Tech Companies Are Artificially Inflating Profits

Michael Burry has set his sights on what he calls the biggest investment mania of our time… Artificial Intelligence. Burry is SHORTING.

Michael Burry, who became globally famous through the film “The Big Short” for predicting the 2008 crash, seems to be making a powerful comeback with a new warning. This time, however, his focus isn’t on banks or the housing market — it’s on a completely different kind of risk: the tech giants driving the AI boom.

Just a few days ago, according to an official filing from Scion Asset Management, he opened massive short positions through put options worth more than $1.1 billion — specifically, $187 million against Nvidia and $912 million against Palantir ($PLTR). These are two of the companies that have led the AI revolution to dizzying heights.

The news hit the investment community like a bombshell, sparking immediate reactions. Palantir’s CEO, Alex Karp, fired back with explosive comments, saying, “Only a madman would short artificial intelligence.” He added, “Burry isn’t just shorting our stock — he’s shorting progress, innovation, AI itself.”

And he didn’t stop there. Karp even hinted that this might be an attempt to manipulate the market, suggesting, “It’s not even clear that he’s truly short. Maybe he’s just trying to exit his position without admitting he was wrong.”

But just a few days later came the big follow-up — this time from Burry himself. In a series of posts on X (Twitter), he accused major tech companies of something very serious: accounting manipulation through the underestimation of depreciation.

What does he mean?

When a company buys equipment — like chips or servers — it estimates how many years that asset will be used. That lifespan determines depreciation, meaning how much of the asset’s cost is expensed each year on the income statement. If a company claims that its servers last 6 years instead of 3, its annual expenses look smaller — and its net profits appear larger.

And that’s exactly what Burry says the “hyperscalers” — the cloud and AI giants — are doing: artificially inflating profits by under-depreciating their assets.

He even cited specific examples:

• Meta extended server life from 3 to 5.5 years.
• Alphabet from 3 to 6 years.
• Oracle from 5 to 6.
• Microsoft also to 6.
• Amazon from 4 to 6, later revised down to 5.

Based on these figures, Burry estimates that by 2028 the sector will have underreported depreciation by $176 billion. For Meta and Oracle alone, that means their profits are overstated by roughly 21% and 27%, respectively.

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THE WALL STREET RESPONSE

So… is he right? Or is he exaggerating?

To answer that, we need to look at the broader picture.

Wall Street, for its part, sees something entirely different — a market rebounding strongly, with solid and widespread profitability. Morgan Stanley ($MS), UBS ($UBSG), and other major players argue that profit margins are stabilizing, earnings are consistently beating expectations, and growth is no longer limited to just the AI sector.

According to the latest FactSet data, over 90% of S&P 500 companies have already reported earnings — and 82% beat analyst forecasts. Overall profits are up 13.1% year over year, marking the fourth consecutive quarter of earnings growth.

And it’s not just tech. Six out of eleven sectors in the index — including financials and consumer discretionary — are showing earnings expansion. The current bull market is broader, not limited to a few mega-cap names, which differentiates this phase from the dot-com bubble.

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In short:
Burry sees a “bubble” built on accounting illusion, while Wall Street sees healthy profitability and growth spreading across multiple sectors.

Posted Using INLEO