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Investor Michael Burry pushed back against critics who challenged his take on chip depreciation at hyperscalers like Meta Platforms Inc. (NASDAQ:META) and Oracle Corp. (NYSE:ORCL), while doubling down with fresh claims that top AI firms are inflating earnings through accounting maneuvers.
On Wednesday, in a post on X, Burry escalated his criticism against leading AI firms and hyperscalers by accusing them of engineering revenue through circular funding loops and sharing a chart he said would eventually be seen “as a picture of fraud, not a flywheel.”
“Every company listed below has suspicious revenue recognition,” he said, noting that the “true end demand is ridiculously small” and that “almost all customers are funded by their dealers.”
Burry also doubled down on his earlier accusations of big-tech companies understating depreciation on their AI capEx, while rejecting the idea that older AI chips justify longer depreciation schedules simply because they remain in use.
“The idea of a useful life for depreciation being longer because chips from more than 3-4 years ago are fully booked confuses physical utilization with value creation,” he said, adding that “Just because something is used does not mean it is profitable. GAAP refers to economic benefits.”
Drawing comparisons to the aviation industry, Burry said airlines “keep old planes around for overflow during Thanksgiving or Christmas,” noting that these assets were only “marginally profitable” for the companies, and not worth all that much.
Burry noted that NVIDIA Corp.’s (NASDAQ:NVDA) A100 GPUs, which were released in 2020, “take 2-3x more power per FLOP (compute unit) so cost 2-3x more in electricity alone than H100s.”
Similarly, “Nvidia claims H100 is 25x less energy efficient than Blackwell for inference,” he said, underscoring how quickly the economics break down as generations advance, while highlighting why longer depreciation timelines for older hardware in tech are difficult to justify.
Earlier this month, Burry revealed he was betting against Palantir Technologies Inc. (NASDAQ:PLTR) and NVIDIA, taking out a massive put option position against both stocks.
While it was falsely reported initially as a $912 million position against the AI trade, Burry later clarified that his total exposure is just $9.2 million, with 50,000 put options against Palantir, with a strike price of $50 a share, which are set to expire in 2027.
Leading analysts and market experts have since questioned his justification of flawed depreciation accounting for these trades, with investor Steve Eisman, who was featured alongside Burry in the movie “The Big Short,” saying, “I just don't think his concerns matter that much.”
Eisman downplayed the impact of extending depreciation, noting that it won’t have any meaningful impact on the long-term outcomes of AI investments.
Similarly, David Friedberg, a former Alphabet Inc. (NASDAQ:GOOG) executive, said that Burry has “got this wrong,” noting that changes to the depreciation schedules reflect the real evolution of data centers, with 7 and 8-year-old chips still operating with full utilization.
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Photo: Shutterstock/Nicoleta Ionescu
