Big Tech’s Profit Boost Hides a Circular Secret

Some of the world’s largest technology companies are reporting higher profits—but not because they are selling more products. Instead, their earnings are being inflated by investments in other tech firms, such as the artificial intelligence company Anthropic. When one major tech company invests in another, the value of that stake can rise quickly. These gains are counted as "investment income" on the investor’s financial statements. That income boosts overall earnings, even if the core business—like cloud services or advertising—grew slowly. This creates a circular effect: Tech company A invests in Tech company B. If B’s value rises, A reports a paper profit. But that profit comes from another tech firm, not from customers. In some cases, the biggest names in the industry are propping up each other’s bottom lines. For investors, this is a warning sign. Inflated earnings can make a company look healthier than it really is. When the investment gains stop—or if the value of those stakes falls—the reported profits will drop sharply. Analysts say this trend is growing. As more tech giants pour billions into AI startups, the line between "operating profit" and "investment luck" is blurring. The result: a stock market that may be pricing in strength that is partly an illusion. For now, the earnings look great. But the real question is: How much of that profit is from building technology—and how much is just from buying it?