Well-known short seller Jim Chanos is drawing a red line under the AI trade, warning that data center operators powering the boom are now valued like the technology giants they supply.
In a new post on X, Chanos says the economics of AI infrastructure are being stretched to the point where even aggressive accounting assumptions suggest “landlords” like CoreWeave (CRWV) are barely making money.
According to Chanos, CoreWeave’s economics reveal the pressures underneath the AI buildout.
“As the AI DC bulls now try to convince you to extend depreciable lives on GPUs today, consider this: CRWV’s 3Q annualized Adj EBITDA was $3.4 billion and annualized interest was $1.2 billion. Using 10-year life(!) on their $20.0 billion of est. GPUs ($2.0 billion) means they are still barely profitable.”
Chanos says the divergence between the companies selling the AI chips like Nvidia (NVDA) and the firms financing the facilities to run them, or landlords, has become increasingly stark.
“I’m just pointing out that the landlords are trading at similar/higher economic valuations than the actual AI hardware/software companies themselves.”
He notes that the capital deployed in the AI infrastructure race is overwhelmingly tied to GPUs, making long depreciation timelines a risky bet.
“At 9/30, CRWV had employed capital of roughly $25 billion. Based on the notes to the financial statements as of 6/30, the vast majority (90%) of the property, plant and equipment (PP&E) in service, construction-in-progress, operating leases and pre-paid (capitalized) expenses…were for GPUs.”
On Monday, “Big Short” investor Michael Burry flagged a similar risk in the AI buildout, noting that hyperscalers were stretching the depreciation timelines of AI chips and servers. Earlier this month, news surfaced that Burry had placed $186.58 million worth of Nvidia puts last quarter, speculating that NVDA and the AI trade would collapse.
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