Big Tech’s circular AI trade grows too big to veil

Of the 305 companies in the S&P 500 Index that have reported second-quarter results, 86% exceeded estimates for their earnings per share, a bigger proportion than the five-year and 10-year averages, FactSet said on July 31.

The combined growth rate in earnings thus far is 47.4%, but drops to 28.8% excluding Alphabet and Amazon.com, both of which reported significant unrealized gains from their respective investments in rocket-maker SpaceX and artificial intelligence startup Anthropic.

NEW YORK, August 3 (Reuters Breakingviews) - Chatbots are solving mathematical conundrums even as they create financial ones. Consider the following: How can SpaceX SPCX.O and Anthropic, two artificial-intelligence lab operators that lose money, account for half of the $280 billion rise in net profit at S&P 500 .SPX companies so far this quarter? The answer is largely that their respective backers, Alphabet GOOGL.O and Amazon.com AMZN.O, have booked enormous paper gains as the pair’s valuations ballooned. This accounting oddity, when combined with dwindling cash and deeper corporate entanglements, makes the financial logic hard to follow.