Apollo Economist Slok: AI Profits Funded by Investors, Not Customers
Apollo Chief Economist Torsten Slok stated that the profits from the AI boom are currently funded by investors rather than coming from customers.
Profits at the upstream level do exist, but these profits are derived from capital raised from loss-making layers, not from cash flows generated by end-user demand.
Chip manufacturers are significantly benefiting, while large-scale cloud computing companies are performing moderately, and the AI application layer continues to incur losses.
This viewpoint emphasizes the disconnect between current profit distribution in the AI industry chain and the payment capabilities of end users.
Capital continues to flow towards upstream infrastructure, driven by event-driven investment logic, while the loss-making application layer relies on financing to sustain itself, with client monetization lagging behind.
Source: Public Information
ABAB AI Insight
Torsten Slok has previously warned that the growth rate of AI capital expenditure far exceeds historical cycles, and pointed out that the profit margins of the S&P 493 (excluding tech giants) have not improved, continuing his consistent observation that the commercialization of AI is slower than expected.
Current profits are concentrated in the "pick and shovel" segments such as chips and energy, supported by downstream financing, motivated by seizing the first-mover advantage in computing power infrastructure, strategically using investor capital to subsidize early ecosystem expansion.
This mirrors the path during the 2000 internet bubble where infrastructure layers profited first, followed by application layers, as well as the early stages of cloud computing where large-scale spending relied on financing. The current AI sector is at a critical juncture transitioning from capital-driven to demand-driven.
Essentially, this is a concentration of capital. Investor funds are replacing customer revenues as the source of upstream profits, maintaining high capital expenditures through continuous financing, amplifying the gap between valuation and actual cash flow.
ABAB News · Law of Cognition
- Upstream profits can appear before end-user demand.
- Investor capital is the most expensive substitute for customers.
- The prosperity supported by financing in the loss-making layer will ultimately need to be validated by real cash flows.