What a difference a year makes in AI accounting
QQQ•A Reuters Breakingviews calculator estimates that cutting the useful life of AI servers and chips by one year would reduce Alphabet, Amazon, Meta and Microsoft’s combined net income by about $36 billion next year, potentially implying nearly $800 billion in lost market capitalization.
1. Depreciation assumptions matter
Alphabet, Amazon, Meta and Microsoft generally spread the cost of graphics processing units and other equipment over five to six years. Longer useful-life estimates lower annual depreciation charges and raise reported earnings. Alphabet extended its server life estimate to six years from four in 2023, while Meta moved to five to 5.5 years from four to five in 2024.
2. Amazon shortened estimates
Amazon shortened the projected useful life for some servers and networking equipment to five years from six in 2025, citing faster technological development and obsolescence. The move reversed earlier extensions. Microsoft now discloses a range of two to six years, while the article says its major peers have not followed Amazon’s latest change.
3. Technology creates uncertainty
The calculator estimates the server equipment on each company’s books, projects the amount in 2027 based on subsequent AI capital expenditure, and models the effect of depreciation changes on earnings and market value. The article says faster technology advances could make older equipment a greater burden and lead to shorter depreciation schedules, while slower development could leave infrastructure in place longer.
