Michael Burry's AI Hyperscaler Accounting Allegations Spark Market Concerns

This analysis is based on the CNBC report [1] published on November 11, 2025, which detailed Michael Burry’s allegations against AI hyperscalers regarding potentially fraudulent accounting practices. The “Big Short” investor accused major cloud computing companies of artificially boosting earnings by extending depreciation periods for AI infrastructure beyond realistic timeframes, potentially understating depreciation by $176 billion from 2026-2028 [1].

The allegations triggered immediate negative reactions across technology stocks, with the Technology sector declining 0.99729% on November 12, 2025, making it one of the worst-performing sectors for the day [0]. The affected companies showed significant stock price declines:

• Meta Platforms (META)
  : Down 2.47% to $611.62 on elevated volume of 16.19M shares [0]
• Oracle (ORCL)
  : Down 4.07% to $226.54, though on below-average volume of 15.05M shares [0]
• Alphabet (GOOGL)
  : Down 1.80% to $286.06 [0]
• Amazon (AMZN)
  : Down 1.55% to $245.24 [0]

NVIDIA (NVDA), the primary chip supplier to these hyperscalers, showed relative resilience with only a 0.31% decline to $192.56, though on elevated volume of 104.73M shares [0]. The divergence between the Dow Jones Industrial Average (+0.71%) and NASDAQ Composite (-0.58%) suggests the allegations specifically impacted technology-heavy indices [0].

Burry’s allegations center on depreciation accounting practices for AI infrastructure. Under GAAP, companies can estimate the useful life of assets like servers and chips, with longer estimated lives resulting in lower annual depreciation expenses [1]. The core issue is whether AI chips, which typically have 2-3 year product cycles, should be depreciated over 5-7 year periods as Burry alleges the hyperscalers are doing [1].

Burry specifically projected that:

• Oracle’s profits could be overstated by roughly 27% by 2028
  [1]
• Meta’s profits could be overstated by roughly 21% by 2028
  [1]
• Industry-wide understated depreciation could reach $176 billion from 2026-2028
  [1]

The allegations align with Burry’s recent positioning against AI stocks. Regulatory filings revealed he held put options with notional values of approximately $187 million against NVIDIA and $912 million against Palantir Technologies as of September 30, 2025 [1]. This suggests his criticism may be partly motivated by his short positions.

The timing coincides with broader market concerns about AI valuations. Jim Chanos, the famed Enron short-seller, has also expressed concerns about massive AI hardware spending by mega-cap tech firms [1]. This convergence of skeptical voices from prominent short-sellers warrants careful consideration.

1. Accounting Valuation Link
   : The allegations connect accounting practices directly to valuation sustainability, suggesting that current AI infrastructure valuations may be built on potentially inflated earnings bases [1].

2. Supply Chain Implications
   : NVIDIA’s relative resilience despite being the primary chip supplier suggests market differentiation between infrastructure providers and equipment manufacturers [0].

3. Sector Rotation Signals
   : The Technology sector’s underperformance contrasted with Communication Services (+1.21887%) and Basic Materials (+0.53336%) indicates potential sector rotation away from AI-heavy stocks [0].

1. Regulatory Risk Potential
   : If Burry’s allegations are substantiated, this could trigger SEC investigations and potentially widespread earnings restatements across the AI infrastructure sector.

2. Investment Thesis Validation
   : The convergence of Burry and Chanos’ concerns may validate broader skepticism about AI investment sustainability and capital expenditure efficiency.

3. Accounting Standards Scrutiny
   : The allegations may prompt review of GAAP depreciation guidelines for rapidly evolving technology assets.

Users should be aware that if Burry’s allegations are substantiated, this could represent significant accounting irregularities that may warrant regulatory intervention and substantial earnings restatements. The projected 20-27% earnings overstatements would be material enough to trigger SEC scrutiny if proven accurate.

1. November 25 Disclosure
   : Burry promised “more detail coming November 25th” [1], suggesting the current allegations may be incomplete
2. Company Responses
   : Monitor official statements from Meta, Oracle, and other named hyperscalers
3. Regulatory Action
   : Watch for any SEC investigations or comments on AI infrastructure accounting
4. Analyst Reactions
   : Track how major research firms respond to these allegations
5. Short Interest Data
   : Monitor changes in short positions across affected stocks

If these accounting practices are widespread, the entire AI infrastructure investment thesis could be called into question, potentially affecting:

• Cloud computing valuations
• AI chip demand projections
• Data center REITs
• AI software companies dependent on hyperscaler infrastructure

The analysis reveals several critical information gaps that warrant attention. CNBC noted they were “not independently able to confirm this practice was being done by the companies” [1], and the accounting estimates fall within GAAP guidelines, making Burry’s fraud allegations difficult to prove definitively. As of the CNBC report, Oracle and Meta had not responded to requests for comment, while NVIDIA declined to comment [1].

The market reactions suggest investors are taking the allegations seriously, with Technology sector underperformance and specific stock declines in the named companies [0]. However, the lack of immediate company responses and unverified nature of the claims creates an information vacuum that decision-makers should navigate carefully.

The convergence of prominent short-seller concerns about AI infrastructure spending and accounting practices warrants monitoring, particularly given the magnitude of potential earnings impacts projected by Burry [1]. However, users should await Burry’s promised detailed disclosure on November 25th before making significant portfolio adjustments.