By Laura Bratton
Publication Date: 2025-12-01 11:00:00
Nvidia’s (NVDA) AI chips have fueled a new debt market, and famed short seller Jim Chanos is flagging its risks.
Emerging AI cloud computing companies looking to rival Big Tech in the market for artificial intelligence have secured large loans backed by the $5 trillion chipmaker’s graphics processing units (GPUs), using that capital to buy more AI chips to scale up their operations. The firms lease space in data centers, fill them with AI hardware, and rent out computing power from that hardware for tech companies to train and run artificial intelligence models.
Four firms in the growing sector — three of which count Nvidia as an investor — have more than $20 billion in debt using Nvidia’s AI chips, or GPUs (graphics processing units) as collateral, the Information reported in July.
Chanos, who is famous for predicting the fall of Enron during the dot-com bust, sees red flags in the rise of GPU-backed debt because the neoclouds securing the loans have no clear path to profitability, making the debt hard to pay back.
“Business models like the neoclouds, a lot of the AI companies themselves … are just loss-making enterprises right now,” Chanos said in an interview with Yahoo Finance last week. “You’ve gotta hope that changes, because if it doesn’t, there’s going to be debt defaults on these things.”
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