Michael Burry, the investor made famous by The Big Short, is warning of a major risk in the AI data center boom. He claims hyperscalers like Meta are understating depreciation to artificially inflate GAAP earnings.
We dive into this controversial argument, explaining exactly what depreciation is and how extending the useful life of assets (like NVIDIA's GPU-based servers) impacts a company's financial reports.
But here's the real question for investors: Is depreciation the biggest threat, or should we be focusing on the massive Capital Expenditures (CapEx) already spent? We break down the implications for NVIDIA and the major hyperscalers.
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Chapters:0:00 Introduction: The AI Data Center Bubble Conversation 1:13 Michael Burry's Depreciation Warning 1:56 Hyperscalers Extending Asset Useful Life (Meta, Oracle)2:07 How Depreciation Schedule Affects GAAP Earnings 3:05 What is Depreciation? (The IRS Definition) 3:29 Depreciation vs. Capital Expenditures (CapEx) 4:53 The Purpose of Depreciation 5:37 Depreciation vs. Operating Expenses 6:17 The Financial Impact of Meta's Extended Depreciation7:57 Why Depreciation is a Non-Cash Expense 8:15 The Real Risk: CapEx and Future Revenue Generation 9:58 Investment Strategy: NVIDIA vs. Hyperscalers
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Content in this video is for general information or entertainment only and is not specific or individual investment advice. Forecasts and information presented may not develop as predicted and there is no guarantee any strategies presented will be successful. All investing involves risk, and you could lose some or all of your principal.
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Nick and Kasey own shares of Nvidia, Meta, Google, Amazon, Oracle