Michael Burry Warned About This AI Risk a Year Ago. Microsoft May Have Just Proved His Point Rich Duprey Thu, November 12, 2026 at 12:14 PM EST 5 min read MSFT +1.47% ORCL -0.30% GOOGN +1.85% AMZN +1.36% META -0.33% Explore stocks on Coinbase Trading disclosure Trading disclosure The above button links to Coinbase. Yahoo Finance is not a broker-dealer or investment adviser and does not offer securities or cryptocurrencies for sale or facilitate trading. Coinbase pays us for certain activity generated through this link. Prices displayed are informational.
Microsoft reportedly let an Oracle GPU deal lapse because the older chips no longer fit its needs, giving Michael Burry's depreciation warning real pricing evidence.
Alphabet burned about $9 billion in free cash flow and Amazon's trailing outflow hit $42 billion, while Amazon is exploring ways to extend useful lives.
Burry counters the rental-demand defense by arguing, "A chip can rent and still depreciate very fast economically."
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On November 6, 2026, Microsoft (NASDAQ:MSFT) 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 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.
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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.
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.
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.
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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