Remember when everyone was freaking out about “circularity” last month? Yeah, that was fun. Well, Wall Street has found a shiny new word to obsess over, and it’s sending AI stocks into a tailspin faster than you can say “ChatGPT.”
The word? Depreciation.
I know, I know. It sounds about as exciting as watching paint dry on a spreadsheet. But stick with me here, because this boring accounting term is currently the reason your AI portfolio looks like it got hit by a truck.
Here’s the deal: All those fancy GPUs and semiconductor chips that Big Tech has been buying up like they’re limited-edition sneakers? Well, some very smart (and very pessimistic) people think these expensive toys are going to lose their value way faster than companies expect.
Enter our favorite doomsday prophets: Michael Burry (yes, the guy from “The Big Short”) and Jim Chanos. These legendary short-sellers are basically saying, “Hey, remember when everyone thought their investments would last forever? Yeah, about that…”
Burry dropped this fun little nugget on X: He thinks Big Tech will “understate depreciation by $176 billion” between 2026-2028. His math? Those shiny AI chips will be obsolete in 2-3 years, not the 6 years companies are banking on. Ouch.
But wait, there’s more! Peter Berezin from BCA Research did some napkin math that’ll make your head spin. He figures the big tech players will be sitting on $2.5 trillion worth of AI assets by 2030. If those assets depreciate at 20% annually, that’s $500 billion in yearly depreciation costs. For context, that’s more than all their combined profits for 2025.
Let that sink in for a second.
Kai Wu from Sparkline Capital painted an even grimmer picture, suggesting depreciation could jump from $150 billion to $400 billion annually in just five years. He compared today’s AI spending spree to the railroad and internet booms, and guess what? When you adjust for how quickly AI chips become yesterday’s news, we’re already spending more than during the dot-com bubble.
Now, before you start panic-selling everything, not everyone’s buying into this doom-and-gloom scenario. Bernstein analyst Stacy Rasgon thinks GPUs can “profitably run for about 6 years” and that most companies’ depreciation accounting is actually reasonable.
But here’s the thing about markets: sometimes it doesn’t matter if the fear is rational. The Nasdaq 100 is down 6.3% in recent weeks, and tech stocks have fallen more than 9%. That’s real money disappearing because of an accounting concept most people learned about once in college and promptly forgot.
So what’s the takeaway? Well, if you’re invested in AI stocks, you might want to buckle up. Wall Street has found its new favorite thing to worry about, and “depreciation” is apparently the word that’s keeping everyone up at night.
Who knew that such a boring word could cause so much drama? Welcome to 2025, folks.