FirstFT: Big Tech profits get $160bn windfall from stakes in other AI companies

Good morning and welcome to FirstFT. In today’s newsletter:

• Big Tech’s $160bn windfall
• Controversial Venezuelan executive courts investors after Trump oil deal
• The search for answers in the Air India crash

Big Tech’s $160bn windfall

Controversial Venezuelan executive courts investors after Trump oil deal

The search for answers in the Air India crash

Big tech giants booked a more than $160bn windfall last quarter from investments in other AI companies, flattering their earnings and raising concerns that paper gains are overstating the strength of the AI boom.

Alphabet, Amazon, Nvidia and Microsoft all reported substantial boosts to their pre-tax profits in their most recent results from the “other income” line in their accounts, which largely comes from valuation gains on equity stakes in other leading AI companies.

These one-off valuation boosts, derived in large part from enthusiasm around AI, risk distorting the financial picture.

“A couple of years ago investors started to ask about the circularity of [Big Tech] revenues,” said Ben Snider, chief US equities strategist at Goldman Sachs. The profit boost from AI investments now “raises the question of whether the growth these companies are reporting is based on underlying demand or if it is misleading in some way”, he added.

Big Tech groups’ equity gains have been turbocharged this year by the public float of SpaceX, in which Google-parent Alphabet and Nvidia both own stakes. The “other income” contribution to profits last quarter was more than double the roughly $69bn boost in the previous three-month period.

The expected public offerings of Anthropic and OpenAI would see the phenomenon continue in the coming year.

Here’s what else we’re keeping tabs on today:

• Economic data: India reports second-quarter GDP figures. China publishes August manufacturing and non-manufacturing PMI data.
• Shein IPO: The China-founded fast-fashion retailer is expected to announce final pricing for its initial public offering. Shein is seeking a $27bn valuation in its Hong Kong listing on Tuesday, almost three-quarters below its peak.

Economic data: India reports second-quarter GDP figures. China publishes August manufacturing and non-manufacturing PMI data.

Shein IPO: The China-founded fast-fashion retailer is expected to announce final pricing for its initial public offering. Shein is seeking a $27bn valuation in its Hong Kong listing on Tuesday, almost three-quarters below its peak.

Five more top stories

1. The controversial Venezuelan energy executive who is now the Trump administration’s business partner has begun talking to potential investors in the oilfields they will jointly control. As part of the unusual energy agreement between Washington and Caracas announced on Friday, Alejandro Betancourt is the administration’s key partner in a company that will control more than 65bn barrels of the country’s reserves.

• Related news: The Trump administration’s deal to take control of 65bn barrels of Venezuela’s oil has been heavily criticised by both members of the country’s opposition and some supporters of the government.

Related news: The Trump administration’s deal to take control of 65bn barrels of Venezuela’s oil has been heavily criticised by both members of the country’s opposition and some supporters of the government.

2. Nepal is intensifying a daunting rescue effort in a race against rising water levels as the death toll from a catastrophic landslide last week along the border with China reached almost 800, with more than 3,000 people missing. Read more about the recovery efforts.

3. HDFC Bank has announced that its chief executive will not seek another term, just months after a rivalry at India’s largest private sector lender resulted in the departure of its chair. Sashidhar Jagdishan, who has been the bank’s chief since 2020, would instead retire from the bank on October 26, HDFC Bank said in an unexpected exchange filing in Mumbai late on Saturday.

4. The increase in global bond yields since the US war with Iran began in February has driven up the cost of borrowing for the world’s biggest developed economies by tens of billions of dollars, according to FT research. G7 nations have locked in an additional $16bn of sovereign debt financing costs because of the rise in bond yields since the war began.

5. Ukraine’s former defence minister Mykhailo Fedorov is seeking US investment for a defence technology fund he hopes will write a “new history” of the war against Russia. In an interview with the FT, Fedorov, who was sacked by President Volodymyr Zelenskyy last month, also said he would be happy to help the US “build an army of drones” in exchange for American supplies of Patriot missile interceptors to help Ukraine.

The search for answers in the Air India crash

Campaigners and groups representing families of the 260 people killed when an Air India plane crashed last year are challenging the theory that pilot action may be to blame as investigators prepare to release their final report into the tragedy.

We’re also reading . . .

• EU enlargement: Icelanders have rejected reopening negotiations on joining the EU, dealing a blow to Brussels’ efforts to draw the strategically important Arctic state closer.
• Big Chicken: Billions of meals each year are made from the fast-growing Ross 308 genetic strain of birds. But a backlash is gathering pace.
• Could AI revive the socialist dream? The technology has the potential to both reignite and overturn the century-old debate over central economic planning, writes Martin Sandbu.
• US politics: Will the most ornery state in the conservative Midwest finally reject Trump’s politics? Rana Foroohar reports from the Indiana state fair.

EU enlargement: Icelanders have rejected reopening negotiations on joining the EU, dealing a blow to Brussels’ efforts to draw the strategically important Arctic state closer.

Big Chicken: Billions of meals each year are made from the fast-growing Ross 308 genetic strain of birds. But a backlash is gathering pace.

Could AI revive the socialist dream? The technology has the potential to both reignite and overturn the century-old debate over central economic planning, writes Martin Sandbu.

US politics: Will the most ornery state in the conservative Midwest finally reject Trump’s politics? Rana Foroohar reports from the Indiana state fair.

Chart of the day

US cities are trying to lure back Canadian tourists who have boycotted the US over the Trump administration’s hostility to its northern neighbour. Relations between the once close allies hit a new low last week when Trump renamed Lake Ontario “Lake America”.

Take a break from the news . . .

Nearly 13,000 readers signed up to play the FT’s new stock picking game, which allowed participants to trade stocks as often as they liked during the competition’s nine-week run. And what a run it was.