Most discussions of an AI bubble focus on valuations. The more important risk may be the quality of the earnings those valuations rest on.

Reported profits across parts of the AI stack are being supported by a dense set of interconnected mechanisms. Large fiscal deficits and cheap capital boost demand that can look organic. Circular financing routes investor capital into startups that then buy the same investors’ hardware or cloud capacity. Accounting choices extend depreciation lives, capitalize R&D, and lean on non-GAAP adjustments. Buybacks and high operating leverage amplify earnings growth. Some demand reflects inventory build and defensive capital spending rather than immediate end-user pull. Subsidies and favorable financing terms further improve reported returns.