What is Michael Burry's criticism of AI chip accounting?

Michael Burry suggests that extending the useful life of AI assets decreases depreciation expense, thereby increasing apparent profits and potentially overvaluing assets.

How are companies like Meta changing their AI asset depreciation?

Meta Platforms and other tech giants have increased the estimated useful lives for their servers and network assets, reducing current depreciation expenses.

Why is depreciation a concern for AI investments?

Depreciation is a concern because accounting methods can impact reported profits, and the rapid obsolescence of AI hardware makes accurate valuation challenging.

Home / Business and Economy / Tech Giants' Depreciation Tactics Under Fire

Tech Giants' Depreciation Tactics Under Fire

8 Dec

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Summary

Big tech firms extend asset useful lives, impacting reported profits.
Michael Burry criticizes extended depreciation as potential fraud.
Accelerated depreciation may better reflect AI chip's value decline.

Tech Giants' Depreciation Tactics Under Fire

The accounting treatment of substantial AI infrastructure spending by major tech firms is a growing point of contention. Critics, notably Michael Burry, have raised concerns that extending the useful life of assets, such as servers and network equipment, can artificially inflate reported profits by reducing depreciation expenses.

Companies like Meta Platforms, Alphabet, Microsoft, and Amazon have indeed shifted towards longer depreciation periods for their AI hardware. For example, Meta's recent extension reduced its depreciation expense by $2.3 billion in the first nine months of 2025. While these adjustments can amount to billions, they are examined against the backdrop of much larger overall profits and expenses.

The debate questions whether the standard straight-line depreciation method accurately reflects the economic reality for rapidly evolving tech assets. Accelerated depreciation is proposed as an alternative that might better mirror the faster value decline of equipment like Nvidia chips, though the overall impact on financial statements is debated as often based on estimations.