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2 October 2026 (Athens, Greece) - I am spending a week with our boss, Gregory Bufithis, to do an in-depth look at the financial side of the artificial intelligence industry, one driven by massive capital deployment, with financial sector investments projected to reach $97 billion by 2027. My first post will be a take-down of the Anthropic S-1,
the U.S. Securities and Exchange Commission initial registration document that U.S. companies must file before they go public.
But first, a piece that caught my eye on my flight over here. From the New York Times:
Mark Zuckerberg says Meta’s A.I. push is a tremendous success. “Our investments in AI are accelerating every major part of our core business,” he has told investors. “Every sign that we’re seeing in our own work and across the industry gives us confidence in this investment.”
But when Meta files its taxes, it tells the Internal Revenue Service (IRS) a different story. It claims that its AI data centres are a giant experiment that could fail, according to four people with knowledge of the company’s operations.
It does this so it can tap into a tax credit intended for research and experimentation. It’s an aggressive interpretation of the tax break, which Meta embraced to claim billions of dollars in tax credits for data centre expansion.
Characterizing its AI data centres as experimental is “kind of wild and out there,” said Andre Shevchuck, a partner at the advisory firm BPM who specializes in the research and experimentation tax credit.
Indeed, Meta’s own accountants recognize that the strategy is on shaky legal ground. In disclosures buried in securities filings, the tech giant warns that billions in tax savings are vulnerable to being overturned by the IRS, in large part because of “uncertainties with our research tax credits.”
Here’s what Meta is doing: for tax purposes, the company classifies its enormous, multibillion-dollar data centres as “pilot models.” Under a tax credit created in the 1980s to spur innovation, companies can get a rebate for supplies, but only if they are being tested in an experimental effort, not standard business operations. Meta is claiming that the costly AI computer chips it buys from companies, including Nvidia, are entitled to a taxpayer-provided discount as part of the experiment.
Meta is already in one sizable dispute with the IRS over this tax break, for using it to subsidize its chief executive’s multibillion-dollar pay package. In 2013, Meta claimed that $4.1bn of stock options exercised by Mr. Zuckerberg counted as a research expense because he helped invent new software, such as Facebook’s News Feed. The IRS is trying to claw back the company’s resulting $355m in tax savings, court filings show.
Full article here.
The data centre finagle is estimated to have saved it $4bn on its tax bill last year. The "research expense" wrinkle is surely what Meta pays its tax lawyers the big bucks for.
More to come.
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