The Depreciation Monster Haunting AI Data Center Profits
Nebius is one of the healthier publicly traded AI data centers companies. Nonetheless, its 2Q2026 income statement illustrates the industry's depreciation challenge. Despite Nebius linearly depreciating GPUs and other server hardware over a generous five years, total depreciation equals 48% of revenues. This figure underestimates true depreciation because technological change and physical burn out means the true average life span is closer to three years. Facebook has provided detailed data on equipment failure during its 56 day estimation of the Llama 3.0 frontier model: https://ai.meta.com/research/publications/the-llama-3-herd-of-models/ . For a 100,000 GPU cluster, equipment failure happens every 30 to 40 minutes. This halts estimation and requires starting over from the previous iteration. Almost all publicly AI data centers exaggerate their profitability and net cash flows by pretending the server hardware lasts 60% longer than it is really does. Michael Burry, who success...
