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Why I don't worry (as much) about big tech's depreciation schedule

mbi-deepdives.com · 1,799 words · saved by 1 readers

In early 2025, I wrote about big tech’s deteriorating earnings quality primarily because of their gradual extension of useful lives for their servers in the last five years. Over the course of this year, these concerns have reverberated in many corners of the market. Just last month, The Economist warned that if server useful lives were reduced to one to two years, it could shave off $2 trillion to $4 trillion market cap from big tech’s valuation. Similarly, Rihard Jarc at “Uncovered Alpha” echoed similar concerns about depreciation schedule: If Jarc or The Economist are right about chips useful lives of just 1-2 years, it would indeed be quite concerning. So, why don’t I worry about it as much as I used to almost a year ago? Thanks to the “Cunningham’s Law”, the best way to get the right answer online is not to ask a question, but to post “wrong” answer. Following my piece on big tech’s earnings quality, I have received some pushback and over time, I came to the conclusion that the cr

In early 2025 , I wrote about big tech’s deteriorating earnings quality primarily because of their gradual extension of useful lives for their servers in the last five years. Over the course of this year, these concerns have reverberated in many corners of the market. Just last month, The Economist warned that if server useful lives were reduced to one to two years, it could shave off $2 trillion to $4 trillion market cap from big tech’s valuation. Similarly, Rihard Jarc at “Uncovered Alpha” echoed similar concerns about depreciation schedule: “The life of the current generation of GPUs is sho

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