MW This famed short-seller explains why he's doubling down on his bet against data centers
By Barbara Kollmeyer
Jim Chanos says the money will come from what the chips produce, not where they reside
Data centers could spell doom for the AI investment story, warns Jim Chanos.
Investors continue to push doubts to the surface over AI bets paying off into year-end.
Among those with strong views on that theme is prominent investment manager Jim Chanos, best known for past short selling bets on Enron and Tesla. In a podcast interview with Monetary Matters with Jack Farley, Chanos discussed why he thinks dot-com bust 2.0 could be coming as he explained one bearish bet he's doubling down on.
The investor placed a big short bet on legacy data centers in 2022, describing the old cloud data center business as "crummy," with a "very low return on capital business, highly capital intensive."
Chanos said he's even less convinced on the newest version of data centers - those that host GPUs, or rent out computing power to AI companies. "It's basically a commodity business, particularly as everybody's building them. And our view to clients has been the magic and the money is going to come from what the chips produce ultimately, not where they reside," he said.
Investors wanting to make AI bets should stick to pure AI titans like OpenAI, xAI, Anthropic, or hyperscalers, he said. "But investing in bitcoin miners that are converting to data center companies or me-too companies that are jumping on the so-called neoclouds, which are basically just landlords, to me seems problematic for two reasons," he said.
Chanos mentioned CoreWeave (CRWV) by name while bitcoin miners-turned-data-center companies include Iren $(IREN)$ and Cipher Mining $(CIFR)$.
The first is that hosting GPUs is a low -margin, low-return on capital business, and the second is any data center buying the GPUs themselves must be making a bet on depreciation, he said. Chanos' own estimate is that those GPUs could end up obsolete or not fast enough for clients within five years. Hedge fund founder Harris Kupperman and "Big Short" investor Michael Burry have also delivered strong warnings on GPU depreciation.
Chanos said that among the big hyperscalers building out their data centers - such as Microsoft $(MSFT)$, Meta Platforms (META), Oracle $(ORCL)$ and Amazon (AMZN) - the first two will be able to finance that from their cash flows, but the rest "will need external financing."
The overriding AI bet is the technology will hit an inflection point in 2027 or 2028 and profits will flow. Oracle and Amazon have shown an inability thus far to monetize those big investments in AI, equipment, hardware and locations, and that's one reason he's short on Oracle.
Read: Why Oracle's stock - and its bonds - can't shake off AI spending fears
He added that many big hyperscalers want to get the data-center business off their own balance sheets and just lease from someone else. "The bet is you're buying these things and leasing them out and that five or six years is actually too conservative, you'll be able to earn money on them for 10 or 12 years," he said.
Chanos said the data-center world is going to shrink as just a handful will be needed and makes the scenario look "a lot like 1999 and 2000."
He warns that a credit crunch or pullback in sentiment such as seen the early 2000s would see a lot of that spending by those companies drop fairly fast. "The risk levels for all these companies are much higher than they were five or 10 years ago," he said.
The markets
U.S. stock futures (ES00) (YM00) (NQ00) are trading lower led by tech ahead of an onslaught of data. Silver (SI00) and gold (GC00) are also weakening.
Key asset performance Last 5d 1m YTD 1y S&P 500 6816.51 -0.35% 3.01% 15.89% 12.66% Nasdaq Composite 23,057.41 -2.20% 2.78% 19.40% 14.66% 10-year Treasury 4.171 -1.90 5.80 -40.50 -23.40 Gold 4310.7 2.15% 6.56% 63.33% 61.44% Oil 56.46 -4.06% -5.46% -21.44% -20.07% Data: MarketWatch. Treasury yields change expressed in basis points
The buzz
U.S nonfarm payrolls for November are due at 8:30 a.m., with jobs growth of 45,000 forecast. October retail sales are coming at the same time, followed by the S&P flash U.S. services and manufacturing purchasing managers indexes for December at 9:45 a.m.
Ford $(F)$ will take a $19.5 billion charge as it shifts focus to hybrids, cuts EV investments and halts the electric F-150.
Lennar $(LEN)$ earnings are coming after the close.
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The chart
Yardeni Research says this chart of Brent oil (BRN00) bears watching, as the commodity trades below $60 a barrel. "Why does that matter? From a technical perspective, it might signal a significant break below a triangular consolidation pattern, similar to what happened in 2014 and again in 2020," said Yardeni. Down 18% so far this year, ample crude supply, with demand flat and production rising have weighed on Brent.
Top tickers
These were the top-searched tickers on MarketWatch as of 6 a.m.:
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-Barbara Kollmeyer
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December 16, 2025 07:09 ET (12:09 GMT)
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