Remember when everyone was freaking out about “circularity” last month? Yeah, that was cute. Now Wall Street has found a new word to lose sleep over, and it’s way more boring but somehow scarier: depreciation.
I know, I know. Depreciation sounds about as exciting as watching paint dry on a rainy Tuesday. But this accounting term is currently body-slamming the AI trade harder than a WWE wrestler having a bad day. The Nasdaq 100 is down 6.3% in recent weeks, and tech stocks are getting absolutely wrecked.
Here’s the deal: All those fancy AI companies have been buying GPUs and chips like they’re collecting Pokemon cards. The problem? Some very smart (and very pessimistic) people think these expensive toys are going to lose value way faster than anyone expected.
Enter our favorite financial doomsday prophets: Michael Burry and Jim Chanos. You know, the guys who love being right about terrible things happening. Burry – the same dude who called the housing crash and got a movie made about him – is now saying Big Tech is basically lying to themselves about how long their shiny new chips will stay useful.
His math is brutal: He thinks these companies will understate depreciation by $176 billion between 2026-2028. Why? Because while companies are planning for their chips to last about six years (optimistic much?), Burry thinks they’ll be obsolete in two to three years. That’s like buying a sports car and having it turn into a pumpkin before you finish paying it off.
But wait, it gets worse! Peter Berezin from BCA Research dropped this fun fact: If hyperscalers hold $2.5 trillion in AI assets by 2030 (which seems likely at this rate), and those assets depreciate at 20% annually, that’s $500 billion in yearly depreciation expenses. For context, that’s more than all their combined profits for 2025. Ouch.
Kai Wu from Sparkline Capital really knows how to kill a party. He pointed out that when you adjust for faster depreciation, today’s AI spending spree makes the dot-com boom look like a garage sale. We’re talking about spending levels that would make even railroad barons from the 1800s nervous.
Now, before you start panic-selling everything and buying gold bars, remember that not everyone agrees with this doom-and-gloom scenario. Bernstein analyst Stacy Rasgon thinks GPUs can actually run profitably for about six years, and that most companies’ depreciation accounting is reasonable.
But here’s the thing about markets: They don’t need everyone to agree for panic to set in. Right now, just the possibility that these depreciation fears might be correct is enough to make investors run for the hills faster than people leaving a bad movie.
So there you have it – the word “depreciation” is now officially more terrifying to tech investors than a horror movie marathon. Who knew accounting could be this dramatic?