Michael Bury of ‘Big Short’ fame sheds light on big tech’s devaluation grip

Big tech’s ability to churn out ever-increasing profits has fueled continued enthusiasm for the stock regardless of rising investor valuations. But what if those numbers are inflated?

This is the question posed by renowned investor Michael Bury in a much-discussed social media post this week. The head of Scion Asset Management, which was known for betting against the US housing market before the 2008 global financial crisis and recently terminated his hedge fund’s registration with the Securities and Exchange Commission, suggested that Meta Platforms Inc. And a longer depreciation schedule for technology computing gear like Alphabets can earn them.

Such accounting moves are no secret, and most investors are betting that the hundreds of billions of dollars spent on chips and other data center equipment will eventually pay off. Meta, Alphabet, Amazon.com Inc. and Microsoft Corp. — Shares of the four biggest spenders on artificial intelligence infrastructure are in the green this year.

But the involvement of Bury, who has a close following in the investment community thanks to his starring role in the book The Big Short, highlights the dangers of massive spending. The Meta, for example, is up just 3% in 2025, well below the 18% jump in the tech-heavy Nasdaq 100 index, and the stock is down 18% in the second half of the year, putting it among the index’s 25 worst performers. By contrast, Alphabet has grown 46% this year, while Microsoft has jumped 19%.

“We’re in a period where we’re moving from AI hype to AI proof of need,” said Anthony Saglimben, chief market strategist at Ameriprise Financial Services Inc.

At issue is how quickly depreciating assets such as graphics processing units and servers lose value. In recent years, most big tech companies have extended the so-called useful life estimates for such equipment, reducing non-cash charges while emphasizing net income. Earlier this year, Meta extended its useful life estimate from four to five years to five-and-a-half years, a change estimated to reduce its 2025 depreciation expense by $2.9 billion.

Both Microsoft and Alphabet have taken similar steps in recent years, saying they have succeeded in eliminating overuse of the tools.

“Companies are always upgrading their server and networking gear and chips, so it’s not a new factor, but we haven’t seen it on this kind of scale before,” Saglimben said. “That’s what makes investors nervous.”

According to Stephen Glaser, associate professor of accounting at the University of North Carolina’s Kenan-Flagler Business School, it’s difficult to determine whether a longer time-line is appropriate. Skeptics argue that Nvidia Corp. Depreciation should accelerate as chipmakers release chips at a faster pace. That was the view taken by Amazon, which in February shortened the useful life of server equipment from six to five years.

Representatives for Amazon and Microsoft declined to comment. Meta and Alphabet did not respond to requests for comment.

Microsoft Chief Executive Officer Satya Nadella discussed the importance of constantly buying new chips and making improvements to make more use of such short-lived assets on the company’s fiscal first-quarter earnings call last month.

“You constantly modernize it and depreciate it. And that means you also use software to increase efficiency,” he said in response to a question about generating sufficient return on investment.

As the pace of capital spending on computing infrastructure continues to increase, the debate is more important than ever. According to data compiled by Bloomberg, the four biggest spenders are projected to increase combined investment by nearly 40% to $460 billion over the next 12 months, with most of that going into computing equipment.

Depreciation costs skyrocket even with accounting moves. Alphabet, Microsoft and Meta had nearly $10 billion in depreciation expense in the final quarter of 2023. The figure rose to nearly $22 billion in the quarter ended in September. By this time next year, analysts expect it to be around $30 billion.

Still, the group delivered third-quarter profits that handily beat Wall Street expectations. Nvidia’s results are due next week, according to data compiled by Bloomberg Intelligence, the earnings of the so-called Magnificent Seven, which includes Apple Inc. and Tesla Inc. Also included, is on pace to grow 27% from a year ago, nearly double the 14% expansion estimated at the start of earnings season.

Those kinds of gains outweigh any concerns about things like depreciation costs, according to Phil Blancato, chief market strategist at Osek, which has more than $700 billion in assets under management.

“The money they’re spending is very stimulative of future earnings, and that’s the point that’s being missed,” Blanketo said. “There is no reason to be concerned about their ability to grow.”