The allegations involve accounting distortions, inflated profits, and servers with artificially extended lifespans.
The estimate: more than US$176 billion in "phantom profits" by 2028.
He even promised to release worse details on November 25th!
Is this the age of artificial intelligence or artificial accounting?
- One of the most common frauds of the modern era
Michael Burry wrote:
“Understating depreciation by extending the useful life of assets artificially boosts earnings — one of the more common frauds of the modern era.”
In other words: companies are manipulating results by extending, on paper, the useful life of assets — just to reduce depreciation and inflate accounting profit.
- Nvidia Chips Are the Epicenter of the Distortion
He accuses tech giants of applying this accounting trick specifically to Nvidia chips and servers—even though these are pieces of equipment with a 2-3 year lifecycle.
On the balance sheet, they appear as if they last much longer.
This is the move that reduces depreciation and inflates accounting profit in the short term.
- Spending explodes, but accounting doesn't keep up
"Heavy investment in chips and servers with a 2-3 year lifecycle shouldn't lead to extending the accounting lifespan of these assets."
But that's exactly what's happening, according to Burry.
- All the big cloud companies are doing this
“But that’s exactly what all the hyperscalers did.”
Companies like Amazon, Microsoft, Oracle, and Meta are allegedly distorting their balance sheets by underestimating the wear and tear rate of the servers they bought for AI.
- The size of the bomb: $176 billion by 2028
Burry estimates that, between 2026 and 2028, these companies will underestimate $176 billion in depreciation.
This is money that should appear as a cost—but disappears from the result, artificially inflating profits.
- Meta and Oracle Lead the Way in Inflated Profits
He projects that, by 2028:
• Oracle ($ORCL) will have profits 26.9% higher than it should
• Meta ($META), 20.8% above reality
“But it gets worse. More details on November 25th.”
- He's sold — and with very clear targets.
Days before making this accusation, Burry revealed that he bought put options against Nvidia and Palantir.
In other words: he's betting directly against stocks linked to the AI boom.
- Jim Chanos and others have been warning about this.
Burry is not alone. Other short sellers have also been criticizing these practices, saying that some companies are using leasing and off-balance sheet structures to hide part of their infrastructure investments.
- The AI bubble may be being inflated in Excel
With the market euphoric, any extra profit is worth billions in market value.
But if profits are artificially inflated by accounting tricks, the risk goes far beyond stretched valuation—it's a distortion at the very foundation of the narrative.