Legendary short-seller Jim Chanos is sounding the alarm on the AI infrastructure boom, warning that a critical accounting oversight regarding Nvidia Corp. (NASDAQ:NVDA) chips creates a “massive financial risk” for the sector's aggressive spenders.
Depreciation Trap
In a recent podcast interview, Chanos argued that data center operators, specifically Oracle Corp. (NYSE:ORCL) and “neocloud” provider CoreWeave Inc. (NASDAQ:CRWV), are overstating their future profitability by relying on unrealistic depreciation schedules for their artificial intelligence (AI) hardware.
The core of Chanos' bearish thesis is the estimated lifespan of the graphics processing units (GPUs) powering the AI revolution.
While hyperscalers and neoclouds typically depreciate these expensive assets over six years, Chanos contends that the relentless pace of Nvidia's innovation renders them obsolete much faster.
He noted that rental rates for Nvidia's “Hopper” chips have already plummeted roughly 28% year-over-year as newer models enter the market. If the useful economic life of a chip is closer to three or four years rather than six, companies must drastically increase their annual depreciation expenses, which would crush reported earnings.
“If the chips last for three years, you have to depreciate a third of what you spend,” Chanos explained. “That's the bet you have to make if you're a CoreWeave investor.”
Benzinga reached out to Nvidia for comment on Chanos’ claims regarding GPU depreciation schedules and the useful life of its chips, but had not received a response at the time of publication.
See Also: Nvidia CEO Jensen Huang’s Joke Sparks Concerns Over Rapid Depreciation Of AI Chips
Oracle's ‘Fundamental' Problem
Chanos singled out Oracle as the most vulnerable among the tech giants. He noted that, unlike Microsoft Corp. (NASDAQ:MSFT) or Meta Platforms Inc. (NASDAQ:META), Oracle is not currently earning its cost of capital on its massive AI investments.
He described the company's aggressive spending spree as a “bet the company” strategy that leaves little room for error.
“If AI monetization gets pushed out… to 2030 or whenever, then Oracle will have fundamental financial problems,” Chanos warned.
Worse Than 1999
The investor views the current cycle as potentially riskier than the Dotcom bubble. In the late 1990s, the companies buying telecom equipment were profitable giants like General Electric Co. (NYSE:GE) and AT&T Inc. (NYSE:T).
Today, the primary customers driving demand for compute—startups like OpenAI and Anthropic—are burning cash.
If venture capital funding dries up or sentiment shifts, Chanos predicts the order books for companies like CoreWeave could evaporate quickly, leaving them with massive debts and obsolete hardware.
NVDA Outperforms The Market In 2025
While NVDA’s shares have advanced by 27.46% year-to-date, the Nasdaq 10 has delivered 19.51% returns in the same period.
On Monday, Nvidia’s shares closed 0.73% higher at $176.29 apiece. The stock has advanced by 21.84% over the last six months and dropped 5.53% in the last month.
It maintains a weaker price trend over the short and medium terms but a strong trend in the long term, with a poor value ranking. Additional performance details, as per Benzinga's Edge Stock Rankings, are available here.
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Disclaimer: This content was partially produced with the help of AI tools and was reviewed and published by Benzinga editors.
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