Big Tech companies booked more than $160bn in gains from investments in other AI companies last quarter, raising concerns that headline profits are overstating the underlying strength of the AI boom.
The Financial Times reports that Alphabet, Amazon, Nvidia and Microsoft all recorded significant boosts to pre-tax profits through valuation gains on equity stakes, including investments in OpenAI, Anthropic and SpaceX.
Alphabet recorded $97.9bn in “other income” in the three months to June 30, while Amazon reported $53.4bn. Nvidia recorded a further $7.7bn in the three months to the end of July.
Manish Kabra, head of US equity strategy at Société Générale, said the gains raised “earnings quality questions”, while Louise Dudley of Federated Hermes said the “size of the adjustments” was “difficult to ignore” and would “undoubtedly introduce additional risk”.