Artificial Intelligence, Real Efficiency

Sometimes, it feels like the world is evolving at an unprecedented pace, and this month’s chart illustrates a trend that affects all of us as investors. When corporations become more efficient, they create ripple effects throughout the economy. 

Due to the evolution of efficiency tools and artificial intelligence, S&P 500 companies now need fewer workers to generate the same revenue as decades ago. In 1990, it took nearly eight workers to generate $1 million in revenue. Now, we’re down to approximately 2.2 workers to generate $1 million in revenue—a dramatic shift. 

Technology and Competition

Historically, technology has often created productivity gains, but this efficiency boost doesn’t happen overnight—it’s the result of decades of innovation and advancement. This month’s chart reflects that reality, showing how businesses have adapted to competitive pressures over time.

A.I. and Profitability

Adopting A.I. can boost profitability, which might help companies improve their financials over time. When companies generate more revenue per employee, their margins often improve, which can be seen in the stock price.