This is an excerpt from the November 17, 2025 Morning Briefing of Yardeni Research.
Michael Burry, the man behind the “Big Short” during the Great Financial Crisis, is shorting the AI trade because he notes that hyperscalers have been depreciating their GPU chip investments over more than 3 years. He thinks that they should be doing it for under three years.
That is a reasonable concern given that the forward earnings of the S&P 500 has been led higher since the start of the Roaring 2020s by the Information Technology sector (chart).
Consider the following:
(1) Complex issue. The depreciation of GPU chips by hyperscalers (like Google, Microsoft, Meta, and Amazon) is a complex and current topic in financial accounting, with significant debate over the appropriate lifespan. Hyperscalers are stretching GPU depreciation schedules, a move that lowers expenses and boosts reported earnings. Critics argue that this is aggressive accounting since GPUs often become obsolete faster.
(2) The useful life debate. Many major hyperscalers publicly use an estimated useful life for their AI server equipment, including GPUs, of five to six years. This is an extension from their historical depreciation schedules for general-purpose servers, which were often around three years. Companies like Microsoft and Oracle have been cited as using or factoring in a useful life of up to six years for their new AI chips/servers. Cloud GPU rental company CoreWeave also extended its GPU depreciation period to six years, from four years, in 2023 (chart).
