"Over the past two years, Amazon ( NASDAQ:AMZN ), Alphabet ( NASDAQ:GOOG )( NASDAQ:GOOGL ), and Microsoft ( NASDAQ:MSFT ) have collectively committed nearly $3 trillion to AI infrastructure. Microsoft alone plans $80 billion in fiscal 2025 capex, mostly data centers; Alphabet raised its 2025 guidance to $75 billion; and Amazon's AWS is on pace for $100+ billion annually by 2026. The stated goal: lock in dominance before rivals do. Wall Street cheers every upward revision, sending these stocks to repeated all-time highs."
"Michael Burry, the man who correctly called the subprime mortgage crisis in 2008, has taken aim at AI hype. Not just targeting Nvidia ( NASDAQ:NVDA ), which he says is supplying an AI build out that doesn't have the end user demand to support it, but also the hyperscalers, accusing them of systematically under-depreciating the very GPUs and servers they brag about buying."
"In his new Substack, "Cassandra Unchained," Burry calls it "one of the more common frauds of the modern era," not outright Enron-level fabrication, but aggressive life extensions that inflate current profits at the expense of future writedowns. He's doing the hard work most investors won't: digging into the SEC filings to find nuggets of concern companies don't want you to see. Depreciation of assets is one of them."
Amazon, Alphabet, and Microsoft committed nearly $3 trillion to AI infrastructure over the past two years, driving massive capex plans and elevated market valuations. The companies aim to lock in market dominance while Wall Street prices in sustained cloud and AI revenue growth. An investor accuses hyperscalers of systematically under-depreciating GPUs and servers, extending useful lives and inflating current profits at the expense of future writedowns. Aggressive life extensions create near-term earnings enhancement while deferring inevitable write-downs if assets become obsolete faster than assumed. Depreciation spreads the cost of physical assets over estimated useful lives.
Read at 24/7 Wall St.
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