Alphabet Faces 24% AI Profit Inflation Warning as Baupost Cuts Stake 41%
Michael Burry alleges Alphabet understates AI infrastructure depreciation, inflating reported earnings by around 24% and warning of a potential $226 billion asset overstatement through 2028. Baupost Group cut its Alphabet stake by 41%, investing $500 million in Amazon, lifting position to 9.3% of the portfolio with 20% growth projected in 2027.
1. Burry’s AI Depreciation Allegations
Michael Burry has accused Alphabet of extending the useful life of AI-related hardware to understate depreciation and hide infrastructure costs. He estimates this practice inflates reported earnings by roughly 24% and could lead to a cumulative $226 billion asset overstatement through 2028 if write-downs occur.
2. Klarman’s Portfolio Reallocation
Seth Klarman’s Baupost Group trimmed its Alphabet holding by 41% during Q4, reallocating approximately $500 million into Amazon. That move elevated Amazon to a 9.3% portfolio weight, reflecting Klarman’s view of slower cloud growth but an attractive valuation supporting about 20% earnings expansion in 2027.