Well-known short-seller Jim Chanos has issued a warning that the booming artificial intelligence (AI) market may be close to a major retracement, as the high corporate enthusiasm may not necessarily result in sustainable capital expenditure. Chanos said this live during recording of Bloomberg’s Odd Lots podcast. Chanos compared the current AI craze to the late 1990s dot-com boom, especially the boom and bust of companies like Cisco and Lucent.
Chanos cautioned that if business sentiment shifts or macro pressures rise, AI-related spending from data center infrastructure to semiconductors may dry up quickly. Temporary delays in projects can translate to drops in revenues and earnings rapidly, which will present risks for investors long on unending AI spending.
Chanos Slams Bitcoin Treasury Companies Like MicroStrategy
Chanos also took aim at companies that raise capital purely to invest in Bitcoin, calling them “absurd” financial structures. He specifically criticized Michael Saylor’s MicroStrategy, which holds Bitcoin as a treasury reserve and has a market capitalization exceeding $100 billion, despite holding only $60 billion in BTC.
Saylor has defended MicroStrategy’s valuation by arguing that the company’s ability to raise capital at a premium makes it an effective Bitcoin acquisition engine. But Chanos likens this to financial alchemy with little economic substance.
Chanos Flags Tesla Hype
Jim Chanos described Tesla as, “the ‘hopes and dreams’ stock of the current market – like how Cisco was in the 1999 tech bubble”. He claimed that whatever Elon Musk did or said, investors would still invest in Tesla at a trillion-dollar valuation.
Although he did not specifically forecast a crash, he warned about the excessive hype which he said was caused by AI advancements and crypto enthusiasms. The problem he expressed was eventually the supply chain disruption and the rising tariffs, a softening labour market and the extraordinary valuations would eventually lead to a correction sooner rather than later.
Conclusion
As AI stocks fuel market highs and crypto-linked firms attract outsized valuations, Chanos urges investors to remember the lessons of past bubbles. High expectations, rapid spending, and speculative models may be sustainable in the short term but history suggests that corrections are inevitable.
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