Famed investor Michael Burry has sounded a new alarm, targeting Big Tech’s accounting practices.
Burry, who had famously predicted the 2008 financial crisis, said that major cloud and AI infrastructure companies are artificially inflating profits by extending the “useful life” of their assets.
“Understating depreciation by extending the useful life of assets artificially boosts earnings—one of the more common frauds of the modern era,” Burry wrote on social media platform X.
Last week, Burry’s Scion Asset Management took bearish positions in AI darlings Nvidia (NVDA) and Palantir (PLTR), as he hinted at caution toward the artificial intelligence trade that has boosted a lot of this year’s market rally.
In the most recent post, Burry highlighted that hyperscalers have been aggressively increasing their capital expenditure through purchases of Nvidia (NVDA) chips and servers that usually last only two to three years.
According to Burry, extending these assets’ lifespan on paper lets firms spread the depreciation expenses over longer periods, which then lowers reported costs and inflates net income. As per Burry’s estimates, these adjustments will lead to a cumulative $176 billion understatement of depreciation between 2026 and 2028.
He further estimated that Oracle (ORCL) and Meta (META) will overstate earnings by 26.9% and 20.8%, respectively, by 2028. Burry also shared a chart that showed how firms have gradually increased their reported useful lives since 2020.
Meta’s (META) network equipment lifespan rose from 3 years to 5½ by 2025, Alphabet (GOOGL) (GOOG) from 3 to 6, and Oracle’s (ORCL) from 5 to 6. Microsoft (MSFT) and Amazon (AMZN) made similar shifts, extending to six years by 2025.
Burry added he will provide more details on November 25.
Here are some tech-related ETFs: (NYSEARCA:VGT), (NYSEARCA:IYW), (NYSEARCA:FTEC), (NYSEARCA:IXN), and (NYSEARCA:RSPT).
Artificial Intelligence/Robotics ETFs: (NASDAQ:AIQ), (NASDAQ:BOTZ), (NYSEARCA:DTEC), (NYSEARCA:GINN), (NASDAQ:ROBT), (NYSEARCA:TECB), (NASDAQ:XT), (NYSEARCA:THNQ), and (NYSEARCA:CHAT).