What a difference a year makes in AI accounting
Alphabet, Amazon, Meta and Microsoft generally depreciate AI servers and related equipment over five to six years. A calculator estimates that shortening the useful life by one year could cut their combined net income by about $36 billion in 2027 and reduce market capitalization by nearly $800 billion at current valuation multiples.
1. Useful-life assumptions
Alphabet, Amazon, Meta and Microsoft have generally settled on depreciating graphics processing units and other data-center equipment over five to six years. Alphabet extended its server estimate from four years to six in 2023, while Meta moved its server and networking equipment estimate to five to 5.5 years from four to five.
2. Potential earnings impact
A Breakingviews calculator estimates that shortening the useful life of the companies’ AI assets by one year would erase about $36 billion of their combined net income next year and could imply nearly $800 billion in lost market capitalization at current valuation multiples. Longer depreciation schedules reduce the annual expense charged against earnings.
3. Technology pace in focus
Amazon shortened the projected useful life of a subset of its servers and networking equipment to five years from six in 2025, citing faster technological development and obsolescence. Microsoft discloses a broad useful-life range of two to six years. The article says faster technology improvements could make older equipment a greater burden, while slower development could leave infrastructure in place longer.
