AI Investment Gains Boost S&P 500 Earnings to Multi-Year High

S&P 500 companies are wrapping up a standout earnings season, with aggregate second-quarter profits up 52% year-over-year, largely driven by a 74% surge in tech sector earnings. Much of that boost came from large mark-to-market gains at Alphabet and Amazon, both tied to investments in AI company Anthropic.

Numbers Look Different Without AI Gains

Excluding those investment-related gains, S&P 500 profit growth would sit closer to 33%, still the strongest since 2021, according to LSEG’s Tajinder Dhillon. Analysts caution against reading too much into paper gains, noting they can reverse just as quickly as they appear, adding uncertainty to future earnings visibility.

AI Infrastructure Fuels Broader Growth

Goldman Sachs estimates AI infrastructure stocks account for roughly a third of second-quarter EPS growth across the S&P 500. Meanwhile, concerns are growing over elevated AI valuations and complex financing arrangements, including Nvidia’s recent $105 billion guarantee supporting OpenAI’s data center lease in Ohio.

Strength Extends Beyond Tech

Seven of eleven major sectors posted double-digit earnings growth, with energy earnings up roughly 143%. About 85% of reporting companies beat analyst expectations. Looking ahead, analysts have raised third quarter profit growth estimates to 29.2%, up from earlier projections.