Michael Burry Warned About This AI Risk a Year Ago. Microsoft May Have Just Proved His Point
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On November 6, 2026, Microsoft (NASDAQ:MSFT | MSFT Price Prediction) declined to renew a computing arrangement with Oracle (NYSE:ORCL). The reported reason was that the older GPUs no longer suited its changing requirements. Oracle pushed back, saying demand remains strong and pointing to some GPU contracts renewed at 20% premiums. One lapsed contract is thin evidence. Still, it is the kind of real-world pricing data that Michael Burry’s warning has lacked.
Burry argued that hyperscalers were stretching chip depreciation schedules past the chips’ realistic economic lives. By his estimate, that could understate depreciation expenses by $176 billion through 2028, and he specifically identified Oracle and Meta, meaning Meta Platforms (NASDAQ:META), as companies at risk. If chips lose value faster than the books assume, then reported profits are too high.
Microsoft’s Own Spending Makes the Signal Louder
Microsoft is refreshing its hardware at a rapid pace. In its fiscal first quarter, property and equipment additions hit $39.37 billion, more than double the $19.39 billion a year earlier. Chief Financial Officer Amy Hood said about three-quarters of that spending went to short-lived assets, mainly CPUs and GPUs. She guided to over $50 billion next quarter and about $170 billion for the calendar year. Free cash flow came in at $18.6 billion, against $58 billion of operating cash flow.
GB300s now make up the majority of its GPU deployments, and Microsoft has docked its first Vera Rubin chips. When the best-informed buyer in the market chooses newer silicon over older capacity, it shows how quickly the frontier moves on.
Peers Are Already Burning Cash
Across the group, cash is running out faster than it comes in. Alphabet (NASDAQ:GOOGL) spent $51.36 billion on capex in the quarter and posted free cash flow of negative $9.07 billion. Meta went negative $2.12 billion, and Oracle went negative $5.40 billion. Amazon (NASDAQ:AMZN) reported a trailing free cash outflow of $42.4 billion. On its call, Amazon also said it is finding ways to extend useful lives, which is the very accounting lever Burry flagged.
Rebuttal Has Real Evidence Behind It
The leading AI chip supplier has the most at stake here, with $279.00 billion in supply obligations. In September 2026, its then-CEO Jensen Huang (he just resigned today due to allegations of extramarital affairs, including one with a purported Chinese spy and another with an Nvidia executive) cited a 22% monthly increase in H100 rental prices and A100 capacity contracted through 2029. Oracle reported GPU utilization of 97.9% and said the majority of its renewed GPUs were 4 years or older.
Burry saw this defense coming. In a July 9, 2026 Substack essay, he wrote: “A chip can rent and still depreciate very fast economically.” His claim is narrower than the one critics attack. Older GPUs keep earning, but that rental income may still fall short of the value they carry on the balance sheet.
Oracle and Meta Reports That Could Reset AI Profits
That makes Microsoft’s exit relevant but not conclusive. Oracle could rent the same chips to someone else, possibly at attractive rates. The deciding question is whether Oracle earns back its original investment over the useful life it assumed. Oracle’s next quarterly report should show whether the released capacity found a new tenant, and at what price. Oracle has already called fiscal 2027 and 2028 peak CapEx years.
After that, watch Meta’s fourth-quarter call and any 2027 capex guidance. A big increase paired with unchanged depreciation schedules would put Burry’s question at the center of the debate. If old chips re-lease at a premium, Huang is right. If they re-lease at a discount, the profits the hyperscalers have reported are overstated.
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After two decades of patrolling the dark corners of suburbia as a police officer, Rich Duprey hung up his badge and gun to begin writing full time about stocks and investing. For the past 20 years, he’s been cruising the markets looking for companies to lock up as long-term holdings in a portfolio while writing extensively on the broad sectors of consumer goods, technology, and industrials. Because his experience isn’t from the typical financial analyst track, Rich is able to break down complex topics into understandable and useful action points for the average investor. His writings have appeared on The Motley Fool, InvestorPlace, Yahoo! Finance, Money Morning, and, of course, 24/7 Wall St. He has been featured in both U.S. and international publications, including MarketWatch, Financial Times, Forbes, Fast Company, and USA Today.
