Struggling to make sense of Big Tech's $600 billion bet on AI? Here's a metric to watch 📋

A crash course in depreciation and accrual accounting 🧾

Profit margins have been at record levels, which helps explain elevated valuations and stock prices near all-time highs. And Wall Street expects margins to stay high through 2026 and 2027.

Of course, this forecast comes with plenty of risks.

One risk is the massive bets that the megacap tech hyperscalers — including Microsoft, Alphabet, Meta, Amazon, and Oracle — are making on AI infrastructure.

Much of the news coverage has led with the eye-popping, nine-figure capital expenditure (capex) commitments and how they’re eating up cash flow.

But how are we to know if these wagers will help or hurt profitability?

One way is to watch depreciation expenses.