Michael Burry Alleges AI Hyperscalers Use Aggressive Accounting to Boost Earnings

This analysis is based on the CNBC report [1] published on November 11, 2025, which detailed Michael Burry’s allegations against major AI infrastructure companies. The investor famed for predicting the 2008 financial crisis has accused AI “hyperscalers” of employing aggressive accounting practices to artificially boost earnings [1].

Burry’s central claim focuses on depreciation accounting practices at Meta, Oracle, Microsoft, Amazon, and Google parent Alphabet [1][2]. The allegation centers on these companies extending the useful life of AI computing equipment (primarily Nvidia chips and servers) to 5-6 years for depreciation purposes, when the actual technology cycle for AI hardware is approximately 2-3 years [2][3]. This accounting treatment could potentially understate depreciation expenses by an estimated $176 billion from 2026-2028, with Meta’s profits potentially overstated by 21% and Oracle’s by 27% by 2028 [1][4].

The market reaction was immediate and significant across the technology sector [0]:

• Meta (META)
  : Down 2.61% to $610.73
• Oracle (ORCL)
  : Down 3.33% to $228.28
• Microsoft (MSFT)
  : Down 1.41% to $501.51
• Amazon (AMZN)
  : Down 1.53% to $245.30
• Alphabet (GOOGL)
  : Down 2.07% to $285.27
• NVIDIA (NVDA)
  : Down 0.09% to $192.98

The broader Technology sector underperformed by 1.35% for the day [0], indicating concerns extending beyond the specifically named companies.

These allegations emerge during massive AI infrastructure investment, with major hyperscalers collectively expected to spend $274 billion on capital expenditures by year-end as they race to build AI capabilities [5]. Bank of America analyst Justin Post has already warned that depreciation and amortization expenses “will accelerate in 2026 as recently deployed assets come online, adding incremental pressure to operating expenses” [5].

Burry’s warning echoes concerns from other prominent short-sellers, including Jim Chanos, who has questioned the sustainability of massive AI hardware investments [4]. The allegations carry particular weight given Burry’s credibility following his successful bet against the subprime mortgage market before 2008 [1].

Notably, Burry recently disclosed significant short positions: $187 million notional value against Nvidia and $912 million against Palantir [1], suggesting these accounting allegations may be part of a broader bearish thesis on AI infrastructure investments.

The allegations highlight a fundamental tension between GAAP accounting standards and technological reality. Under GAAP, companies have discretion in estimating asset useful lives for depreciation purposes [1]. However, the rapid pace of AI technological advancement creates unique challenges for traditional accounting methods. If AI hardware truly becomes obsolete in 2-3 years due to performance improvements, then 5-6 year depreciation schedules could indeed create systematic earnings inflation.

The scope of the alleged practice remains unclear. If this represents an industry-wide accounting approach, it could create systemic valuation risks across the entire AI investment thesis. If selective, it may represent company-specific governance issues. The lack of immediate company responses creates an information vacuum that prolongs market uncertainty [1].

Similar accounting concerns have emerged during previous technology bubbles. The rapid innovation cycle in AI creates unprecedented challenges for financial reporting, potentially creating structural risks if accounting practices don’t keep pace with technological obsolescence.

: If allegations prove true, they could trigger SEC investigations into accounting practices, potentially leading to financial restatements and legal liabilities. The analysis reveals several risk factors that warrant attention regarding potential regulatory scrutiny [1].

: Technology sector valuations are partially justified by AI growth expectations. If earnings are being artificially inflated by 20-27% as alleged [1][4], valuation multiples may require significant downward revision. Meta’s current P/E ratio of 27.00 and Oracle’s 52.97 could face pressure [0].

: CNBC noted they “were not independently able to confirm this practice was being done by the companies” [1]. The unverified nature of the allegations creates uncertainty, with Burry promising “more detail” on November 25, 2025 [1][4].

1. November 25, 2025
   : Burry’s promised detailed disclosure [1][4]
2. Company Responses
   : Official statements from affected companies
3. SEC Activity
   : Any regulatory inquiries or investigations
4. Analyst Revisions
   : Wall Street analysts’ responses and earnings estimate changes
5. Technical Analysis
   : Monitor support levels and trading volumes in affected stocks

The allegations center on depreciation accounting practices where AI hyperscalers allegedly extend equipment useful lives beyond realistic technology cycles, potentially understating expenses by $176 billion through 2028 [1][2]. The immediate market reaction shows significant stock declines across the technology sector [0]. While the allegations remain unverified, they raise important questions about accounting practices in rapidly evolving technology sectors. The situation warrants careful monitoring as additional information emerges, particularly Burry’s detailed analysis promised for November 25, 2025 [1][4]. Users should be aware that these allegations, if proven true, could significantly impact not only the named companies but the entire AI investment thesis that has driven market valuations to historic levels.