AI's Hidden Cost: Why Investors Are Worried About Faster Tech Wear and Tear

The tech world is buzzing with a new concern: depreciation. Investors are now fretting over how quickly expensive tech gear, like GPUs and chips, might lose value. This worry is shaking up the AI market, with big tech stocks taking a hit.

Market Insights from Renowned Investors

Michael Burry and Jim Chanos, famous for their sharp market insights, have been vocal about this issue. Burry recently shared his thoughts on X, estimating that big tech companies might understate depreciation by a whopping $176 billion between 2026 and 2028. He believes these high-tech components might only last two to three years, not the six years that companies are planning for.

The Depreciation Debate Heats Up

Peter Berezin, chief global strategist at BCA Research, added to the debate. He pointed out that if big tech firms hold $2.5 trillion in AI assets by the end of the decade, a 20% depreciation rate could lead to $500 billion in annual depreciation expenses. That's more than their combined profits for 2025!

Kai Wu, founder and Chief Investment Officer of Sparkline Capital, echoed these concerns. He predicts that depreciation values could skyrocket from $150 billion a year to $400 billion in the next five years. Wu argues that the assumed lifespan of AI data centers might be too optimistic. He compares current AI spending to past tech booms, like the internet and railroad eras, highlighting that AI's rapid depreciation could make it the most significant of all.

Dissenting Views

However, not everyone is convinced. Stacy Rasgon, an analyst at Bernstein, believes that GPUs can last about six years and that current depreciation accounting is reasonable. Despite this, the mere possibility of faster depreciation is causing jitters in the AI market, cooling down what was once a red-hot investment trend.