Michael Burry, famed investor and the inspiration behind the movie The Big Short, has turned his focus to major technology companies, accusing them of leveraging questionable accounting practices to inflate their profits. In a recent post on X (formerly Twitter), Burry highlighted how extending the depreciation schedules of computing and networking equipment misrepresents financial results.
The ‘Depreciation Fraud’ in Big Tech
According to Burry, major players such as Meta, Alphabet, Microsoft, Oracle, and Amazon have been tweaking the useful life estimates of their tech assets to artificially boost earnings. For instance, filings reveal significant extensions in depreciation schedules: Meta adjusted from three years in 2020 to five-and-a-half years by 2025, while Alphabet and Microsoft pushed theirs to six years.
This method decreases annual depreciation expenses, enhancing reported profits. However, Burry points out that this approach is particularly misleading for AI servers powered by NVIDIA chips, as these servers typically have a shorter lifespan of just two to three years due to rapid technological advancements.
The Financial Fallout: Alarming Numbers
By extending depreciation schedules, Burry estimates that $176 billion in depreciation will be understated between 2026 and 2028. This could result in inflated earnings across the tech sector. Specifically, Oracle’s profits may appear 26.9% higher and Meta’s 20.8% higher by 2028 due to this accounting maneuver.
Burry also disclosed that his hedge fund has taken significant short positions against NVIDIA and Palantir, with investments of $912 million and $186.6 million in put options, respectively. Both companies are currently trading at elevated valuations, which Burry believes are unsustainable.
Why Does This Matter to You?
This narrative serves as a reminder to exercise caution when interpreting financial results, especially in sectors driven by rapid innovation. If you are an investor in tech or AI stocks, carefully analyze the fundamentals beyond the surface-level earnings reports.
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Stay informed by following industry news and expert opinions—it could mean the difference between long-term success and falling for inflated valuations.
