Michael Burry, famed for predicting the 2008 financial collapse and dramatized in The Big Short, is now sounding alarms about the AI boom—accusing major tech firms of using deceptive accounting practices to overstate profits. In a new warning posted on X, Burry alleges that leading “hyperscalers”—companies providing cloud and AI infrastructure—are manipulating depreciation schedules to artificially inflate earnings.
Burry claims these companies are extending the estimated lifespan of expensive AI chips and servers beyond realistic timelines, minimizing annual depreciation costs and boosting reported profits. “Understating depreciation by extending useful life of assets artificially boosts earnings – one of the more common frauds of the modern era,” Burry stated.
He estimates this tactic will understate depreciation by a staggering $176 billion from 2026 through 2028, allowing firms to present an overly optimistic picture to investors. Specifically, he singled out Oracle and Meta, projecting their earnings could be inflated by 27% and 21% respectively by 2028.
Burry’s allegations target the heart of the AI investment frenzy, which has driven tech valuations to record highs. Under GAAP (Generally Accepted Accounting Principles), companies have some flexibility in estimating asset lifespans. However, Burry argues this leeway is being abused to mask the true cost of fast-depreciating equipment like Nvidia AI chips, which typically follow a 2-3 year product cycle.
The accusations follow Burry’s earlier moves to short AI heavyweights. Regulatory filings from Scion Asset Management reveal put options against Nvidia and Palantir, signaling a bearish bet that these companies are overvalued. Burry hinted more revelations are coming, promising to release additional findings on November 25.
Palantir CEO Alex Karp responded by dismissing Burry’s positions as “super weird” and “batshit crazy,” but the high-profile investor has a history of being early—and right.
