Michael Burry Accuses AI Hyperscalers of Artificial Earnings Boosting Through Depreciation Practices

This analysis is based on Michael Burry’s November 10, 2025 social media post on X [1], where the famed “Big Short” investor accused major AI hyperscalers of artificially boosting earnings through questionable depreciation accounting practices. The allegations target fundamental accounting methods at Meta, Oracle, Microsoft, Google, and Amazon, suggesting these companies are extending depreciation schedules for AI computing equipment to 5-7 years despite the actual 2-3 year product cycle for AI chips [1][2].

Michael Burry’s analysis suggests that AI hyperscalers are systematically manipulating earnings through depreciation accounting. By extending useful life estimates of AI computing equipment beyond realistic technological obsolescence periods, these companies could artificially inflate earnings by approximately $176 billion across the industry from 2026-2028 [1]. The immediate market reaction was significant, with META dropping 2.89% to $608.95 and ORCL declining 4.19% to $226.26 [0].

The allegations carry varying weight across different hyperscalers:

• Meta
  could overstate earnings by roughly 21% by 2028 [1]
• Oracle
  faces the most severe potential impact with approximately 27% earnings overstatement by 2028 [1]
• Google, Microsoft, and Amazon
  may face similar accounting scrutiny, though specific percentages weren’t detailed in the initial allegations

Oracle appears particularly vulnerable, already experiencing a 25% monthly decline amid concerns about AI profitability [2]. This compounded pressure suggests the market may be pricing in multiple risk factors simultaneously.

The core issue centers on the mismatch between depreciation schedules and technological reality. AI computing equipment typically follows a 2-3 year product cycle due to rapid technological advancement, yet companies are allegedly using 5-7 year depreciation periods [1]. This practice creates a significant earnings quality issue, as expenses are artificially deferred to future periods.

Michael Burry’s track record adds substantial weight to these allegations. His previous successful predictions, including the 2008 housing crisis, mean market participants take his analysis seriously [1]. The promised detailed analysis on November 25, 2025, with specific calculations and methodology, will be crucial for validating these claims.

The allegations suggest a potentially systemic issue across the AI infrastructure sector. If accurate, this could represent one of the largest accounting scandals in recent tech history, affecting multiple trillion-dollar companies simultaneously. The $176 billion potential earnings overstatement from 2026-2028 indicates the scale of alleged manipulation [1].

The timing of these allegations is particularly significant given the recent AI investment boom. Companies have been aggressively expanding AI infrastructure, with capital expenditures reaching record levels. Questions about earnings quality could trigger a broader revaluation of AI-related investments beyond just the named hyperscalers.

these allegations target fundamental accounting practices that could trigger:

1. Regulatory Investigations
   - SEC inquiries into depreciation accounting practices across multiple major tech companies
2. Earnings Restatements
   - If allegations prove accurate, companies may need to restate historical earnings
3. Market Valuation Adjustments
   - Significant downward pressure on stock prices based on revised earnings expectations
4. Increased Short-Selling Activity
   - Michael Burry’s reputation may attract additional short sellers targeting AI infrastructure stocks

1. Information Arbitrage
   - Investors who can accurately assess the validity of these allegations before November 25, 2025 may find informational advantages
2. Defensive Positioning
   - Opportunities to reduce exposure to potentially overvalued AI infrastructure stocks
3. Alternative Investment Focus
   - Potential rotation toward companies with more transparent accounting practices in the AI value chain

The November 25, 2025 disclosure date represents a critical inflection point. Until Burry releases his detailed analysis with specific calculations, the market will operate under uncertainty. This creates elevated volatility risk for affected securities.

The allegations center on depreciation accounting practices where AI hyperscalers allegedly extend equipment useful life estimates to 5-7 years despite actual 2-3 year technological obsolescence cycles [1][2]. This practice could artificially inflate earnings by deferring expenses to future periods, creating a mismatch between reported profitability and economic reality.

Meta faces potential 21% earnings overstatement by 2028, while Oracle could face 27% overstatement [1]. The industry-wide impact could reach $176 billion from 2026-2028 [1]. Current market reactions show immediate price pressure, with META down 2.89% and ORCL down 4.19% [0].

The credibility of Michael Burry as an analyst, combined with the specific nature of these accounting allegations, suggests this issue warrants serious attention from investors and regulators alike. The promised detailed analysis on November 25, 2025 will be crucial for validating these claims and understanding their full implications.