Michael Burry, the famed investor known for shorting the U.S. housing market before the 2008 financial crisis, has issued a fresh warning targeting the accounting practices of major tech companies. Burry alleges that leading cloud computing and AI infrastructure firms are artificially inflating profits by extending the "useful lives" of their assets.
On social media, Burry wrote, "Understating depreciation by extending asset lives to artificially boost earnings—this is one of the most common frauds today." His hedge fund, Scion Asset Management, recently disclosed bearish positions in AI darlings NVIDIA and Palantir, signaling skepticism toward the AI-driven market rally.
Burry highlighted that hyperscale data center operators have aggressively increased capital expenditures by purchasing NVIDIA chips and servers, which typically last only two to three years. By artificially extending these assets' lifespans on their books, companies can spread depreciation costs over longer periods, reducing reported expenses and inflating net profits. He estimates such adjustments could lead to $176 billion in understated depreciation between 2026 and 2028.
Projecting further, Burry predicts that by 2028, Oracle and Meta Platforms, Inc. will overstate profits by 26.9% and 20.8%, respectively. He shared a chart showing how companies have progressively extended reported equipment lifespans since 2020:
- Meta Platforms, Inc. increased network equipment lifespans from 3 to 5.5 years by 2025.
- Alphabet extended lifespans from 3 to 6 years.
- Oracle raised them from 5 to 6 years.
Microsoft and Amazon made similar adjustments, both setting equipment lifespans at 6 years.
Burry warned the situation could worsen and promised more details by November 25.
This isn’t his first caution against AI hype. Last month, he posted, "Sometimes we see bubbles, sometimes we 'save the day,' and sometimes staying out makes you the winner." Scion’s 13F filings revealed $1 million put options on NVIDIA and $5 million puts on Palantir, comprising 80% of the fund’s positions.
Burry, immortalized in *The Big Short*, also shared charts suggesting investors should be wary of AI stocks. One showed slowing cloud revenue growth at Amazon, Alphabet, and Microsoft—key AI players. Another indicated U.S. tech capex growth now mirrors 1999–2000 dot-com bubble levels.
Renaming his X profile "Cassandra Unchained," Burry invoked the Greek myth of Cassandra, cursed to prophesy truths no one believed.
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