US corporate profit boom faces its ‘Minsky moment’
SPY•US corporate profits reached a record $4.7 trillion for the 12 months to mid-year, up 17% year over year, as AI investment and fiscal support lifted earnings. The article warns that delayed depreciation, rising debt and private-market gains may make reported profits vulnerable if AI investment or valuations falter.
1. Profits surge
US corporate profits reached a record $4.7 trillion for the 12 months to mid-year, a 17% increase from a year earlier. Earnings per share for S&P 500 companies rose 26% in the 12 months to July, compared with a long-run average annual growth rate of 7%. The article attributes the broader profit boost partly to tax breaks and a federal deficit running at around 6% of GDP.
2. AI spending lifts earnings
Since January 2025, forecast earnings for 19 S&P 500 companies heavily involved in the AI buildout have risen by around $700 billion, 50% more than for all other companies in the benchmark. Morgan Stanley expects 42 leading AI-exposed companies to grow earnings 67% in 2026, while the rest of the S&P 500 is projected to grow 23%; the AI group is forecast to contribute 78% of index earnings growth next year. The article says equipment buyers spread chip costs over years, while suppliers book revenue upfront, and that gains in private AI investment values have also boosted reported earnings at major hyperscalers.
3. Debt and profit risks
Hyperscalers have issued around $225 billion of unsecured bonds this year and have $1.1 trillion in lease commitments for AI equipment and services that have not yet commenced. Morgan Stanley forecasts the group will have negative free cash flow of around $550 billion next year. The article warns that profits could weaken as depreciation rises, AI investment slows or valuations fall, and notes that OpenAI has pushed back its planned IPO, Firmus Technologies shelved its stock offerings, and CoreWeave shares and bonds have tumbled.
