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Short seller Jim Chanos rolls his eyes at AI hype as Nvidia signals it may sell new shares to eager investors

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Jim Chanos rolled his eyes at a bold claim that investor interest in AI couldn’t be satisfied.

“Wall Street is quite good at creating supply to meet demand,” the famed short seller said.

Nvidia has signaled it may sell up to $10 billion of stocks and other securities to eager investors.

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Jim Chanos took aim at the excessive hype around artificial intelligence on Friday, as investors continue to pile into Nvidia and other technology stocks in the belief they’ll cash in on the disruptive technology.

“There simply is not enough market cap available to support the buying mania for artificial intelligence,” Joseph Zappia, a cochief investment officer at LVW Advisors, told The Wall Street Journal for a recent article.

“Oh boy,” Chanos responded on Twitter. The short seller, known for his bets against Enron and Chinese real estate, added: “Wall Street is quite good at creating supply to meet demand.”

The Chanos & Company boss spoke on Nvidia’s prospective $10 billion sale of new shares and other securities, which the microchip maker reaffirmed last week.

“More AI ‘market cap’ filed Friday. Imagine that,” Chanos said in a follow-up tweet that included a screenshot of Nvidia’s prospectus.

Nvidia’s stock price has soared by more than 160% this year on the back of AI excitement and the company’s powerful second-quarter sales guidance, lifting its market capitalization to nearly $1 billion.

The graphics-chip specialist said the rise in demand for AI juiced demand for its semiconductors last quarter. The news sparked a rally in other chipmaking stocks, including Advanced Micro Devices and Marvell.

Many big-name investors have piled into AI since the eruption of interest in the intelligent-language tool ChatGPT drew traders to the space during the first three months of 2023.

Stanley Druckenmiller and David Tepper both loaded up on Nvidia shares last quarter, while the fellow billionaire Bill Ackman bet on Google’s parent company, Alphabet, as an alternative AI play.

But others – like Chanos – have warned that AI stocks could have seen their value inflated by traders’ expectations that the Federal Reserve will soon pause its interest-rate hiking campaign.

Bank of America said Friday that the AI boom was likely a “baby bubble” that would be popped when the Fed tightened its monetary policy further in a bid to curb soaring prices.

“Don’t chase here… financial conditions are tightening again,” strategists said in a research note, pointing to previous stock-market fads that ended as borrowing costs rose.

Read more: Big-name investors are going all-in on AI

GPT’s reaction to this article:

The article discusses the hype around artificial intelligence and the massive investment in companies such as Nvidia. Jim Chanos, a renowned short seller, believes that Wall Street is good at creating supply to meet demand and that there is not enough market cap available to support the buying mania for AI. He also warns that AI stocks could have seen their value inflated by traders’ expectations that the Federal Reserve will soon pause its interest-rate hiking campaign. Bank of America predicts that the AI boom is likely a “baby bubble” that will be popped when the Fed tightens its monetary policy further in a bid to curb soaring prices.

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