GOOG Stock Under Pressure: AI Hype vs. Reality
Alright, let's dive into this Michael Burry accusation against Alphabet (GOOG/GOOGL) and other hyperscalers. The Big Short guy is claiming accounting shenanigans, specifically that these companies are artificially boosting earnings by understating depreciation. It’s a bold claim, and one that investors should take seriously, but also examine critically.
The Allegation: Depreciation Deception
Burry's central argument, as laid out on X (formerly Twitter), is that hyperscalers are extending the "useful life of assets" to reduce depreciation expenses and inflate their bottom lines. He estimates a potential $176 billion understatement between 2026 and 2028. He specifically calls out Oracle and Meta, estimating they're overstating earnings by 26.9% and 20.8%, respectively, by 2028. Let's focus on Google, since that’s what we're really here to talk about. According to Burry, Alphabet doubled the network/compute useful life to six years starting in 2020. (A change of this magnitude would definitely raise some eyebrows).
Now, depreciation is a real headwind for these companies. They’re pouring billions into AI infrastructure, and that investment eventually hits the income statement. We’ve already seen profit growth slow relative to revenue over the past couple of years, in part because those aggressive cost cuts can only go so far. But is extending the useful life of an asset fraud? That’s a loaded word. It implies intent to deceive, not just a difference in accounting judgment.
The European Commission is also breathing down Google's neck. They're launching a formal investigation into whether Google's "site reputation abuse policy" unfairly impacts publishers. The potential fine for non-compliance? Up to 10% of Alphabet's global turnover (revenue), which could be as high as $77.1 billion based on last year's numbers. Worst-case scenario (and it's a very worst-case scenario), a repeated infringement could double that to 20%.
Is this just the EU being the EU, constantly trying to clip the wings of American tech giants? Maybe. But it highlights the inherent risk of doing business in a region where you're perceived as a monopolist.
Google's Defense: Growth Engines Still Firing
Putting aside Burry's accusations for a moment, let's look at Google's performance. Q3 2025 was a banner quarter, with revenues exceeding $100 billion for the first time. Google Search revenues jumped 15% year-over-year, which should silence the doomsayers who predicted AI would kill their core business. Google Cloud also continues to be a bright spot, growing 34% year-over-year to $15.2 billion. Their cloud backlog now sits at $155 billion – 46% higher than it was in June.
And this is the part of the report that I find genuinely puzzling. If Google's growth engines are firing on all cylinders—Search, Cloud, YouTube, even potentially their own TPUs—why would they need to resort to accounting tricks to juice their earnings? It doesn't quite add up. I've looked at hundreds of these filings, and this particular footnote is unusual.
Alphabet’s Tensor Processing Units (TPUs) could be another major growth driver. Anthropic plans to buy as many as 1 million of these, representing a revenue opportunity worth billions. And let's not forget Waymo, their self-driving car venture.
The stock has already seen a significant rerating, with the forward price-to-earnings (P/E) multiple expanding to 26.7x. While I don't see the current levels as particularly tempting for new investments, I'm also not rushing to sell my existing positions.
Accounting "Fraud" or Aggressive Bookkeeping?
So, where does this leave us? Burry's allegations are serious. If true, they could expose a systemic issue across the hyperscaler landscape. But let’s be clear: even if Alphabet is stretching the definition of "useful life," that doesn't automatically equate to fraud. It could simply be aggressive accounting, pushing the boundaries of what's acceptable but still technically legal. The difference, of course, hinges on intent and materiality.
We need more data. Burry promised to release more details on November 25th, and I'll be watching closely to see if he provides concrete evidence to back up his claims. Until then, it's prudent to remain skeptical, but not panicked. Is GOOG Stock a Buy or Sell as Michael Burry Accuses Hyperscalers of ‘Fraud’?