Michael Burry is sharpening his criticism of how major tech companies use accounting tricks to conceal the true cost of AI asset depreciation.
In a new post on X, “Big Short” investor highlights changes to Baidu’s accounting by extending the useful life of its servers and reducing annual depreciation expense.
“2021: Useful life 4 to 5 years for servers. 2024: Useful life 5 to 6 years for servers.”
Burry notes that Baidu also recorded a major write-down of its physical AI assets.
“Took a RMB 16.2 billion impairment on RMB 30.1B net PPE. Over 50%.”
Burry also points out that Baidu had a steady capital expenditure of about 8 to 11 billion RMB per year since 2021, but its 2024 depreciation expense was only 6.8 billion RMB, which inflated near-term net income as less expense is recognized each year.
He says the combination of extending asset lifespan and taking a large impairment allowed Baidu to report a sharp increase in earnings.
“In 2024, net income rose over 50% as a result of the useful life change.”
Earlier this month, Burry called out US-based hyperscalers for cooking the books by stretching depreciation schedules on fast-cycling AI chips and hardware. By understating asset depreciation, Burry said that he expects hyperscalers to report earnings distortion to the tune of $176 billion in the coming years.
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