Michael Burry: "Big Tech Inflating Profits by Understating Depreciation"
"Increasing Capital Expenditures Does Not Extend Asset Lifespan"
Burry to Reveal More Details on the 25th
Michael Burry, the short-selling investor made famous by the film "The Big Short," has claimed that some big tech companies are reducing depreciation expenses to make their accounting profits appear larger than they actually are.
According to U.S. financial media outlet CNBC on November 11 (local time), Burry argued via the social media platform X (formerly Twitter) the previous day that artificial intelligence (AI) infrastructure providers are understating depreciation costs compared to the actual figures.
He stated, "If you extend the useful life of assets and understate depreciation, profits are artificially inflated," adding, "This is one of the most common frauds today." He also pointed out, "It should not be the case that large-scale capital expenditures for purchasing Nvidia chips and servers every two to three years, due to product cycles, are justified by extending the useful life of computing equipment," and emphasized, "But this is exactly what all hyperscalers have been doing." He estimated that hyperscalers will understate depreciation expenses by about $176 billion between 2026 and 2028.
He specifically named enterprise cloud company Oracle and Meta, the parent company of Facebook, claiming that by 2028, their profits could be overstated by 27% and 21%, respectively. When companies set a longer useful life for their assets, annual depreciation expenses decrease, resulting in higher profits.
Burry is known for predicting the subprime mortgage crisis during the 2008 financial crisis in the United States. Recently, he has raised concerns about an "AI bubble," likening the current AI boom to the dot-com bubble of the late 1990s. Previously, it was revealed that Burry had taken short positions on Nvidia and Palantir, which is believed to have contributed to the recent significant corrections in the stock prices of big tech and AI companies.
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In his X post, Burry announced that he would reveal more detailed information on the 25th.
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