Apollo's Zito: AI Deflation So Sharp It Makes Risk Unpriceable

John Zito, co-president of Apollo Global Management, told investors last week that artificial intelligence may be the only macro signal that matters.

I spend very little time thinking about most of the things you just brought up, Zito said at the Morgan Stanley Financial Services Conference on June 10. I think the only thing that matters is whether what's going on with Anthropic in the labs is real or not. It's so dwarfing with what's going on in the world.

Zito's argument is that AI, if it proves as powerful as its backers claim, will overwhelm the usual checklist of inflation, deficits, interest rates and geopolitical fragmentation. The scale and speed of the disruption make it nearly impossible to probability-weight outcomes over the next 12 to 24 months.

If AI is real, it's so hyper deflationary to so many things over the long term that it's really hard to take risk, he said.

The transmission mechanism runs through earnings expectations. Zito pointed to frontier AI companies like Anthropic, where revenue projections in Silicon Valley range from tens of billions to hundreds of billions of dollars in annualized revenue within a few years. That kind of trajectory, if realized, would rewrite the economics of entire industries. Software margins would compress. Smaller companies would face pressure. The benefits would accrue disproportionately to large-scale platforms and infrastructure providers.

I think some businesses are going to massively thrive, Zito said. Most of the efficiencies will be driven toward the big-scale players.

Apollo has been adjusting its portfolio to reflect that uncertainty. Zito said the firm has increased exposure to Treasurys and hard assets, and taken positions that protect against inflation. At the same time, Apollo has participated in large-scale infrastructure-adjacent financing deals, including allocations tied to Broadcom and SpaceX, as well as sports assets. The goal is to build portfolios that can withstand a range of outcomes, particularly if AI proves to be a powerful deflationary force.

The difficulty, Zito said, is that traditional macro frameworks lose their predictive power. Investors still hang on every inflation report and Fed signal. The larger uncertainty may be whether AI becomes the kind of force that rewrites assumptions about growth, margins and inflation itself.

If you're not diversified, there's not much you can do, he said.

For Apollo, which carries an Alpha Score of 47 -- labeled Mixed -- the stance reflects the challenge of positioning for an outcome that defies easy categorization. The firm is hedging both inflation and deflation, a strategy that acknowledges the difficulty of calling the direction of the next cycle.

The next scheduled catalyst is not a data print. It is whatever Anthropic reveals next.