forbes.com
Big Tech's AI Profits Drive CEF Growth Despite Market Discounts
Financial analysis reveals that Big Tech companies are profiting from AI investments, as shown by Q2 2025 earnings in communication services and IT; this is reflected in the rising net asset values of tech-focused closed-end funds (CEFs), which still trade at discounts despite strong performance and dividend yields ranging from 6% to 13%.
- What evidence directly refutes the claim that AI is unprofitable for Big Tech, and how does this impact CEF investors?
- In the second quarter of 2025, communication services companies like Alphabet and Meta, major AI investors, saw significant profit growth, demonstrating AI's profitability for Big Tech. This growth was mirrored in the IT sector, further supporting the claim that AI is a profitable venture for these companies. These profits are already available to closed-end fund (CEF) investors.
- What underlying factors might influence the discounts to NAV observed in tech-focused CEFs, and what are the potential implications for future investor decisions?
- The article suggests that the profitability of AI for Big Tech is a significant factor in the rising net asset values of several technology-focused CEFs. However, despite strong performance, these funds still trade at discounts to NAV, suggesting that there may be further opportunities for investors. The differing dividend yields (ranging from 6% to 13%) among the funds highlight varying investor preferences and risk tolerances within the market.
- How do the performance and dividend yields of various tech-focused CEFs, specifically the BlackRock and Columbia Seligman funds, compare and what accounts for the differences?
- The article uses Q2 2025 earnings data from communication services and IT sectors to counter the claim that AI is unprofitable for Big Tech. The strong performance of companies like Alphabet and Meta, significant AI investors, directly refutes this assertion, showing that AI investments translate into tangible profits. This is further substantiated by similar growth in the IT sector, which supplies much of the hardware and software for AI development.
Cognitive Concepts
Framing Bias
The article frames AI investment as overwhelmingly positive and profitable, emphasizing the high dividend yields of specific CEFs. Headlines and subheadings reinforce this positive outlook, potentially misleading readers into overlooking risks or alternative viewpoints.
Language Bias
The article uses language that promotes a positive view of AI investments, such as "roaring higher," "great bargains," and "indestructible income." These terms are not neutral and may influence readers' perception of the risk level. More neutral terms could include 'increased,' 'attractive valuations,' and 'stable income.'
Bias by Omission
The article focuses heavily on the profitability of AI in Big Tech and high-yielding CEFs, potentially omitting discussions on the risks, downsides, or ethical considerations associated with AI investments. It also doesn't explore alternative investment strategies or the potential for AI market correction.
False Dichotomy
The article presents a false dichotomy by suggesting that the only two options are believing AI is unprofitable or investing in high-yielding CEFs. It ignores other perspectives, such as cautionary approaches to AI investments or alternative investment strategies.
Sustainable Development Goals
The article discusses investment opportunities in tech CEFs, offering high dividend yields (up to 13%). Increased access to high-yield investments can potentially reduce income inequality by providing more financial opportunities for investors, particularly those seeking higher returns compared to traditional investments.