Tech Giants' Unrealized AI Equity Gains Inflate S&P 500 Earnings Growth
Taylor Wilson
Microsoft, Amazon, and Alphabet booked massive paper gains on unlisted stakes in OpenAI, Anthropic, and SpaceX, pushing S&P 500 quarterly earnings growth from 29% to 48% — nearly half the headline number has nothing to do with actual operations.
48% earnings growth — how much is real?
LSEG data puts S&P 500 year-on-year earnings growth at roughly 48% this quarter. Strip out gains on private-company stakes and it falls to about 29%, closer to the 24% analyst consensus.
This means → roughly 19 percentage points of headline growth came from valuation swings in unlisted companies, not from selling more products or services.
In plain terms = these tech giants invested in AI firms and SpaceX; when those firms' valuations rose, accounting rules forced the gains into reported profit — even though no cash changed hands.
How much did each company inflate?
Amazon was hit hardest: earnings jumped over 240% year-on-year, but only about 17% after stripping investment gains. The quarterly report showed $53.4 billion in gains, mainly from its Anthropic stake.
Alphabet reported bottom-line growth near 300%, dropping to roughly 23% ex-SpaceX and Anthropic. The driver: Google holds about 5% of SpaceX.
Microsoft was less affected — Anthropic gains lifted its growth rate by about 10 percentage points, adding roughly $3.2 billion to net income, including $480 million from its OpenAI stake.
How inflated is the "earnings beat"?
Actual earnings this quarter topped estimates by about 7% on average; the long-run norm is just 4.4%. This means → the beat margin itself was amplified by paper gains.
The "Magnificent Seven" account for roughly 35% of S&P 500 Q2 revenue and about one-third of the index's weighting.
This reflects a structural distortion: accounting moves at a handful of companies can reshape how the entire index's earnings picture looks to investors.
Paper gains can reverse — will next quarter swing the other way?
D.A. Davidson tech research head Gil Luria warned that SpaceX shares have fallen roughly 50% from their post-listing high.
In plain terms = this quarter SpaceX's valuation rose and Alphabet booked a profit; if the valuation drops next quarter, the same mechanism creates a loss.
Luria noted that at SpaceX's current price, Alphabet "will very likely record a large mark-to-market loss" in Q3. An Anthropic IPO in September could partially offset it, "but it is too early to draw conclusions."
What should investors take away?
Both Anthropic and OpenAI have filed confidential IPO registrations with the SEC and are expected to go public within a year. Until then, valuation swings in these unlisted stakes will keep affecting Big Tech's quarterly numbers.
This means → for at least the next few quarters, investors need a new habit: when reading Big Tech earnings, find the non-GAAP figure (profit excluding investment gains) first, then judge operating quality.
In plain terms = the headline number cannot be read as "how much the company earned" — it includes paper gains and losses driven by someone else's valuation moves.
Content is for reference only, not financial advice.