Michael Burry, known for his portrayal in 'The Big Short,' recently made headlines for attending the New York premiere of the film at the Ziegfeld Theater on November 23, 2015. Burry, the founder of Scion Asset Management, has gained attention for disrupting the market with a bold short bet on tech stocks.
In a recent post on platform X, Burry criticized major technology companies, referred to as 'hyperscalers'—the top-tier cloud and AI infrastructure providers—for inflating earnings by misrepresenting depreciation expenses. He argued that these companies are falsely extending the life cycle of chips to reduce depreciation costs, thus artificially boosting profits.
"Understating depreciation by extending the useful life of assets artificially boosts earnings - one of the more common frauds of the modern era," Burry stated. He emphasized that the aggressive acquisition of Nvidia chips and servers on a short product cycle does not justify the longer useful life estimates currently used by these firms.
Burry predicted that from 2026 to 2028, this accounting strategy would minimize depreciation by approximately $176 billion, leading to inflated industry profits. He singled out Oracle and Meta Platforms, claiming that their earnings could be overstated by about 27% and 21% respectively by 2028.
Questions have been raised about these allegations; CNBC noted the challenge of proving them due to the flexibility granted in asset depreciation assumptions. Attempts to get comments from Oracle and Meta are ongoing, while Nvidia has declined to comment.
Burry is no stranger to making bold financial predictions. He famously bet against subprime mortgages before the 2008 crash and has recently warned that the excitement around artificial intelligence mirrors the tech bubble of the late 1990s.
Last week, Burry revealed possible new bets against AI frontrunners Nvidia and Palantir Technologies, with put options valued at $187 million and $912 million respectively as of September 30. The specifics of these contracts, such as strike prices or expiration dates, were not disclosed.
These revelations elicited a sharp response from Palantir's CEO, Alex Karp, who dismissed Burry's actions as "super weird" and "bats--- crazy." Whether Burry retains these positions remains unclear.
Nvidia's shares rallied nearly 6% on Monday following a 7% decline the previous week, while Palantir's shares increased nearly 9% after an 11% drop. Nvidia's stock prices fell again on Tuesday.
Burry hinted at further details to be released on November 25 and urged his audience to "stay tuned."