look like an ordinary cyclical recovery rather than a technology-driven step change.
The bottom line is that the AI capex boom is so far only showing up in the sellers’ margins, not the buyers’.
This is important because the longer it takes the S&P 500 to generate ROI, the bigger the downside risks to an economy and a market this concentrated in the AI trade.
h/t JuliusCaesar121