Big Tech's Anthropic, OpenAI stakes distort S&P earnings picture
Speakers
Kate Rooney
— Technology Reporter
Summary
CNBC's Kate Rooney reveals how Big Tech's mark-to-market gains on private AI investments like Anthropic and OpenAI are significantly distorting S&P 500 earnings reports. The headline 50% earnings growth drops to 29% when these gains are removed, exposing much weaker underlying business trends at Amazon, Alphabet, and Microsoft. Looking ahead, potential IPOs of these AI labs could introduce earnings volatility and impairment charges, while a host notes Salesforce's heavy Anthropic exposure may similarly inflate its value.
- S&P 500 Q4 earnings growth near 50% year-over-year, but 18pp lower when stripping out Big Tech's AI portfolio gains.
- Amazon's earnings growth drops from 240% to 17% without Anthropic/OpenAI gains; Alphabet falls from 300% to 23%.
- Microsoft had a smaller ~10pp boost, but all three saw earnings heavily inflated by mark-to-market valuation changes.
- The AI portfolio gains are recorded as 'other income', creating varying transparency across companies.
- Future IPOs of Anthropic and OpenAI could cause volatility and impairment charges similar to Amazon's Rivian writedown.
- A host points out that Salesforce's Anthropic stake may account for half of its market cap, making it a proxy for the private AI firm.
Ideas
S&P 500 earnings growth is artificially inflated.
Headline S&P 500 earnings growth of nearly 50% year-over-year is significantly inflated by mega-cap tech's mark-to-market gains from their private AI stakes; stripping out those gains brings growth closer to 29%, revealing a much less bullish underlying picture.
Big Tech's headline growth masks weak fundamentals.
Amazon's 240% earnings growth drops to just 17% when excluding AI portfolio gains, Alphabet's 300% growth falls to 23%, and Microsoft saw a 10pp boost; these massive distortions mask much weaker underlying business performance, creating a risk of repricing once the market focuses on organic growth.
Salesforce's Anthropic stake could be half its value.
Salesforce's Anthropic stake, accumulated across every funding round since 2023, could represent roughly half of its $150 billion market cap, making the stock a leveraged proxy for Anthropic's private valuation and highly vulnerable to a reversal.
