What is Michael Burry's concern about AI depreciation?

Michael Burry believes AI chips will depreciate faster than anticipated, potentially leading to understated depreciation costs for Big Tech firms.

How could AI chip depreciation affect Big Tech profits?

Accelerated depreciation of expensive AI hardware could significantly increase expenses, potentially outweighing profits for major technology companies.

Are AI chip depreciation concerns widely accepted by analysts?

No, while some investors are concerned, many mainstream analysts believe current depreciation accounting for AI hardware is reasonable.

Home / Business and Economy / AI's New Threat: Depreciation Fears Erode Tech Stocks

AI's New Threat: Depreciation Fears Erode Tech Stocks

22 Nov

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Summary

Short sellers warn AI chip depreciation could exceed Big Tech profits.
Estimated depreciation of AI assets could reach $500 billion annually.
Accelerated depreciation models suggest AI spending tops internet boom.

AI's New Threat: Depreciation Fears Erode Tech Stocks

Concerns are mounting over the potential impact of depreciation on artificial intelligence investments, with prominent short sellers highlighting the risks. Michael Burry and Jim Chanos are among those sounding the alarm, suggesting that Big Tech companies may be understating depreciation expenses for their AI hardware. They posit that the rapid obsolescence of GPUs and semiconductor chips could lead to substantial financial burdens, potentially exceeding company profits in the coming years.

Analysts estimate that the value of AI assets held by hyperscalers could reach trillions of dollars. If depreciation rates are applied realistically, based on a shorter two-to-three-year lifecycle for AI chips rather than the commonly assumed five to six years, annual depreciation expenses could soar to hundreds of billions. This scenario could significantly drag down net income, even for highly profitable tech giants.