Steve Eisman has challenged fellow “Big Short” investor Michael Burry’s argument that accounting practices could be masking risks across the AI trade, even as both investors identify vulnerabilities in the sector.
Eisman discussed Burry’s concerns on the New Money podcast on Friday, focusing on chip depreciation, hyperscaler profits and the financial strength of leading AI companies.
Burry has argued in his Cassandra Unchained Substack that hyperscalers may be overstating earnings by underreporting depreciation on AI hardware. “Where I think he is wrong, for the moment, is that there is such demand for chips right now that there is still huge demand for the older chips,” Eisman stated.
He further argued that if AI growth drives strong performance for Anthropic, OpenAI and major hyperscalers, changes to companies’ depreciation schedules would be relatively insignificant. Eisman said, “With all due respect to Michael, I think his argument is too academic.”
Eisman suggested that while Burry may be highlighting a genuine concern, the issue identified is not significant enough to drive the broader outcome, which will be influenced by much “bigger factors” in both directions.
Burry Questions AI Chip Depreciation
Last year, Michael Burry flagged chip depreciation at hyperscalers such as Nvidia Corp. (NASDAQ:NVDA), Meta Platforms Inc. (NASDAQ:META) and Oracle Corp. (NYSE:ORCL) while escalating his broader claims that major AI firms are using accounting practices to inflate earnings. He accused companies of suspicious revenue recognition, arguing that reported demand is much smaller than it appears because customers are allegedly funded by the companies’ own partners or dealers.
Earlier this month, Burry compared Nvidia’s defense of its GPU depreciation schedules to a 1960s market bubble, arguing that similar arguments about asset values have occurred before. Nvidia had presented data showing its A100, H100 and B200 chips retain significant value beyond a five-year accelerated depreciation schedule, a move Nvidia bulls viewed as a rebuttal to critics of its accounting assumptions.
Eisman Flags AI Trade Risks
Eisman challenged Burry’s thesis but remains cautious about the broader AI trade. The investor previously said that he reduced exposure rather than dismissing the risk entirely.
Earlier this week, he said he had partially hedged four AI positions, adding, "I’ve played ball too. I’ve invested in these companies," and "I’ve taken some risk down." Eisman estimated that OpenAI and Anthropic account for about 70% of AI-related revenue at Microsoft Corp. (NASDAQ:MSFT), Amazon.com Inc. (NASDAQ:AMZN), Alphabet Inc. (NASDAQ:GOOGL) (NASDAQ:GOOG) and Oracle, warning that problems at either AI lab could have broad implications for the cloud giants.
Disclaimer: This content was partially produced with the help of AI tools and was reviewed and published by Benzinga editors.
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