Big Tech's Anthropic and OpenAI stakes are distorting the corporate earnings picture
If you were to strip out Big Tech's investment gains from private AI companies, the earnings story is a lot less bullish.
TL;DR
- Tech companies' venture capital investments in private AI firms like Anthropic and OpenAI are inflating reported corporate profits.
- Microsoft, Amazon, and Alphabet have recognized substantial investment gains from stakes in these AI companies, impacting their quarterly income statements.
- Excluding these private investment gains, the S&P 500's earnings growth in the recent quarter is significantly lower than headline figures suggest.
- Analysts typically exclude these one-time gains from forecasts, but they have led to more earnings upside surprises in the near term.
- The influence of mega-cap tech stocks, which hold significant stakes in these AI ventures, amplifies the impact of these investment gains on overall market earnings.
- Future earnings for companies like Alphabet could see reversals based on the current trading of stakes like SpaceX.
- Some analysts view the underlying earnings growth as healthy, considering these investment gains as 'sprinkles' on an already strong earnings season.