patrick.net

Also interesting besides this circular investing between Open AI, Oracle and Nvidia is that Michael Burry is assailing essentially accounting fraud in regards to the "AI companies" like Meta or Facebook are knowingly depreciating assets (i.e., AI systems) beyond their likely useful life causing stocks like Meta being artificially inflated by about 20%.

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Michael Burry's depreciation observation is that major tech companies ("hyperscalers") are allegedly overstating their earnings by using unrealistically long depreciation schedules for their AI computing equipment, such as Nvidia chips and servers. He calls this practice "one of the more common frauds of the modern era".
Core Argument
Extended Useful Life: Burry argues that while the AI hardware market features rapid technological advancements, often with a 2-3 year product cycle for new, more powerful chips, companies are depreciating this equipment over 5-6 years.
Inflated Earnings: By extending the "useful life" of an asset on their books, companies reduce their annual non-cash depreciation expense, which in turn artificially inflates their reported net income and makes their profits look higher than they are in economic reality.
Projected Impact: Burry estimates that this accounting practice could lead to a collective understatement of depreciation expenses by $176 billion across these tech giants between 2026 and 2028. He projected that by 2028, Oracle's earnings could be overstated by 26.9% and Meta's by 20.8%.
"Race Against Time": The issue creates a "race against time" where companies are rapidly spending capital (capex) on new infrastructure, hoping that future AI-driven revenues will eventually catch up and justify the massive investment before the current hardware becomes technologically obsolete and requires significant write-downs (impairments).
Company Actions
Several companies have adjusted their depreciation schedules:
Meta extended the useful life of its network equipment from 4-5 years to 5.5 years earlier this year.
Alphabet and Microsoft have made similar moves, extending their useful lives to six years.
Amazon recently moved in the opposite direction for a subset of equipment, reducing the useful life estimate from six years back to five years, citing the "increased pace of technology development, particularly in AI and machine learning".
Market Context
Burry's observation is part of a broader critique of the AI sector, which he believes is in a bubble. He has also disclosed short positions in Nvidia and Palantir. Critics suggest that while Burry's analysis may be "early" (a common theme for his famous 2008 housing market short), the concerns about the long-term return on investment for AI capital expenditures are shared by others, including some analysts at BlackRock.

He assumes algorithms won't improve over the next years. A very bold assumption.

Anyone buy the dip today? I put in a buy for Wendy's if it hits $7.80.

HeadSet says

Anyone buy the dip today? I put in a buy for Wendy's if it hits $7.80.

Nope my stonks were mostly up today, one ran 6%. I agree with Burry on the tech/AI bubble but there won't be a crash, at least not for now. Just poor performance of the sector for a while.

mell says

HeadSet says

Anyone buy the dip today? I put in a buy for Wendy's if it hits $7.80.

Nope my stonks were mostly up today, one ran 6%. I agree with Burry on the tech/AI bubble but there won't be a crash, at least not for now. Just poor performance of the sector for a while.

We can’t use market fundamentals to analyze anymore. It’s not a free market, it’s heavily manipulated. It would have crashed while ago and self corrected. Now we have massive manipulation to keep it afloat by corporations, government, investors… it’s all fake.

At this point it’s just gambling,

FortWayneHatesRealtors says

mell says

HeadSet says

Anyone buy the dip today? I put in a buy for Wendy's if it hits $7.80.

Nope my stonks were mostly up today, one ran 6%. I agree with Burry on the tech/AI bubble but there won't be a crash, at least not for now. Just poor performance of the sector for a while.

We can’t use market fundamentals to analyze anymore. It’s not a free market, it’s heavily manipulated. It would have crashed while ago and self corrected. Now we have massive manipulation to keep it afloat by corporations, government, investors… it’s all fake.

At this point it’s just gambling,

That's why iTulip closed up shop almost 10 years ago - EJ considered the entire economy to be bullshit fake.

FortWayneHatesRealtors says

We can’t use market fundamentals to analyze anymore. It’s not a free market, it’s heavily manipulated. It would have crashed while ago and self corrected. Now we have massive manipulation to keep it afloat by corporations, government, investors… it’s all fake.

At this point it’s just gambling,

Also there could be another "industrial revolution" or economic surge such as with internet and ecommerce stocks in the 1990s. A lot of money is going to AI capital expenditures which are benefitting the major stocks like Google and Nvidia. That is why Google is up at least 58% year to date. Both companies revenue has skyrocketed this year because of AI.

But how long will this rate of growth continue ? It is bound to slow down.

"Circular finance deals" are part of the current boom in AI, and Mish Talk website has an excellent article about this titled "S&P 500 Bounce Off Support, What About Bitcoin?".

Mister Mish brought up a great example about Lucent doing the same with financing upstart telecom and internet companies and then its stock collapsing +90% as part of the internet stock bubble.

Lucent's stock collapsed starting in early 2000, and by 2002, it had dropped from a high of over $63 per share to under $1. The collapse was due to a series of factors, including the bursting of the dot-com bubble, accounting issues, failed mergers, and a sudden downturn in demand for telecommunications equipment.

Many of the smaller, riskier start-ups that Lucent lent money to, such as Winstar Communications and Global Crossing, did not survive and eventually went bankrupt, leading to significant financial losses and write-offs for Lucent. However Sprint (later acquired by T Mobile) and Verizon were Lucent equipment customers who survived.

AD says

Lucent's stock collapsed starting in early 2000, and by 2002, it had dropped from a high of over $63 per share to under $1. The collapse was due to a series of factors, including the bursting of the dot-com bubble, accounting issues, failed mergers, and a sudden downturn in demand for telecommunications equipment.

I was on the front lines for this as an employee for a small process measurement and control company that sold to the big OEM's that sold turnkey production lines to fiber producers such as Lucent, Corning, General Cable, Sumitomo, and others - all of whom had a huge manufacturing presence in my state of North Carolina (Lucent was in Georgia just north of Atlanta on 85).

Fiber was the sexy "AI" of the early 2000's and they overbuilt production capacity in anticipation of FTTH (fiber to the home) for every house in the U.S. When the demand didn't materialize and improvements in switches increased capacity of existing fiber all of these companies had active production capacity or capacity in the pipe line that became worthless in the space of 6 months.

Suddenly 70% of the process engineers and engineering managers I was working with disappeared. IIRC this was at least a year after the dot com bust but it got almost no national news coverage. It was a big deal in NC and the state even passed a law allowing these companies to depreciate 100% of their production equipment in one year - the only caveat was that all of this equipment had to go to the land fill immediately to get the tax benefit.

It was surreal hearing about brand new never turned on multi-million dollar fiber drawing towers at Siecor (a joint venture between siemens and corning) and general cable being de-installed and trashed before they ever got into production. My employers' revenue (we were small) for the Southeast went from 300k in 1997 to over 3 million in 2000 down to about 200k by 2002. It was brutal.

stfu says

My employers' revenue (we were small) for the Southeast went from 300k in 1997 to over 3 million in 2000 down to about 200k by 2002. It was brutal.

Yes, seems like in most industries especially technology that it is never steady, straight line growth which in your case is with the fiber optic sector. It seems more like a speculative boom-bust, feast or famine environment.

At least your small company survived, as so will the big players like Google and Nvidia will survive albeit with some proverbial bruises and at least some small AI firms will also after the AI bubble pops or slowly collapses.

So what is the status of your small company now ? How long did it take to return to 1997-level sales ?

AD says

So what is the status of your small company now ? How long did it take to return to 1997-level sales ?

They're still in business but I have no idea of numbers or if they ever got back to the sales figures we achieved back then. They have a diversified business selling into Plastic, medical, and rubber extrusion and hot and cold steel. Wire and Cable used to be 80% of revenue when I first started with the company but it was below 50% when I left.

Trump admin is pumping stock market and private equity bailouts. So next 3 years stocks will do very well.

They won’t let AI bubble explode.

Full S&P 500 (with Magnificent 7): Up about +15% YTD as of November 2025, driven largely by mega‑cap tech.

Excluding Magnificent 7: The remaining 493 companies are up only about +7–8% YTD, showing much weaker performance.

Nvidia’s explosive growth—62% YoY revenue increase in Q3 2025—is partly driven by circular investing, where its own capital fuels demand for its GPUs. Analysts estimate 10–20% of recent growth may be circular, but the exact share is uncertain. The practice raises questions about sustainability, though it also entrenches Nvidia’s dominance in AI infrastructure.

Just look at Lucent's stock price around 2000 as it made a lot of circular financing deals with smaller telecom companies to buy Lucent hardware. MishTalk has a recent article about this.

FortWayneHatesRealtors says

Trump admin is pumping stock market and private equity bailouts. So next 3 years stocks will do very well.

They won’t let AI bubble explode.

True as he has made the AI race or competition with China, etc. as a major agenda of his administration. And the White House recently hosted a dinner with the AI industry leaders like Tim Cook, Sergey Brin, Sam Altman, Bill Gates, and Mark Zuckerberg which highlighted this.

Mplx 8% dividend energy stock

This Energy Stock Pays an 8% Dividend (And It's Safe) | The Motley Fool https://share.google/x92iM191ARTuxIuwF

Worth investing? Given that snp is very high n market may go down

JPMorgan sees S&P 500 reaching 7,500 in 2026 — or surging past 8,000 if the Fed keeps cutting rates

https://finance.yahoo.com/news/jpmorgan-sees-sp-500-reaching-7500-in-2026--or-surging-past-8000-if-the-fed-keeps-cutting-rates-142602366.html

https://rudy.substack.com/p/the-increasing-economic-fragility



Why is the rest of the world rushing into the US stock market?

KgK one says

Mplx 8% dividend energy stock

Similar to AMLP. Note of caution to anyone that starts investigating this. These are ETF's that own Energy MLP (Master LImited Partnerships). You may look at the MLP's these two ETF's own and think "why buy the ETF - the dividends of the underlying MLP's are much higher". You would be right in that but a word to the wise :

These MLP's get special tax treatment in order to pay these dividends. That means if you hold the individual MLP's you will get a K1 from each one that you will have to include on your taxes. If you buy these inside your tax deferred account (IRA, ROTH) you still have to pay these taxes - and it's an accounting hardship (people do it, but it's not straightforward).

Again, this isn't for the ETF's - AMLP and XMLP - they take care of the tax paperwork but they are charging you to do it - the dividends of what they hold are higher than what they pay you. I've owned AMLP in the past and it did a reverse split 1:5 so I dumped it as soon as I broke even on the principal - but I did receive the dividends the entire time.

OK semi-serious question for 12.6.25. Is it time to time the market?

I'm getting very concerned with the weight of MAG7+Nvidia in my favorite ETF's (IUSG, SCHB). I have a younger relative who codes LLM's for sub prime fintech's in the Bay area and he is adamant that AI is the biggest bubble he's seen in his life (granted he was not investing even as recently as the 2018 pullback).

I've started putting new money into (what I believe to be) a good alternative ETF called DGRO which is more focused on dividend growth (not yield) but still includes a small exposure to MAG7. I'm considering closing or at least severely downsizing my positions in IUSG and SCHB. I'm talking about a major repositioning of as much as 60% of our net worth so it's material to me.

I made this mistake in late 2007/ early 2008 and ended up regretting going conservative and lost out on big returns in 2009 - 2012.

I'm not California rich, but I am Appalachia rich and I want to stay that way. I'm interested in patnetters opinions because I believe the average street IQ on this board exceeds reddit and bogleheads (which is a board for retired public employees and financial Karens). Should I just stay the course (boglehead) or be proactive. I don't know If I will ever need this money because we live frugally and will both (wife and I) get nice SS at 70 and I have small pensions from a couple of too big to fail pharma companies - I say this so that no one advises putting everything into TIPS.

What does the collective wisdom of the board say? Are we nervous yet?

I'm not nervous, but on the other hand, I don't know how much exposure to AI stocks I have either.

I know I'm overweight AAPL because once upon a time I rolled the dice and bought some shares, and my funds also own AAPL usually.

However, what is really important to me is taxes; the tax on investments is what really costs money down the road.

For decades I have not made changes to my investments; I never "rebalanced" them as I got older.

The only change I made recently is exchange my International Stock funds for USA stock funds, and I'm selling the one in my taxable account bit by bit; it's my "piggy bank' these days.

Trump is pumping stocks, don’t expect crash anytime soon

stfu says

I'm getting very concerned with the weight of MAG7+Nvidia in my favorite ETF's (IUSG, SCHB). I have a younger relative who codes LLM's for sub prime fintech's in the Bay area and he is adamant that AI is the biggest bubble he's seen in his life (granted he was not investing even as recently as the 2018 pullback).

I've started putting new money into (what I believe to be) a good alternative ETF called DGRO which is more focused on dividend growth (not yield) but still includes a small exposure to MAG7. I'm considering closing or at least severely downsizing my positions in IUSG and SCHB. I'm talking about a major repositioning of as much as 60% of our net worth so it's material to me.
I made this mistake in late 2007/ early 2008 and ended up regretting going conservative and lost out on big returns in 2009 - 2012.

Same boat here - dodged the 2008 clusterfuck but stayed too conservative during the 2011-2013 runup.

I've been following Finster's (from iTulip) blog Financology ever since iTulip's hibernation. He's been talking about the same thing - diversifying stock positions away from the Mag-7 while maintaining one's overall allocation to equities:

https://financology.net/2025/11/26/how-to-survive-a-bubble/

He has several ETF-based model portfolios covering various investment strategies (growth, income, capital preservation, permanent portfolio) for various portfolio sizes:

https://financology.net/model-portfolios/

stfu says

What does the collective wisdom of the board say? Are we nervous yet?

My IRAs (rollover/traditional and Roth) are in a balanced fund arrangement, 50% investment grade bonds and 50% index funds, and I plan on keeping it the same for next 4 years as it has been for the last 5 years.

Generally the conservative rule is X% of savings in stocks whereas X is 105 minus your age.