The $martest Guys in the Room ⭐

Big Tech spending on AI is much, much higher than these companies report, as are the reporting shenanigans they use to hide that spending. How much worse? These companies reportedly spent over $600 billion in the past year building out AI datacenter infrastructure, but the real amount spent was at least five times higher, or $3 trillion.

That's according to a new report in The Wall Street Journal, which is the only major business publication that seems to be worried about the Big Tech over-spending and under-reporting. And it begs the question why the U.S. Securities and Exchange Commission (SEC) hasn't stepped in to at least ask questions or, God forbid, put a stop to this illegal behavior.

Yes, U.S. corporations have been hiding money from the federal government for as long as both entities have existed. And yes, our industry is barely 50 years old. But there's no shortage of stories about financial shenanigans dating back to a time when one could at least argue that these then-new financial titans were inexperienced and didn't understand their growing power or the legal responsibilities that accompanied that. Today, however, the stakes are much higher. Much higher.

I've been writing about this issue for years now, mostly about Microsoft because I cover its financial results so thoroughly each quarter. But AI overspending transcends Microsoft and is engulfing all of Big Tech. in more recent years, I've written about the financial shenanigans Microsoft and its co-criminals have engaged in, in Transparency ⭐ last October, in WSJ: Microsoft is Still Not Meeting Its Financial Disclosure Requirements last November, and in and Comedy or Tragedy? ⭐ earlier this month.

I am not a financial analyst. But what started as an observation, a decade or more ago, about Microsoft's ongoing escalation of being less transparent about where the money comes from has transformed into a wider concern. Not just about where the money comes from, but where it's going. And how much of it there is.

We all know the most infamous quote about history, that those who don't know it are doomed to repeat it. But when we're talking about the smartest guys in the room, to reference yet another infamous quote about a history that is quite relevant here, that of Enron, I'm reminded of one of my own historical observations, one I made about Microsoft some decades ago: How could a company so chock-full of smart people make so many stupid mistakes?

One way is to do so purposefully. In addition to this morning's WSJ missive, there's another report in Bloomberg Tax, which explains that Big Tech is reviving the fraudulent accounting practices that toppled Enron, by hiding spending and debt from investors and lenders into "off-balance sheet" spending that explains how Big Tech is using variable interest entities (VIEs) to help financial the massive AI infrastructure build-out. Doing so isn't just risky, it's deceptive, because Big Tech is using financial shenanigans...