“The Big Short” switches to “combat mode”! Burry: Tech giants’ “underestimated depreciation leads to inflated profits.” Oracle’s profits in 2028 are overstated by 26.9%, Meta’s by 20.8%.
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Michael Burry, the “Big Short” renowned for predicting the 2008 financial crisis, is once again taking aim at tech giants.
On November 11, Michael Burry posted on his social media platform stating that tech giants are underestimating depreciation by extending the “useful life” of assets, thereby artificially inflating their earnings. He estimates that from 2026 to 2028, large tech companies will have inflated profits by $176 billion due to underestimated depreciation.
Burry promised to disclose more details on November 25. He specifically noted that, by 2028, Oracle’s profits could be exaggerated by 26.9%, and Meta’s by 20.8%.
Notably, he previously disclosed holding put options on Nvidia and Palantir, further drawing market attention to his bearish stance on the AI industry.
As previously reported by WallstreetCN, Wall Street investment banks such as Morgan Stanley and Bank of America have also issued warnings, arguing that the market is severely underestimating the true scale of current AI investments and is unprepared for the impact of future depreciation costs, which may mean the actual profitability of tech giants is far below market expectations.
Accounting “Tricks”: Extending Hardware Life to Smooth Costs
Burry believes tech giants are playing “tricks” in their accounting treatments.
In his post on X, he pointed out that tech giants are underestimating depreciation by extending the “useful life” of assets, thereby artificially inflating earnings—calling this “one of the most common modern frauds.”
He argues that as tech companies purchase Nvidia chips and servers in large quantities to expand computing power, these computing devices—which typically have product cycles of just 2 to 3 years—should not have their depreciation periods extended.
However, “hyperscalers” like Meta, Alphabet, Microsoft, Oracle, and Amazon are doing just that, with some companies even extending depreciation periods to 6 years.
(Tech giants’ estimated annual useful life for servers and network devices)
Nevertheless, Amazon has already shortened the estimated useful life of some servers and network devices from six years to five years in Q1 2025, precisely because of the accelerated development of AI technology.
Once this trend reverses and broadens, depreciation costs will be recognized more quickly, putting pressure on short-term profitability.
Depreciation: A “Time Bomb”—Market Yet to Digest Future Profit Impact
Bank of America has previously said that Wall Street is “slow to react” to the growth rate of future depreciation costs.
Bank of America analyst Justin Post pointed out in a report that as Google, Meta, and Amazon significantly ramp up capital expenditures in 2024 and 2025, their depreciation expenses will inevitably accelerate after 2026.
According to his estimates, by 2027, for just these three companies, market consensus on depreciation expenses could be nearly $1.64 billion below reality, meaning their future actual profitability may be far below current market expectations.
Moreover, the “short lifespan” of AI assets exacerbates this risk. Hardware such as GPUs used for AI computation have rapid technical iteration and heavy workloads, with a useful life of perhaps just three to five years. This trend contradicts tech giants’ practice of extending the useful life of devices.
Wall Street Alarm Bells: Underestimated CAPEX and “Off-Balance Sheet” Expansion
Morgan Stanley’s research highlights that the AI CAPEX intensity of tech giants is nearing levels not seen since the peak of the dot-com bubble, but public data does not fully reflect the scale of investment.
Morgan Stanley emphasizes that two major factors have led to the underestimation of actual investment size.
First is the rise of finance leases. Companies like Microsoft and Oracle are increasingly building data centers via this “off-balance sheet” tool, with initial investments not counted as traditional CAPEX.
According to their estimates, factoring in finance leases, Microsoft’s CAPEX-to-sales ratio for fiscal year 2026 will jump from 28% to 38%.
Second is the delayed impact of “construction in progress (CIP),” where a significant amount of capital already spent is parked on the balance sheet un-depreciated, and its effect on profits is just beginning to emerge.
Bank of America warns that the AI infrastructure market could replay the historical pattern of overcapacity and price wars caused by aggressive investment.
BofA believes that if supply growth continues to outpace demand, as early as 2027, the industry may see even more aggressive pricing strategies.
At that point, to maintain data center utilization, hyperscalers may be forced to cut prices—eroding their profitability. This prediction provides another layer of support for Burry’s view that tech giants’ profitability is overstated.
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