Short Seller Jim Chanos Betting Against This Booming Tech Sector: 'This Is Our Big Short'

Zinger Key Points
  • Chanos points to competition for data centers coming from their current customers.
  • The investor is up around 30% in 2022 according to the report, citing a fall in Coinbase and online used car company Carvana.

Famed short seller Jim Chanos has a new industry he’s targeting with bets against a high growth area. Here’s why, despite the growing industry, Chanos sees pain for the market leaders.

What Happened: Chanos is getting ready to place a big bet against data centers, according to a report from The Financial Times.

Chanos is seeking to raise “several hundred million dollars” for a fund that would go short in several U.S. listed real estate investment trusts in the data center market.

“This is our big short right now,” Chanos said. “The story is that although the cloud is growing, the cloud is their enemy, not their business. Value is accruing to the cloud companies, not the bricks-and-mortar legacy data centers.”

Mentioned in the article are Digital Realty Trust DLR and Equinix EQIX.

Chanos doesn’t see growth of data centers slowing down, instead citing customers of data centers building their own data centers in the future.

“The real problem for data center REITs is technical obsolescence. Their three biggest customers are becoming their biggest competitors. And when your biggest competitors are three of the most vicious competitors in the world than you have a problem.”

Chanos names Amazon.com Inc AMZN, Alphabet Inc GOOGGOOGL and Microsoft MST as the three biggest cloud providers and companies that could build their own data centers.

The short seller also calls the data center REITs overvalued and says they could see declining revenue and earnings growth.

Related Link: Famed Short Seller Jim Chanos Targets Coinbase 

Why It’s Important: Chanos has often bet against stocks or sectors and has had a series of wins in his short picks. The investor is best known for predicting the collapse of Enron previously.

Chanos also made $100 million from shorting payments company Wirecard in 2020, before the company filed for bankruptcy.

One short position that didn’t work out as well for Chanos was one in Tesla Inc TSLA, a stock that is up since Chanos shorted it.

A more high profile short position in 2022 was Chanos calling out the valuation of Coinbase Global COIN.

Chanos has compared the current stock market to “the dotcom era on steroids.”

The investor is up around 30% in 2022 according to the report, citing a fall in Coinbase and online used car company Carvana CVNA.

Chanos calls it a great time for short sellers.

“We’ll be feasting on the returns of these stock ideas for years – very similar to the post-dotcom era.”

Photo: Created with an image from Asia Society on flickr

Posted In: Amazon Web ServicesData Center REITsdata centersGoogle CloudJim ChanosMicrosoft AzurereitsShort Sellershort sellingNewsShort SellersShort IdeasTrading Ideas

Ad Disclosure: The rate information is obtained by Bankrate from the listed institutions. Bankrate cannot guaranty the accuracy or availability of any rates shown above. Institutions may have different rates on their own websites than those posted on Bankrate.com. The listings that appear on this page are from companies from which this website receives compensation, which may impact how, where, and in what order products appear. This table does not include all companies or all available products.

All rates are subject to change without notice and may vary depending on location. These quotes are from banks, thrifts, and credit unions, some of whom have paid for a link to their own Web site where you can find additional information. Those with a paid link are our Advertisers. Those without a paid link are listings we obtain to improve the consumer shopping experience and are not Advertisers. To receive the Bankrate.com rate from an Advertiser, please identify yourself as a Bankrate customer. Bank and thrift deposits are insured by the Federal Deposit Insurance Corp. Credit union deposits are insured by the National Credit Union Administration.

Consumer Satisfaction: Bankrate attempts to verify the accuracy and availability of its Advertisers' terms through its quality assurance process and requires Advertisers to agree to our Terms and Conditions and to adhere to our Quality Control Program. If you believe that you have received an inaccurate quote or are otherwise not satisfied with the services provided to you by the institution you choose, please click here.

Rate collection and criteria: Click here for more information on rate collection and criteria.