‘Big Short’ investor Michael Burry accuses AI hyperscalers of artificially boosting earnings

On November 23, 2015, Michael Burry attended the New York premiere of “The Big Short” at the Ziegfeld Theater in New York City. The investor, known for his role in the movie, has recently caused a stir in the market with a tech short bet. Burry has now turned his attention to accusing some of America’s largest technology companies of using aggressive accounting practices to inflate their profits from the artificial intelligence boom.

In a recent post on X, Burry, the founder of Scion Asset Management, claimed that major cloud and AI infrastructure providers, also known as “hyperscalers,” are understating depreciation expenses by extending the useful life of their assets beyond what is realistic. This accounting maneuver artificially boosts earnings and is a common fraud tactic in the modern era, according to Burry.

Burry specifically called out companies like Oracle and Meta Platforms, stating that their profits could be overstated by significant margins due to this practice. He estimated that the accounting maneuver could understate depreciation by about $176 billion from 2026 through 2028, inflating reported earnings across the industry.

While Burry’s accusation is serious, it may be challenging to prove due to the flexibility companies have in estimating depreciation. Companies can spread out the cost of large assets over time based on their estimate of the asset’s depreciation rate, which can impact their bottom line.

Burry, who gained fame for betting against subprime mortgages before the 2008 financial crisis, has been vocal about the similarities between the current AI enthusiasm and the late-1990s tech bubble. He recently disclosed put options against AI favorites Nvidia and Palantir Technologies, sparking a reaction from Palantir CEO Alex Karp.

Following Burry’s revelations, Nvidia’s shares rebounded nearly 6% after a drop the previous week, while Palantir saw a 9% increase in its shares. Burry hinted at more information to come on November 25, urging readers to stay tuned for further updates.

Overall, Burry’s claims have sparked interest and scrutiny in the tech industry, highlighting the importance of transparent accounting practices in the rapidly evolving AI landscape. It remains to be seen how companies will respond to these allegations and whether any regulatory action will be taken as a result.