The largest AI profits are accumulating furthest from the customer, while the companies closest to the end user are absorbing the losses.
That verdict is the latest insight from Apollo Chief Economist Torsten Slok. Per his estimates, margins for silicon and equipment stand at 41%, while models and applications serving the end users (including frontier labs such as OpenAI and Anthropic) operate at a -59% margin.
“AI boom’s profits are currently being funded by investors rather than earned from customers,” Slok wrote. “The upstream margins are real, but they are paid for out of capital raised by the layer losing money, not out of cash generated by end demand,” he warned.
Risk or Concede
Adoption is expanding, but cash generated per unit of compute has yet to match the cost of training and operating frontier systems.
