Honestly, I think he's leant so far into this "Cassandra" fantasy that he believes he's an ostracised oracle. Except he has 1.5m followers and media churn out every tweet/SEC filing. Not really a Cassandra lol.
Always curious to hear what Dr Burry has to say but I'm getting disappointed. Maybe late November will be a surprise.
(FWIW, Jim Chanos has been complaining about big tech depreciation schedules for ages.)
But, to me, it doesn't matter because every Wall St analyst knows how to calculate FCF (which highlights the reality when capex outsizes D&A consistently).
The point is AI's a narrative thing. Wall St are seeing these large capital outlays and are applying huge IRRs to them for these big tech companies. Rightly or wrongly. But it's way too difficult for a layman to figure it out.
The real risk is that all capex is a waste of money and the tech becomes obsolete fast - depending on what you read/who you speak to, you'll find a different answer.
But - just like gambling - big tech is only one big breakthrough away from AI being a narrative to something real and game-changing. Like biotech on steroids, maybe.
Unlike biotech, big tech have the balance sheet flexibility and insane cash flow generation to keep investing until they hit treasure or even just turn off the taps and move on at any point. Maybe the "circular" dealings make stopping difficult but everyone cries about how it's fishy ... I think it makes big tech more powerful.
Big tech currently believes that AI spend is necessary for their survival. Wall St think it'll make them more valuable. And then contrarians think AI's a bubble. Based on all of that, I'm slowly becoming more bullish on big tech. Until govt starts to regulate/break it up, these companies will only become more powerful.
Burry's wrong. So far. The accounting is not where you look. Just like AMZN in the nineties/noughties, profitability was the wrong metric to track. |
