Michael Burry Warns MSFT, GOOG, META Are Using 'Sinister' Accounting To Hide AI Costs, Inflate Profits By 20%

Famed “Big Short” investor Michael Burry has issued a scathing warning to Silicon Valley, alleging that tech giants are employing aggressive accounting maneuvers to mask the true costs of the AI infrastructure race.

The ‘Sinister’ Accounting Trick

Burry, in an X post, targeted a group of Big Tech companies, including Microsoft Corp. (NASDAQ:MSFT), Alphabet Inc. (NASDAQ:GOOG, GOOGL), and Meta Platforms Inc. (NASDAQ:META), accusing them of “understating depreciation” to protect their bottom lines.

The crux of the allegation lies in how long these companies claim their AI hardware remains valuable. While the industry moves at breakneck speed, Burry argues companies are artificially extending the “useful life” of chips and servers to keep expenses off current income statements.

“Now you are engaging in accounting tricks to hide expense, to protect earnings,” Burry posted. “You will be tortuously adjusting your earnings in a new and sinister ways.”

Inflated Profits And The 20% Gap

According to data shared by Burry, this accounting treatment creates a massive disconnect between reported profits and economic reality.

His estimate suggests that across the major hyperscalers, earnings are being overstated by an average of 24%.

The impact is most severe for Oracle Corp. (NYSE:ORCL), which Burry suggests could be overstating earnings by as much as 48% to 62%, depending on the server life cycle.

For Meta and Microsoft, the overstatement is estimated to sit comfortably above the 20% mark. Burry contends that if these companies used a realistic 2.5-year depreciation cycle for AI chips, their reported profitability would vanish.

The Looming Write-Off

The warning extends beyond current earnings to the long-term health of corporate balance sheets. Burry highlighted a projected $226 billion cumulative asset overstatement through 2028.

He warned that “asset quality is important in the long run,” noting that while a $50 billion write-off might seem small against a $3 trillion market cap today, “it will loom larger should it come to that.”

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