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Half of the S&P 500's Earnings Jump This Quarter Came From Two Companies That Lose Money · Minds, Bodies, and Terawatts

• 0:00
  [Host] This is Minds, Bodies, and Terawatts, where the best earnings of the quarter came from companies nobody can buy. Reuters Breakingviews reported Monday that SpaceX and Anthropic, two money losers, drove half the two hundred eighty billion dollar rise in S and P five hundred net profit.
• 0:17
  [Guest] Neither earns a cent. But Alphabet and Amazon own pieces of them, and when those pieces get revalued upward, the increase lands on the owner's income statement as profit.
• 0:28
  [Host] Revalued against what? Nobody can buy Anthropic stock.
• 0:31
  [Guest] Against private financing rounds, and for SpaceX, against its listing. Alphabet's other income line came in at ninety-eight billion dollars for the quarter, and nearly all of it traces back to nine hundred million dollars Google put into SpaceX more than a decade ago.
• 0:48
  [Host] That isn't a trick, though. Accounting rules say you report a holding at what it's worth now.
• 0:54
  [Guest] They do. But Jeffrey Goldfarb, the Breakingviews corporate finance editor, framed the real problem differently. The same spending spree, he said, is turning cash dispensers into incinerators.
• 1:04
  [Host] Incinerators meaning what, exactly?
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  [Guest] Alphabet threw off two hundred fifteen billion dollars of free cash flow across twenty twenty-three through twenty twenty-five. Last quarter that number was negative five point nine billion.
• 1:16
  [Host] So the record profit and the cash burn are the same three months.
• 1:21
  [Guest] The same three months. The profit is a revaluation. The cash went into data centers.
• 1:27
  [Host] Uncomfortable, but not circular. Owning a stake isn't trading with the company.
• 1:31
  [Guest] They do both. A filing days before the listing shows Google paying SpaceX nine hundred twenty million dollars a month for computing capacity.
• 1:40
  [Host] Google pays the company whose rising price is inflating Google's earnings.
• 1:44
  [Guest] And Anthropic has committed to buy more than a hundred billion dollars of Amazon cloud over the next decade, while Amazon extends it financing in exchange for more equity.
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  [Host] So the cloud bill and the equity stake are the same money going in a circle.
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  [Guest] Round trip revenue. Amazon books the cloud sales as real income, then marks up the stake that bought them.
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  [Host] Who is holding this if the marks come back down?
• 2:12
  [Guest] Anyone with an index fund. Alphabet and Amazon are among the heaviest weights in the S and P five hundred, so the target-date fund in an ordinary 401(k) already owns a slice of a private AI lab. Nobody chose that.
• 2:27
  [Host] Has anything come back down yet?
• 2:29
  [Guest] SpaceX has spent most of its short public life trading below the price it listed at in June. Anthropic's mark has no market at all to test it against.
• 2:40
  [Host] These were supposed to be the companies that made everything cheap.
• 2:44
  [Guest] That's the collision. A public company cannot let its product drift toward free, because free has no margin. The more abundant the technology gets, the harder its owners work to make it feel scarce.
• 2:57
  [Host] And now that abundance sits inside everyone's retirement savings as collateral.
• 3:01
  [Guest] Which means the day intelligence actually gets cheap reads as a hit to the portfolio.
• 3:06
  [Host] Why would the mark be the last number to move?
• 3:10
  [Guest] Because an incumbent fortune fails from the demand side. The customers stop being able to pay long before anyone writes the asset down.
• 3:19
  [Host] Alphabet's best business this quarter was a check it wrote to Elon Musk before Starship had ever flown, and it cannot spend a dollar of it. Patrick Deglon calls that gap transfer efficiency in Unscarcity: the share of a paper fortune you can still turn into something real only ever falls.
• 3:38
  [Guest] For more on how incumbent capital gets converted into working infrastructure before it melts, head to unscarcity dot ai. The book is on Amazon, the audiobook is on Spotify. This has been Minds, Bodies, and Terawatts.