Michael Burry has accused two of America’s biggest tech players, Oracle and Meta, of using what he calls “depreciation gimmicks” to exaggerate their profits from the AI boom, according to CNBC.
The Scion Asset Management founder said that the major cloud and AI infrastructure companies, what he called “hyperscalers,” are bending accounting rules to make their earnings look stronger than they really are.
Burry warns of overstated profits in ORCL, META through 2028
In a post Monday on X, Burry said these tech giants are understating depreciation expenses by pretending their AI chips and servers will last longer than they actually do. “Understating depreciation by extending useful life of assets artificially boosts earnings—one of the more common frauds of the modern era,” he wrote.
Burry added that companies massively increasing capital spending on Nvidia chips and servers with two-to-three-year product cycles should not be extending the lifespan of that hardware on paper.
Burry estimated that from 2026 through 2028, this accounting method will understate depreciation by about $176 billion, inflating reported earnings across the AI industry.
He said Oracle’s profits could be overstated by roughly 27% and Meta’s by about 21% by 2028.
Burry’s accusation points at how GAAP (Generally Accepted Accounting Principles) lets companies decide the “useful life” of an asset. When a business buys big-ticket equipment like servers or semiconductors, it spreads the cost over several years.
If the company claims those assets last longer, the annual depreciation expense becomes smaller, which makes profits appear larger. Burry said this practice distorts the truth about how quickly AI infrastructure loses value.
CNBC reported it was unable to independently verify whether these companies are doing this.
Burry doubles down with new shorts and industry backlash
Burry, famous for betting against the housing market before the 2008 financial crisis, had last week revealed new put options against Nvidia and Palantir Technologies, with about $187 million in puts against Nvidia and $912 million against Palantir, though the exact strike prices and expiration dates weren’t listed in his SEC filing.
Cryptopolitan later reported that Alex Karp, the Palantir CEO, hit back at Burry’s bet, calling it “super weird” and “bats— crazy.”
Despite his comments, Nvidia stock surged nearly 6% on Monday after a 7% crash last week, while Palantir rose by 9% following an 11% decline before.
But Tuesday was not so good for Nvidia’s stock, specifically SoftBank announced it had sold its entire stake in what is the most valuable company on earth (about 32.1 million shares worth $5.83 billion). That made NVDA lose around 3% while SoftBank itself had slid by more than 7% as Wednesday.
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Source: https://www.cryptopolitan.com/mike-burry-oracle-meta-overstate-earnings/
