Big Tech profits rose by $160bn from stakes in other AI firms

In short: Some of the biggest tech companies reported a roughly $160bn profit boost, mainly from their investments in other AI companies, not from selling more products.

What's going on

Alphabet, Amazon, Nvidia, and Microsoft have recently reported higher pre-tax profits partly because the value of their stakes in other companies went up. A “stake” is just a slice of ownership, like owning a small part of a restaurant. When that slice becomes more valuable on paper, accounting rules can let companies count it as profit.

Analysts said these paper gains have made it harder to judge how strong the companies’ regular businesses really are. The gains show up in financial statements under “other income,” which is separate from money made by selling ads, cloud services, or hardware. This “other income” boost was more than double the roughly $69bn seen in the prior three-month period, according to the report.

SpaceX played a big role this year. The Financial Times reported that SpaceX’s move to become publicly traded increased the estimated value of shares held by existing investors, including Alphabet and Nvidia. SpaceX had absorbed Elon Musk’s xAI before going public, tying part of its story to AI data centers in orbit.

Alphabet’s “other income” rose to $97.9bn for the three months to June 30, more than double the previous quarter. Amazon’s “other income” rose to $53.4bn, more than triple the previous quarter. Nvidia reported $7.7bn in “other income” for the three months to the end of July.

What to watch

These gains can swing up or down quickly, so future quarters could look weaker if prices fall or if private investments are valued differently. Analysts also said expected future stock market listings from Anthropic and OpenAI could keep this effect going.

Source: Financial Times