Legendary Short Seller Jim Chanos on Why AI Will Crash

**John Johnston** (0:00)
Hi, everyone, JJ here. Welcome back to The Lounge. Well, today, I want to focus on a legendary short seller, Jim Chanos, who is calling out the AI bubble, and he's been on a few interviews just recently. This one of them, Prof G Markets, where he breaks down why he thinks the.com bubble will come to grief. As a video, another video I've done today, multiple videos today about the wheels coming off the AI bubble, the AI boom. Is that happening? And Jim Chanos lays it out here. Now, who's Jim Chanos? He is legitimately a legendary short seller. He's had problems trying to short SpaceX, well, not SpaceX, Tesla and SpaceX. Now, I think he's short SpaceX because of how kind of ridiculous he thinks that is. But he talks about the AI boom in general. And I'm going to start here with explaining who this guy is, why he's legit and then he talks about various things to do with the bubble. We'll go through a little bit of that. I'm not going to play the whole thing, but I do encourage you again to watch this interview with Jim Chanos if you are interested in this stuff.

**SPEAKER_2** (1:11)
Our guest today is one of the most famous short sellers on Wall Street. Over the years, he's been given nicknames such as the Darth Vader of Wall Street, and also the LeBron James of short selling. He first made a name for himself in 1982, when as a junior analyst, he urged clients to bet against a piano manufacturer that had expanded into insurance. Just months later, the company filed for bankruptcy.
But he is perhaps best known for calling the collapse of Enron before it imploded.

**John Johnston** (1:41)
There, get that? Remember that? That he was responsible for involved in calling out Enron before it collapsed, and now he's calling out the AI bubble. He has had a lot of successes along the way. There was Wirecard, I think, in Germany as well.
But he hasn't had a lot of success in this very bullish market. Short sellers tend to not do well until things turn, and things might be turning. But he does explain some of the reasons here that the AI bubble, he thinks, will come to grief, that it is a bubble and that it is going to get in trouble if not happening already under the surface.

**SPEAKER_2** (2:20)
That cemented his reputation as one of Wall Street's most respected skeptics. Now, he is sounding the alarm once again, this time about AI.
He has argued that today's AI boom may be an even bigger bubble than the.com era. So we wanted to understand why one of Wall Street's most successful contrarian investors thinks the market has become so euphoric and what he believes investors are missing.

**John Johnston** (2:46)
He's not just saying that it's bigger than the.com bubble. He says it's far bigger than the.com bubble.
the.com bubble didn't have economic impact really beyond sort of the tech community or it did, but not as much as say the great financial crisis. But he's saying that this is definitely bigger than the.com bubble. We'll have to see what happens as it unfolds, of course.

**SPEAKER_2** (3:06)
Here is our conversation with the legendary short seller, Jim Chanos. Jim, great to have you on the show. Thank you for joining us. I'm going to start with a simple two part question for you.
Is this market in a bubble? And if so, is it going to pop?

**Jim Chanos** (3:24)
The market is very, very expensive. I learned a long, long time ago, about 40 years ago, when I started my firm, that the market was inherently predictable, but that there were companies and sectors within the market that are often much more predictable. And so I don't know if the market broadly speaking is in a bubble. It's certainly quite expensive as it's expensive as pretty much it's ever been right up there with 1999, 2000, the.com bubble you reference.
But look, I mean, it's been expensive for a number of years. Okay.

**John Johnston** (4:04)
So he's saying the overall market, he's not really willing to say that's in a big bubble. Others are willing to say that, but he is saying that the AI sector definitely is looking at those companies in the sector. And if you look at the charts of things like Micron and Nvidia and others, they have made parabolic moves with a semiconductor index. So XX, have a look at that ticker. It's gone way parabolic. And as Michael Burry, another short seller says, parabolas don't resolve sideways. So both of these guys and others who I will be looking at, George Noble is another one. That other video I made today is about that.