Another short seller, Jim Chanos, is flagging the risks in AI debt

December 2, 2025 | Daily JAM, Long Term, Morning Briefing, NVDA, Top 50 Stocks | 1 comment

I take everything from both extreme speculative bulls and extreme negative bears with a grain–or more–of salt. Members of each camp talk their own positions and certainly aren’t above cherry-picking facts to buttress their own views.
But I do take shorts like Jim Chanos very seriously. In his long career on the short side of the market Chanos has proven himself to be a well-informed analyst of company weaknesses and corner-cutting. So I think it’s very important to listen when he has joined his voice to those pointing to serious accounting problems at AI companies and the possibility that those accounting problems could lead some of the huge amount of debt that AI companies have issued this year to blow up. Chanos and other short sellers like Michael Burry have focused on the use of asset backed debt to pay for the huge build out in AI data centers. The problem, these shorts say, is that many of these new AI companies–particularly in the part of AI called “neoclouds–have used assets in the form of Nvidia (NVDA) chips to secure large loans to buy more AI chips to scale up their operations. But, and this is the crux of the shortsellers’ case, they are using unrealistically long schedules to depreciate the value of these assets–5 or 6 years when the life of these technology assets is more like 2 to 3 years.