Big short protagonist Michael Burry criticizes AI giants again: Underestimating depreciation and inflating earnings is modern fraud.

Michael Burry, the prototype of the protagonist in “The Big Short” known for predicting the subprime mortgage crisis, has once again criticized technology giants. He warned that cloud giants like Meta, Amazon, and Microsoft are underestimating depreciation and artificially inflating profits by “extending the useful life of equipment.” Burry pointed out that this way of beautifying financial reports is one of the most common “fraudulent means” used by modern enterprises.

Burry blasts: AI giants “falsify” financial reports using accounting methods

Burry recently posted on social media platform X, pointing out that extending the asset depreciation period and lowering annual amortization expenses will make the book profits and current earnings look better, but this is actually a method of “manipulating profits upward.” He bluntly stated that such practices are very common in modern enterprises and are even more widely abused in the current AI frenzy.

He emphasized that it is completely unreasonable for technology companies to invest huge amounts of capital to purchase Nvidia chips and servers that only have a product cycle of two to three years, yet extend their lifespan.

This should not be a reason to extend the lifespan of the equipment, but all large-scale operators do this.

( Note: Annual depreciation expense = ( cost – salvage value ) / useful life )

Underestimating depreciation by as much as $176 billion, tech stock earnings are overestimated by 20%.

Burry estimates that between 2026 and 2028, the total underestimated depreciation amount of ultra-large cloud service providers will reach as high as $176 billion. Based on this calculation, he predicts: “By 2028, Oracle ('s earnings will be overestimated by 26.9%, while Meta will be overestimated by 20.8%.”

He also attached a diagram showing how major tech companies extend the depreciation period:

Amazon )Amazon(: 4 years → 5 years

Oracle ): 5 years → 6 years

Microsoft (Microsoft): 3 years → 6 years

Alphabet: 3 years → 6 years

Meta: 3 years → 5.5 years

Burry warned that these accounting practices lead investors to mistakenly believe that the company's profits are continuously growing, when in fact it is just a facade of deferred cost amortization. He also announced that more details will be released on November 25.

AI Bubble Warning Intensifies: Burry Holds Put Options to Short the Market

Burry has recently returned and frequently posted warnings that the market is entering a bubble stage. Last week, he revealed that he holds put options on Palantir ($PLTR) and Nvidia ($NVDA), indicating that he is betting on a correction in the AI boom.

Burry is not the only person to question this perspective. Notable short-seller Jim Chanos has also warned that companies use accounting adjustments and innovative financing techniques to remove equipment from their balance sheets, in order to beautify their earnings.

( The main character of the big short returns to bearish AI giants: buy put options on Palantir and Nvidia, warning of a bubble )

Industry rebuttal: The extended lifespan of GPUs has its technical rationale.

However, Ben Bajarin, CEO of the market research firm Creative Strategies, rebutted that extending the depreciation period is not entirely accounting fraud. Burry's remarks are too one-sided from an accounting perspective and ignore the technological reality.

He explained that currently about 90% of the GPUs installed in cloud centers are Nvidia H100 or older chips, and with the advent of the next generation and new architectures, their computing power will see a significant leap. This suggests that the investment cycle for computing resources for enterprises may be extended to over 5 years, rather than being merely an accounting manipulation:

This involves deeper technical arguments rather than just a simple analysis of the balance sheet.

Real value or financial report illusion? AI investment observations

This debate concerns not only accounting details but also reveals the capital contradictions of the AI era. The ability to clearly discern the company's true intentions and the hidden data behind it from financial reports, as well as to excavate one's own perspectives and insights, is one of the key factors for investors to thrive in the wave of AI.

(Big Short 2.0? Deutsche Bank Seeks to Short AI Stocks to Hedge Risks, Market Bubble Shadows Emerge? )

This article features the main short seller Michael Burry criticizing AI giants again: underestimating depreciation and inflating earnings are modern frauds. It first appeared in Chain News ABMedia.