Influential hedge fund investor Michael Burry, whose prescient bet against the housing market was chronicled in “The Big Short” movie, has accused some of the largest tech companies of using questionable accounting practices to juice their earnings from the artificial intelligence (AI) boom.
In a post on X Monday, the Scion Asset Management founder claimed that major cloud computing and AI infrastructure providers, hyperscalers, are understating depreciation expenses by overestimating the useful lifespan of their computing equipment.
“Understating depreciation by extending useful life of assets artificially boosts earnings – one of the more common frauds of the modern era,” Burry wrote.
The investor argued that despite companies rapidly increasing capital expenditures to purchase NVIDIA Corp. chips and servers that typically have two- to three-year product cycles, the firms have extended the estimated useful lives of their computing equipment, a move he characterized as contradictory.
Burry projected that this accounting approach could understate depreciation by approximately $176 billion between 2026 and 2028, inflating reported earnings industrywide. He specifically highlighted Oracle Corp. and Meta Platforms Inc., estimating their profits could be overstated by roughly 27% and 21%, respectively, by 2028. (Meta has announced an unprecedented $600 billion investment in U.S. infrastructure and jobs over the next three years to expand its AI capabilities, though the staggering commitment raises serious questions about feasibility given that it more than doubles what the company has earned in total profits since going public 15 years ago and far exceeds its 2024 annual revenue of $62.3 billion.)
The practice pushes expenses into future periods, artificially improves profit margins, and obscures the real economics of AI infrastructure buildouts. Burry calculates that major tech firms have collectively understated depreciation by approximately $176 billion, arguing that these accounting choices hide how rapidly AI hardware becomes obsolete.
The allegations come as Burry has recently made waves in financial markets with a short position against technology stocks, adding scrutiny to an industry already facing questions about the sustainability of AI-related investments.
According to a regulatory filing, Burry’s investment firm disclosed put options valued at approximately $187 million against NVIDIA and $912 million against data analytics firm Palantir Technologies Inc. as of Sept. 30. The filing did not include details on strike prices or expiration dates for the contracts, leaving uncertainty about whether the positions remain active or served as temporary hedges.
The disclosure drew a strong rebuke from Palantir CEO Alex Karp, who characterized Burry’s wagers as “super weird” and “bats— crazy” during public remarks.
“How long are the latest GPU chips really going to last in the data center? Typically, they are written down over five to six years lifetime, but in reality a 5-year-old GPU doing frontier modeling is three generations old and not pulling its weight, not to mention that some reports of heavily-used GPUs in data centers are failing after nine months of 70% workloads usage and need to be replaced,” longtime tech analyst Jack Gold observed in an email. “Is that in any of the forecasts? It’s good for NVIDIA as it sells replacements, but not very good for the AI data center/cloud companies that have a much higher overhead cost as a result.”
Burry has previously sounded alarms about AI investment, comparing current market enthusiasm to the late-1990s technology bubble that preceded the dot-com crash. His skepticism stands in contrast to widespread investor optimism about AI’s transformative potential. Indeed, SoftBank this week said it sold its entire $5.8 billion holdings in NVIDIA to pay for pricey AI investments.
Two distinct approaches have emerged among leading tech companies. Amazon.com Inc. and Apple Inc. recognize costs upfront, prioritizing financial transparency even when it creates quarterly volatility.
Conversely, Meta, Microsoft, Alphabet, Oracle, NVIDIA, AMD Inc., Intel Corp., Broadcom Inc., Huawei, and Cambricon have taken the opposite approach, lengthening asset depreciation periods to distribute expenses over time and sustain their growth stories. But when physical hardware deteriorates faster than accounting recognizes, the gap between reality and reporting grows into an accumulating liability.
In a post on X, Burry indicated that “more detail” would be forthcoming on Nov. 25, telling followers to “stay tuned.”
Market reaction to the disclosure was mixed. NVIDIA shares declined 7% last week before recovering nearly 6% on Monday, though the stock retreated again on Tuesday. Palantir experienced an 11% sell-off last week, followed by a 9% rebound on Monday.
