Apollo CEO: "AI, inflation, and government debt" — the coming shock the world is not prepared for

Recently, Marc Rowan, CEO of Apollo Global Management, one of the world's largest alternative asset management firms, issued a warning: Despite strong current economic performance, an exogenous shock driven by geopolitical restructuring, inflationary pressures, and AI disruption is gathering momentum, and the world is not prepared for it.

Rowan stated, as the company released its quarterly results, that he estimates the probability of such an exogenous shock at 30% to 35%, far higher than normal levels. He pointed out that policies restricting the free flow of labor and goods have inflationary effects in the short term, while AI will trigger profound socioeconomic upheaval, causing a "blue-collar rise and white-collar pressure" within the structural reversal. Meanwhile, he severely criticized the aggressive operations of some competitor insurance companies, warning of contagion risk within the industry.

Against this backdrop, Apollo has shifted its fixed-income portfolio to higher credit quality, reduced its exposure to high-risk industries such as software, and has reserved about $40 billion in cash within its insurance business in preparation for market volatility. Rowan's remarks echo concerns from financial executives such as JPMorgan CEO Jamie Dimon, adding another layer of anxiety to the U.S. stock market, which is currently near historical highs.

Probability of Exogenous Shock Rises to 35%, Three Major Forces Intertwine

Rowan stated that companies’ and consumers’ balance sheets remain healthy, and the economy appears "quite robust" on the surface, but he emphasized that "the chance of an outcome beyond expectations is much higher." He attributed this risk to the convergence of three forces.

First is a comprehensive geopolitical reset. Rowan described the current global change as a "thorough geopolitical restructuring," believing that this very process poses a potential threat to market stability.

Second is inflationary pressure. He said, "Almost everything we are doing, whether intentionally or not, is likely to bring inflation," pointing directly at trade tariffs and immigration policies—restricting the free flow of goods and labor, even for reasonable aims, will inevitably be inflationary in the short term, "even if we haven't yet seen clear signs."

Third is the AI-driven reshaping of economic structures. Rowan characterized the current AI wave as "unquestionably the greatest technology cycle" of his career, believing its impact will be extremely profound. Meanwhile, he specifically pointed out the fragility of government finances—compared to companies and consumers, government balance sheets are already under pressure.

"Blue-collar Rise, White-collar Pressure": AI Reshapes the Labor Landscape

Regarding AI’s impact on the job market, Rowan made a clear judgment: "Almost every job will be augmented or replaced. We will see a complete reversal—blue-collar workers will rise, white-collar workers will come under pressure."

He illustrated with numbers: an Ivy League humanities graduate may earn only $60,000 per year after ten years of work, while a worker skilled in accurately leveling concrete floors can earn up to $250,000 annually.

Rowan believes this shift will bring "unknown" political consequences, as humanity "has no political precedents for such change." He predicts that "blue cities," where white-collar workers are concentrated, will experience "a certain degree of political turbulence," and that this trend will also apply in Europe.

Blackstone Group President Jon Gray affirmed this judgment at the contemporaneous Milken Conference. He predicts that blue-collar jobs will enjoy "great prosperity," citing his data center company QTS as an example: a year ago, their construction site employed about 10,000 people, and by the end of this year, that will rise to 40,000. Gray attributes this trend to the combined push from energy, physical infrastructure, data center construction, and reindustrialization.

AI Shocks Private Equity: Efficiency Gains Coexist with "Succession Risk"

AI's impact on the job market also extends to the private equity industry itself. Several PE executives presented different positions in discussions.

Neuberger Berman’s global private markets head Anthony Tutrone said that AI’s main benefit is boosting capacity and quality rather than layoffs. "At first we thought it was mostly a cost game, but for us, it’s more about productivity and quality improvement, enabling us to review more deals and react faster." He also acknowledged that AI might create labor savings in legal and corporate finance back-office areas.

Qatar Sovereign Wealth Fund's head of fund business Mohsin Pirzada took a more cautious stance. He worries that institutions focused solely on cost-cutting rather than productivity improvement will face "succession risk"—if junior staff no longer handle memo screening and investment due diligence, in five years no one will have the skills to manage the organization.

Credit specialist Golub Capital President David Golub believes that the industry's "pyramid structure" will remain basically stable; AI may make the pyramid slightly steeper, but no fundamental change will occur. Junior staff will still exist, but their work will become more productive. Tutrone added that the core of the private market is relationships: "It’s much harder for a virtual avatar to build relationships with CEOs."

Reserving $40 Billion in Cash, Stern Critique of Peers’ "Absurd" Operations

Facing the above risks, Apollo has taken a series of defensive moves. Rowan said the company has shifted its fixed-income portfolio toward higher credit quality, reduced exposure in high-risk sectors like software, and reserved about $40 billion in cash in its insurance business. "This means we focus our investment on capital protection, ensuring we can weather the cycle—if a correction comes, we frankly expect it to come."

Apollo showed strong results this quarter, surpassing $1 trillion in assets under management and reaching a new high in fee-related earnings, which gives confidence to its defensive positioning.

However, Rowan reserved his sharpest criticism for industry competitors. He warned that not all insurance companies operate as they should; some rely, in his words, on "absurd" practices—including Cayman Islands offshore structures, complex mortgage arrangements, and aggressive credit assumptions—that make some balance sheets look healthier than they actually are. "We are indeed concerned about contagion," he said, meaning that if conditions deteriorate, pressure may spread throughout the industry, forcing regulators or central banks to intervene to protect insurance and retirement clients.

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