A buried Nvidia warning could shake the entire AI buildout

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Nvidia is no longer ignoring Michael Burry. The chipmaker quotes him explicitly and corrects him.

Nvidia released a secret seven-page note to Wall Street analysts in which it fought back against the "Big Short" investor's concerns about an AI bubble, what he refers to as "distorted earnings." The chip giant wrote to him by name and said that his calculation was wrong:

The memo also pushed back against his assessment of how long clients keep Nvidia's chips in operation. It informed investors that hyperscalers depreciate GPUs over a period of four to six years and that older products "continue to run at high utilization rates and retain meaningful economic value."

Burry, on the other hand, has doubled down, claiming that Nvidia "is clearly Cisco," not Enron, and that investment in AI infrastructure is like the telecom overbuild of the late 1990s.

But the real struggle isn't about bubbles.

The useful life of Nvidia's processors is a silent accounting choice that reveals how lucrative the AI age actually is.

Burry’s warning: The AI boom looks like Cisco in 1999

Burry is making his point crystal clear after months of warnings on X and a new "Cassandra Unchained" Substack. He says that the rise in AI infrastructure is more like the telecom overbuild of the late 1990s than the dot-com stock bubble itself.

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Two main aspects make up his argument:

• Depreciation lifespans are too long: Burry notes that AI hardware becomes commercially useless in 2–3 years, whereas cloud platforms can make such assets last for 5–6 years.

• Earnings are inflated: Those longer useful lives flatten depreciation, boosting margins and overstating profitability by an estimated $176 billion across several major companies between 2026 and 2028, according to Burry.

• Nvidia is “Cisco, not Enron”: Burry isn't suggesting Nvidia is doing fraud. He's arguing that it is at the core of a capital cycle that might go too far, as Cisco did during the fiber boom.

He thinks that investors are confusing a supply boom with long-term demand, and the evidence is in the depreciation schedules.

Nvidia’s memo pushes back quietly but forcefully

Nvidia sent a seven-page note to Wall Street analysts that was shared with the press by many news publications. The corporation talks to Burry by name and directly refutes what he says.

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Nvidia's main arguments in their response:

• "Not Enron." Nvidia denies any suggestion of accounting fraud.

• Math for buybacks. The business claims it has bought back $91 billion worth of shares since 2018, not the $112.5 billion that Burry said. It says that Burry wrongly added taxes on restricted stock units.

• Claims of circular funding are exaggerated. Nvidia says that its strategic equity investments make up just a small part of company income.

• The detractors are wrong. GPUs last longer than they say. Nvidia argues that hyperscalers usually write off GPUs over four to six years. They also reference to earlier processors like the 2020 A100 that are still being used a lot.

That last point is the real divide. If Nvidia is right, depreciation schedules don't make profits seem better than they are; they align with the actual value of assets.

Big tech’s recent accounting moves show the split

What makes this discussion important is that hyperscalers are now transforming depreciation lives.

Related: Jensen Huang just changed Nvidia: Here’s what you need to know

• Amazon shortened lives:Effective Jan. 1, 2025, Amazon trimmed the useful life of some servers from six years to five, citing faster AI development. The shift will shave roughly $700 million off Amazon’s operating income next year.

• Meta lengthened lives:Meta moved server and networking depreciation to 5.5 years and said the change will reduce 2025 depreciation expense by $2.9 billion.

• Alphabet and Microsoft already extended lives:Google is at six years for servers, while Microsoft extended lives to six years back in FY 2023, boosting operating income.

The fact that one firm shortens lives while another lengthens them shows that no one truly knows how long AI hardware will be valuable for business. Even the firms that purchase billions of dollars' worth of GPUs every three months are still figuring it out.

What’s really at stake for Nvidia

The issue about devaluation has a direct effect on Nvidia's long-term future.

If useful lives are shorter:

• Hyperscalers' profits go down.

• ROIC demands are becoming worse.

• Cloud platforms could slow down their buildouts or cut down on investment.

• Nvidia still sells processors, but the rate at which they come up with new ones might slow down.

If useful lives stay the same or become longer:

• The current AI capex cycle seems to last longer.

• GPUs keep their economic worth for longer periods of time, typically moving to second-tier workloads or inference.

• The resale and secondary markets for older Nvidia processors are still strong.

• Refresh cycles are still strong, which helps Nvidia's high value.

This isn't just about keeping track of money. It's about whether the industry is building ahead of demand or preparing for a shift to faster computers that will last for years.

How investors should read the fight

You don’t need to choose Team Burry or Team Nvidia. But you do need to watch the place where their views intersect: useful life assumptions.

Signals to follow:

• Watch 10-Qs for life revisions: If more companies follow Amazon and shorten lives, Burry’s thesis gains traction.

• Track depreciation vs. capex: If depreciation flattens while capex stays aggressive, Burry’s warning about overbuild risk grows louder.

• Separate optics from materiality: Nvidia’s equity stakes in partners like CoreWeave create headlines, but the dollars are minuscule compared with revenue. Depreciation schedules, by contrast, move billions.

The spat between Nvidia and Burry is more than simply another "AI bubble" dispute. It's a dispute about how to determine the lifespan of the technology that powers the boom.

That number four, five, or six could tell us whether this time is like Cisco's telecom peak or the start of a new, long-lasting computing platform.

The footnotes are where the actual story is for Nvidia investors and the AI industry as a whole.

Related: Wait until you see what Nvidia just did to your money

This story was originally published by TheStreet on Nov 28, 2025, where it first appeared in the Investing section. Add TheStreet as a Preferred Source by clicking here.