Marks Without Markets
What is actually inside the S&P 500's blowout first-quarter earnings number
On April 30, Alphabet reported the largest quarterly profit in the company’s history, with revenue up 22%. Buried in the release was a less celebrated number — more than half of that profit came from $36.9 billion in net gains on equity securities, primarily unrealized gains on private holdings.
Anthropic appears to be central to that story. Alphabet had just signed a $200 billion cloud computing deal with the AI lab, and the value of its existing stake had jumped after Anthropic’s February funding round. The filing does not isolate Anthropic by name. Days later, Amazon disclosed $16.8 billion in pre-tax gains explicitly tied to its Anthropic stake.
Add an $8 billion income tax benefit at Meta tied to Treasury guidance on previously capitalized R&D costs, and three accounting items at three companies explain most of the $54 billion jump in S&P 500 first-quarter earnings above what Wall Street had expected.
Millions of Americans own the S&P 500 because it is supposed to be the cleanest available shorthand for U.S. corporate profits. In the first quarter, that shorthand became less clean. The issue is not that the accounting is wrong. It is that one of the world’s most important earnings numbers now contains large gains from private AI valuations that were not set in a continuous public market.
The Financial Times documented the line items themselves on Thursday, with Robin Wigglesworth walking through each company. The next layer of the story concerns anyone with money in an S&P 500 index fund: what those line items do to the index the companies sit inside.
Alphabet and Amazon already held large equity stakes in Anthropic from earlier investments. When Anthropic raised new money in February at a valuation more than double its previous round, accounting rules in place since 2018 required the two companies to revalue what they already owned. The increase flowed straight through the income statement, despite no actual sale.
The Series G triggered the markup. The markup hit the income statement. The income statement rolled up to the S&P 500.
The defense is that the rule is the rule and the gains are real. Warren Buffett made the opposite argument in 2018 when the same standard forced Berkshire Hathaway to mark its Apple stake through net income. He called the resulting bottom line “useless.” He lost. The Apple markups turned out to be real money — Berkshire sold roughly two-thirds of the position between 2023 and 2024 at prices well above the 2018 marks, and Buffett quietly stopped complaining.
The argument extends to Anthropic: the markups represent real value that will be substantially realized at IPO, just as Apple’s were when Berkshire began selling. The difference is in how prices get set. Apple traded continuously in a public market, with prices established every second by millions of investors who had no commercial relationship with Berkshire. Anthropic has no public market — no listed stock, no S-1, no continuous bid. Its valuation is set in private funding rounds, negotiated among investors and strategic partners.
A market, in any meaningful sense, is a setting in which prices are set by parties whose interests are unrelated to the holder. Apple had one. Anthropic does not.
The next chapter is being written this month. Anthropic is in talks on a new round at $900 billion, more than double its February valuation. A close near those terms would force another markup in the second quarter, plausibly larger than the two first-quarter markups combined. The numbers will land in late-July earnings reports and roll into the S&P 500 figure from there.
None of this is hidden — it sits in financial statements, research notes and news coverage. The accounting is technically clean: the Series G was a real transaction at a real price, and the markups are mathematically correct given that price. What’s less clearly understood is what the resulting earnings figure now contains.
The 27% first-quarter growth rate is closer to 18% on the operating numbers. The gap is one-time items, primarily the Anthropic markup. It remains the headline number, the one that drives passive flows, anchors valuation debates and gets cited in every macro outlook. It’s also a number that now includes one-time accounting items at three companies, generated by a mechanism whose information content depends on a price-discovery setting that does not currently exist for the assets being marked up.
The index is not lying. It is measuring more than most investors think.