Is AI Boom Built on Fake Revenue?

Research media Bull Theory recently published an article pointing out that the core logic of the current AI prosperity has fundamental flaws. Tech giants invest in AI startups, with contracts simultaneously requiring the latter to return the funds to rent their cloud servers, and then record this amount as new cloud revenue - essentially paying themselves with their own money.

Take Microsoft and OpenAI as an example, Microsoft invested $13 billion in OpenAI, actually in the form of cloud service credits. OpenAI uses these credits to train models, and Microsoft counts the corresponding server usage as part of the cloud business revenue. Currently, OpenAI's annual cloud bill has exceeded $60 billion, more than twice its actual revenue of $25 billion, with the difference entirely dependent on the aforementioned loop.

Anthropic's situation is the same, with expenditures on Amazon cloud services reaching $2.66 billion in just nine months, almost equal to all income during the same period.

This mechanism also leads to a second accounting effect. Whenever an AI startup completes a new round of financing and its valuation is adjusted, tech giants can revalue their equity holdings at the new valuation, directly booking unrealized paper gains into profits. In the first quarter of 2026, Alphabet reported a profit of $62.6 billion, with $28.7 billion coming from the paper revaluation of its investment in Anthropic, accounting for nearly half. Amazon's profit of $30.3 billion during the same period included $16.8 billion from the paper gains due to the valuation adjustment of Anthropic.

At the same time, Amazon's actual free cash flow plummeted by 95% to just $1.2 billion, as the company needed to actually spend $44.2 billion on building data centers. The gap between paper profits and cash flow is quietly widening.

This self-reinforcing cycle drives up the prices of tech stocks, forcing pensions and index funds to continuously increase their holdings. Before AI technology generates real cash profits, investments, revenues, and stock prices rise synchronously on paper. The South Sea bubble burst within seven months, and the internet bubble lasted five years - how long this cycle can last is the most difficult question for the current market to answer.