Market observers are increasingly concerned that an AI bubble is forming on the stock market. Now Jim Chanos has also warned of an enormous risk in this regard.
• Short seller Jim Chanos warns of AI bubble
• Criticism of unrealistic depreciation plans
• Oracle particularly at risk
Since the launch of the chatbot ChatGPT in November 2022, there has been a real AI hype. Many companies want to keep up with such applications, which increases the need for specialized technology in data centers. NVIDIA in particular can benefit greatly from this, because the NVIDIA technologies originally developed for graphics cards have also proven themselves for AI applications. Thanks to its technological lead, the US company was able to become the market leader and now controls around 80 percent of the global market for AI high-performance processors.
But now there are increasing concerns that a huge AI bubble is forming here. As “Benzinga” reports, the legendary short seller Jim Chanos has now joined the ranks of warnings.
Accounting errors in NVIDIA chips
In a recent podcast interview, which can be viewed on YouTube, Chanos warned of a “massive financial risk” arising from incorrect accounting by data center operators. What he is essentially concerned with is the lifespan of the GPUs used, which hyperscalers and neoclouds would typically depreciate over six years.
However, Chanos is of the opinion that NVIDIA’s high pace of innovation causes the hardware to become obsolete much faster and points out that the rental prices for NVIDIA’s “Hopper” chips have fallen by around 28 percent within a year alone as newer models come onto the market. If the economic life of a chip is three or four years instead of six, companies would have to significantly increase their annual depreciation, which would ultimately depress profits, the expert argued.
Oracle is particularly at risk
The danger is particularly great with Oracle because, unlike other tech giants such as Microsoft or Meta, the data center operator is currently not earning the capital costs for its massive AI investments. That’s why Chanos considers the group’s strategy to be a “bet” that leaves little room for error. Because if “the Monetization of AI is pushed back to 2030 or whenever, then Oracle will face fundamental financial problems,” Chanos warned.
Worse than dotcom bubble
The investor considers the current cycle to be even riskier than the dot-com bubble in 1999. While back then it was profitable large corporations that invested in telecommunications equipment, today it is particularly unprofitable startups that are stimulating demand for computers. If venture capital funding dries up or market sentiment shifts, orders from companies like neocloud provider CoreWeave could quickly disappear, leaving them with huge debts and outdated hardware, warns Chanos.
Editorial team finanzen.net
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