NEW YORK / LONDON (IT BOLTWISE) – Michael Burry, known for his prediction of the 2008 financial crisis, has once again captured the attention of the financial world. This time his criticism is directed against the depreciation practices of large tech companies such as Meta, Alphabet and Microsoft. Burry argues that extending the useful lives of assets artificially inflates profits and distorts balance sheets.
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Michael Burry, the legendary investor who rose to fame for predicting the 2008 financial crisis, has once again rocked the financial world. This time his criticism is directed against the depreciation practices of large tech companies such as Meta, Alphabet, Oracle, Microsoft and Amazon. Burry argues that these corporations are extending the useful lives of their network and computing infrastructure assets to artificially reduce depreciation and thus increase profits.
The extension of the useful life from around 3-5 years to up to 6 years contradicts the actual hardware cycles, which are often only 2-3 years. According to Burry, this practice leads to a systematic understatement of depreciation, which artificially inflates companies’ profits. He predicts that this practice could result in depreciation understatement of $176 billion by 2026-2028, severely distorting profit figures on balance sheets.
Burry’s criticism comes at a time when the valuation of tech and AI companies is already under scrutiny. Extending the useful life of assets could be seen as a fundamental accounting trick that massively distorts modern company valuations. This practice is also a reason for Burry’s short positions against these tech giants. He sees this as confirmation of his theses about the overvaluation of profits at tech and AI giants.
In the past, such large, highly publicized short actions by large traders often did not work out. Examples like Jim Chanos’ Tesla short or Bill Ackman’s Herbalife short show that such bets are risky. However, if Burry’s short trade works, he could secure a place in the short sellers’ hall of fame. The financial world is watching closely to see whether Burry’s predictions will come true this time.
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