Michael Burry Alleges 'Fraud' in AI Sector, Citing Accounting Tricks
‘The Big Short’ investor accuses tech giants of inflating earnings by manipulating depreciation schedules for AI hardware, putting the sector's lofty valuations under scrutiny.
Michael Burry, the investor famed for his bet against the housing market chronicled in ‘The Big Short,’ has turned his sights on the artificial intelligence industry, accusing top technology companies of engaging in fraudulent accounting practices to inflate profits.
In a series of social media posts, Burry alleged that major AI and cloud infrastructure providers are using “suspicious revenue recognition” and depreciation “gimmickry” to mask true costs and create a misleading picture of financial health. The claims introduce a significant element of skepticism into a sector that has powered stock market gains for the better part of a year, though the market has largely shrugged off the warnings in initial trading.
Burry’s central accusation focuses on how companies account for the massive capital expenditures required for AI infrastructure. He claims that tech giants including Meta, Microsoft, and Alphabet have artificially boosted earnings by extending the declared “useful life” of their AI hardware. "Understating depreciation by extending the useful life of assets artificially boosts earnings—one of the more common frauds of the modern era," Burry stated in a post on X, the platform formerly known as Twitter.
According to his analysis, these accounting changes are not trivial. Burry estimated the adjustments could lead to a cumulative $176 billion understatement of depreciation between 2026 and 2028. He specifically highlighted that Oracle’s earnings could be overstated by as much as 26.9% and Meta’s by 20.8% by 2028, according to reports from Seeking Alpha. He noted that companies like Meta and Microsoft have doubled the assumed lifespan of their hardware over the past five years.
Despite the gravity of the allegations from a high-profile investor, the market’s reaction has been muted. In Wednesday trading, shares of AI bellwether Nvidia (NVDA) climbed 2.85% to $186.52, while Alphabet (GOOGL) rose 3.00% to $292.81. Other companies named by Burry saw modest declines, with Meta Platforms (META) falling 1.23% and Microsoft (MSFT) dipping 1.35%, movements in line with typical market volatility.
The investor later escalated his critique, alleging that the issue extends beyond depreciation into how revenue is recognized. He suggested that true end-user demand for AI services is “ridiculously small” and that much of the reported revenue comes from circular funding between companies. He posted a chart which he claimed would “eventually be seen as a picture of fraud, not a flywheel,” as reported by Benzinga.
Burry's warnings strike at the heart of the bullish narrative that has propelled tech valuations to record highs. Nvidia, for instance, has a market capitalization of over $4.4 trillion, fueled by soaring demand for its AI processors. The enormous investment in data centers and GPUs by cloud providers like Microsoft, Google, and Oracle is predicated on a massive, durable revenue stream from AI services for years to come. Burry’s thesis suggests that the financial foundation of this boom may be less stable than it appears.
While Burry’s track record on the 2008 subprime mortgage crisis lends his voice significant weight, some of his more recent bearish market calls have not come to fruition amid a resilient bull market. For now, investors seem content to focus on the transformative potential of AI. But with Burry promising to release more details, the accounting practices of the world’s most valuable companies are likely to face a new and uncomfortable level of scrutiny.