Big Tech earnings get $160bn lift from AI investment gains

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Big Tech AI earnings boost

Highlights

Alphabet, Amazon, Nvidia and Microsoft recorded over $160bn in combined other income last quarter, mainly from higher valuations in OpenAI, Anthropic and SpaceX.
SpaceX's public float more than doubled Big Tech's other income from $69bn in the prior quarter, with gains now obscuring core operating business trends.
Market price-to-earnings multiples for leading U.S. tech companies have dropped to about 20 times as volatile, one-off AI investment gains cloud earnings quality and future outlook.

AI holdings reshape reported profits

As reported by Financial Times, Alphabet, Amazon, Nvidia and Microsoft recorded more than $160bn in combined windfalls last quarter through the other income line, largely reflecting higher valuations for equity stakes in companies such as OpenAI, Anthropic and SpaceX.

Those gains are appearing more prominently in financial statements because accounting rules require quarterly changes in the value of equity investments to be recognised in profit or loss. Analysts say that dynamic is flattering pre-tax earnings and complicating efforts to assess whether growth is being driven by underlying demand or by one-off revaluations.

The contribution from other income was more than double the roughly $69bn boost in the prior three-month period. SpaceX has become a major factor this year after its public float, which delivered a substantial uplift for existing investors including Alphabet and Nvidia; the company had absorbed Elon Musk's xAI before listing and promoted orbital AI data centres as part of its market story.

Valuation risk clouds sector outlook

Several Big Tech hyperscalers reach record pre-tax profit levels in their latest earnings reports, but at Alphabet and Amazon a main driver is other income tied to SpaceX and Anthropic rather than new operating businesses or fresh cash generation.

Analysts still view underlying earnings in the U.S. technology sector as strong, yet they say the uneven nature of these AI-related investment gains makes earnings quality harder to judge. That concern has helped push market price-to-earnings multiples for the companies down to about 20 times from roughly 25 times.

The one-off equity revisions also create the risk of sharper reversals in later reporting periods if valuations fall or stop rising. Expected public offerings by Anthropic and OpenAI could extend the trend in the coming year, while also increasing the chance of volatile comparisons for future earnings.

In our earlier article on neocloud operators’ surge in AI computing demand, we explained how firms such as Nscale, CoreWeave and Nebius are benefiting from scarce AI infrastructure by renting out servers and chips, often with relatively asset-light balance sheets. We also noted that their reliance on supplier support, vendor-finance structures and long-term contracts can amplify downside risk if demand forecasts cool, competition rises, or contract flexibility and hardware obsolescence start to bite.

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