^{Michael Burry attends the New York premiere of "The Big Short" at the Ziegfeld Theater in New York City on Nov. 23, 2015. | Jim Spellman | WireImage | Getty Images}

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Burry reignites Wall Street controversy

Michael Burry, the famed contrarian investor behind The Big Short and founder of Scion Asset Management, has once again stirred debate on Wall Street. In a detailed post on X, Burry accused major artificial intelligence and cloud computing firms—often referred to as hyperscalers—of manipulating accounting practices to make their earnings appear stronger than they actually are.

According to Burry, companies including Meta Platforms, Oracle, and other AI infrastructure giants are understating depreciation expenses by extending the “useful life” of high-cost assets such as GPUs and servers. This, he said, allows them to report higher profits while masking the true costs of their massive capital expenditures.

“Understating depreciation by extending useful life of assets artificially boosts earnings — one of the more common frauds of the modern era,” Burry wrote. “Massively ramping capex through purchases of Nvidia chips and servers on a 2–3-year cycle should not justify the extension of useful lives. Yet this is exactly what all the hyperscalers have done.”

The $176 billion earnings distortion

Burry estimated that from 2026 through 2028, this accounting maneuver could understate depreciation by about $176 billion across the industry. He further suggested that Oracle’s profits could be overstated by 27% and Meta’s by roughly 21% by 2028 if the current reporting methods continue.

While CNBC and other financial outlets have not independently verified Burry’s claims, his statements spotlight a long-standing issue in corporate finance: how flexible accounting rules under Generally Accepted Accounting Principles (GAAP) can influence the perceived profitability of large tech firms.

Under GAAP, companies can depreciate expensive assets—like semiconductors and servers—over an estimated lifespan. By extending that lifespan from, say, three years to five or more, a company spreads its costs over a longer period, reducing annual expenses and boosting net income.

AI’s massive capex race

Burry’s comments come at a time when AI hyperscalers are spending record sums on data centers and computing infrastructure. Companies like Microsoft, Google, Amazon, Meta, and Oracle have collectively committed hundreds of billions of dollars to AI-related capital investments, largely fueled by demand for Nvidia’s high-performance GPUs.

According to data from Goldman Sachs, global spending on AI data center infrastructure is projected to exceed $1 trillion by 2030, up from less than $150 billion in 2023. Nvidia, which controls over 90% of the AI GPU market, has seen its valuation soar to $4.6 trillion, while AMD and Intel race to catch up.

Burry, however, believes that this “AI gold rush” is being overstated and that Wall Street enthusiasm mirrors the dot-com bubble of the late 1990s. “The fundamentals don’t support the hype,” he warned earlier this year.

Burry’s latest big bet

Regulatory filings show that Burry recently placed large put option bets against two of the AI sector’s top players—Nvidia and Palantir Technologies. As of September 30, his fund disclosed $187 million in notional value in puts against Nvidia and $912 million against Palantir. The exact strike prices and expiration dates remain undisclosed.

These filings triggered a sharp response from Palantir CEO Alex Karp, who dismissed Burry’s wagers as “super weird” and “bats--- crazy.” Despite the criticism, Burry’s track record as the investor who foresaw the 2008 housing collapse continues to make his warnings impossible for markets to ignore.

Following the disclosure, Nvidia shares rebounded 6% on Monday after a 7% decline the previous week, while Palantir’s stock climbed 9%, recovering from an earlier 11% sell-off. Still, Nvidia slipped again on Tuesday amid broader market volatility.

Looking ahead

In his X post, Burry hinted that more details would be released on November 25, suggesting that his analysis of hyperscaler accounting practices may be part of a larger exposé.

Whether his claims hold up or not, the debate underscores a critical question facing investors: Are AI-driven profits as sustainable as they appear?

As the global AI arms race accelerates, Burry’s warning serves as a reminder that behind every growth story lies the fine print—and sometimes, that fine print tells a very different story.