We saw this most egregiously with SoftBank.*
From Yahoo Finance, May 4:
The quality of Big Tech earnings may not matter much right now as everyone gets swept up into the AI boom.
But at some point — and this may come sooner than you think — investors will be questioning how strong Big Tech earnings really are. Currently, they're being boosted by rising valuations of stakes in private, smaller tech players.
Talk about circularity in investing!
The numbers: "The hyperscalers' earnings growth this quarter was boosted by an unusually large contribution from equity stakes in private companies," Goldman Sachs strategist Ben Snider pointed out in a new note.
Alphabet (GOOG, GOOGL) and Amazon (AMZN) generated "other income" totaling $53 billion in the first quarter. This accounted for nearly 60% of those two companies' income in the quarter — and 34% of the total $155 billion in income this quarter across the five largest hyperscalers. This represents the group's largest collective share of earnings attributable to "other income" in at least a decade, Snider said.
Of this $53 billion in "other income," $49 billion was explicitly due to equity stakes in private companies.
Amazon, for example, holds a significant minority stake in Anthropic (ANTH.PVT), estimated at 15% to 20% of the startup.
Following its October 2025 restructuring, Microsoft (MSFT) holds a roughly 27% equity stake in OpenAI's for-profit business....
....MORE
*If interested see:
February 12 - "Where Will SoftBank Get The Money To Fund Their Commitment To OpenAI?"
By writing-up their stake in OpenAI, naturellement.May 13 - "SoftBank profit more than triples to $12 billion on OpenAI stake gains"
June 8 - "SoftBank’s Attempt to Get $6 Billion OpenAI Margin Loan Stalls"
