The stock market has a habit of celebrating news it should probably be squinting at. And Meta Platforms (NASDAQ: META) jumping 9% this week on plans to sell its excess AI computing capacity is a fine example.
In a week when World Cup organisers discovered what happens when demand meets a heatwave, Meta has quietly admitted $125bn-$145bn for 2026 might be more computing power than it needs.
What’s the news?
The positive view is that ‘Meta Compute’ is a shrewd new cloud business to rival Amazon’s AWS and Microsoft’s Azure. The less polite one is that Meta has overspent again.
When a firm commits $600bn to US infrastructure through 2028 and then starts renting out excess capacity, the question becomes whether compute demand is sustainable. And that’s a huge question in today’s stock market.
The market has already hinted at an answer. Data centre names have been sliding for weeks, and Meta’s announcement accelerated things. CoreWeave fell 13.9% in a day and sits 38% below its May high, while Nebius dropped 17%. Awkwardly, both count Meta as a flagship customer.
CoreWeave has a $21bn commitment from the company, Nebius up to $27bn. A landlord whose biggest tenant starts subletting should worry.
Investors are watching the details
American investor Michael Burry has been sceptical of the data centre boom. His charge is that hyperscalers are inflating earnings by extending chip depreciation schedules in an unjustified way.
His estimate: a collective $176bn understatement of depreciation between 2026 and 2028, with Meta’s earnings overstated by 20.8% by 2028. And it’s not just Meta – similar points are true of Amazon and Microsoft.
Is Burry right? The counterargument is that older chips are holding their value better than before, as evidenced by higher rental prices:
- H100 rental prices have risen roughly 40% since October 2025, from about $1.70 to $2.35 an hour — the opposite of depreciation.
- Memory prices have gone parabolic, with DDR5 contract prices tracking towards 5x year-on-year increases.
The trouble is that this effect can also happen in reverse. If compute demand falls, older chip prices fall, depreciation schedules suddenly look generous, and those flattered earnings deflate.
Extended depreciation schedules mean the stakes are high precisely because the accounting only works while the party continues. And Meta might be the first sign that it isn’t going to last forever.
A crash warning?
Meta’s view for some time has been that the risk of underinvestment is greater than the risk of overinvestment. So the latest news shouldn’t be a huge surprise.
It’s also worth noting that it has had some genuine success with its products. Over 4m advertisers now use its AI tools and its AI agents are showing real signs of progress.
The latest news doesn’t mean a crash is coming. But it’s a reminder to be wary of stocks priced as though the good times last forever.
Meta isn’t on my Buy list right now – I’m focusing on other opportunities. And in most cases, those are businesses that don’t need an adjusted depreciation schedule for the numbers to stack up.
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Stephen Wright owns shares in Amazon and Microsoft.
