AI Boom or Accounting Boom? Tech Giants’ Profit Data Faces Scrutiny

According to Jin10, large technology giants earned more than $160 billion in windfall gains from investments in other AI companies last quarter, boosting their profits and raising concerns that paper gains may overstate the true strength of the AI boom. Alphabet, Amazon, Nvidia, and Microsoft all said in their latest earnings reports that pretax profit was lifted sharply by the "other income" line in their financial statements, mainly from valuation gains on equity investments in other leading AI companies. These one-time valuation gains largely stemmed from market enthusiasm for AI. As investors closely examine tech companies' results to gauge the health of the AI ecosystem, the gains may distort corporate financial performance. Goldman Sachs chief U.S. equity strategist Ben Snider said investors began asking a few years ago about the circularity of revenue at big tech companies, and he added that profit growth from AI investment now raises the question of whether these companies' reported growth is based on underlying demand or is, to some extent, misleading.