Famous 2008 crisis investor warns AI companies are faking profits

Michael Burry, the American investor who predicted the 2008 financial crisis, has issued a new warning—this time accusing some of the largest U.S. technology firms of manipulating their accounting to exaggerate profits from the artificial intelligence boom.

Allegations of inflated earnings

In a post on X, the Scion Asset Management founder claimed that major cloud and AI infrastructure companies—often called “hyperscalers”—are extending the reported lifespan of their chips and servers beyond realistic limits. That move, he said, allows them to understate depreciation expenses and report inflated earnings.

“Understating depreciation by extending useful life of assets artificially boosts earnings—one of the more common frauds of the modern era,” Burry wrote. He argued that companies rapidly increasing their capital spending on Nvidia processors and servers are manipulating assumptions about how long those assets will last.

Billions in overstated profits

Burry estimated that between 2026 and 2028, this accounting tactic could understate depreciation by roughly $176 billion across the industry. He named Oracle and Meta Platforms, suggesting their profits could be overstated by around 27% and 21% respectively by 2028.

Under generally accepted accounting principles (GAAP), firms can spread the cost of large assets, such as semiconductors or servers, over their expected useful life. By assuming a longer lifespan, the annual depreciation expense shrinks—making profits appear larger on paper.

Echoes of a past warning

Burry, whose bets against the U.S. housing market inspired The Big Short, has recently compared today’s AI excitement to the late-1990s tech bubble. He has also revealed new bearish positions against AI leaders, including Nvidia and Palantir Technologies, through put options valued at more than $1 billion combined.

Palantir CEO Alex Karp dismissed Burry’s trades as “super weird” and “bats— crazy.” Still, Burry’s warning has reignited debate among analysts about whether AI’s corporate profits are as strong as they seem—or merely a product of accounting flexibility.

A growing debate

While depreciation estimates are permitted under accounting rules, experts say they can easily be stretched to produce smoother results. Proving wrongdoing would require evidence that companies intentionally misrepresented how long their assets would last.

Burry said he plans to release more details on November 25. Whether his prediction proves correct remains to be seen, but his message echoes his past warnings: that the market’s biggest trends often look strongest just before they start to crack.

Sources: CNBC, Reuters, SEC filings, X, Ziare

This article is made and published by Asger Risom, who may have used AI in the preparation