Michael Burry warns of AI-Fueled big tech bubble

Michael Burry warned that the AI-driven rally in major technology companies may be a bubble, pointing to changes in depreciation accounting and a large data-center buildout as factors that could inflate reported profits.

Burry’s analysis finds that companies including Meta and Google have lengthened the assumed useful lives of expensive AI chips and servers since 2020, spreading depreciation over more years. That lowers annual depreciation expense and raises reported earnings in the short term.

He estimates the collective understatement of depreciation could total about $176 billion between 2026 and 2028, a gap he says would boost reported profits for these firms by roughly 20% over that period.

Burry raised concerns about whether the expanded data-center infrastructure behind AI will generate enough revenue to cover its costs. He compared the current investment cycle to Cisco Systems in the late 1990s, when heavy infrastructure spending preceded a stock decline of more than 80% after the dot-com peak.

He warned of a ‘major top’ in the AI rally and projected that major Big Tech shares could fall 40% to 50% if market conditions change. In November 2025 he put on positions betting against leading AI-related stocks and later closed his hedge fund. He repeated his concerns in March 2026 and urged investors to reduce their tech exposure.

Burry cautioned investors against shorting the names because strong market momentum could keep prices elevated in the near term even if fundamentals do not support current valuations. ‘Sometimes, the only winning move is not to play,’ he wrote to investors.

His $176 billion estimate is based on a review of company filings and assumptions about how quickly specialized AI hardware should be depreciated. Depreciation policies and capital spending vary by firm, and companies disclose their accounting assumptions in financial reports.

Investors and analysts will weigh Burry’s calculations against company guidance, public filings and revenue trends as they reassess profit expectations and capital expenditure plans.