A prominent tech strategist challenges Michael Burry’s warning that hyperscalers are committing a “modern era fraud” by extending chip depreciation schedules to inflate profits.
On Monday, “Big Short” investor Burry said AI giants are extending depreciation schedules on AI chips to boost earnings.
He also predicted that hyperscalers will understate depreciation by $176 billion in the coming years.
But Futurum Group CEO Daniel Newman takes the opposite side of the argument. In a new CNBC interview, he says rapid advances in chip efficiency don’t automatically make current depreciation timelines fraudulent.
“So these things are lasting longer than a few years. But at the same time, the argument on the other side is that these new chips, Nvidia, Jensen’s coming out with a new generation twice a year right now. And these new generations are so much more efficient. And with the cost of infrastructure, the demand on energy, they’re there.”
Newman notes that the accounting choices fall within accepted guidance and says Burry’s fraud language overshoots the mark.
“I think he’s reaching, he’s grasping at straws to say it’s fraud or suggest they’re doing something illegal. I think they’re using the maker’s depreciation schedules, the accelerated depreciation schedules that are available to them to show income. And as long as these things continue to run and continue to be monetized, I think that these companies are okay.”
He also says Burry may be underestimating hyperscaler expertise in asset planning and the long-term earnings effect of slower depreciation.
“The depreciation conversation is real, but I don’t think Burry knows better than Zuckerberg or Nadella the useful life of these capex investments. And if the earnings are overstated short term, it would likely mean they are understated longer term.”
Newman characterizes the dispute as a technical accounting debate rather than evidence of wrongdoing.
“This isn’t the same as shorting NINJA loans for houses. This is far more nuanced, technical, and saying fraud here is more an indictment on the tax code than any of these companies.”
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