Legendary short-seller Jim Chanos has issued a stark warning about the data center investment boom, advising investors to focus on AI model developers rather than the infrastructure companies powering artificial intelligence. Chanos, founder of Kynikos Associates and known for predicting Enron’s collapse, shared his skepticism following Nvidia’s recent $2 billion investment in CoreWeave, an AI infrastructure company that has attracted significant attention despite questions about its profitability.
The veteran investor outlined his concerns in a series of posts on social media platform X, where he questioned whether the data center investment boom represents sustainable growth or merely inflated hype. According to Chanos, companies building data centers should be viewed economically as real estate investment trusts rather than technology firms, a distinction he believes is crucial for understanding their true value.
Why Data Center Investment Faces Scrutiny
Chanos articulated his investment thesis clearly when responding to a user who expressed enthusiasm for AI coding tools. The short-seller recommended owning companies that build AI models rather than those constructing data centers, arguing that model developers represent genuine technology investments while infrastructure companies function more like REITs. This perspective challenges the prevailing narrative that has driven massive capital flows into data center stocks throughout 2024 and into 2025.
The investor specifically cited CoreWeave’s financial statements as evidence supporting his skepticism. He questioned whether the company could achieve profitability even with favorable accounting assumptions, noting that based on annualized third-quarter results, CoreWeave would still report losses using a 10-year depreciation schedule for its GPU hardware. Additionally, he challenged what he described as “wildly bullish claims” from data center companies, urging investors to examine actual fundamentals rather than following AI investment trends blindly.
CoreWeave’s Mixed Financial Performance
CoreWeave’s recent earnings report highlighted the challenges facing data center companies. While the company exceeded Wall Street revenue estimates for the third quarter, it simultaneously scaled back guidance for the coming year and disclosed temporary delays involving a data center partner. These developments underscore the volatility and uncertainty characterizing the AI infrastructure sector, supporting Chanos’s cautious stance on data center investment opportunities.
However, Nvidia’s substantial investment in CoreWeave signals continued confidence from major technology players in the data center buildout. The chip manufacturer’s backing represents a significant endorsement, even as finance professionals debate the sustainability of current valuations and growth projections in the AI infrastructure space.
Broader Concerns About AI Capital Expenditure
This is not the first time Chanos has expressed reservations about the artificial intelligence infrastructure boom. In previous interviews, he highlighted potential risks if companies begin scrutinizing returns on their massive capital expenditures for AI data centers and chips. Meanwhile, the short-seller warned that excessive spending on physical AI infrastructure could create systemic problems if investors and executives pause to evaluate actual economic returns.
In contrast to the optimism pervading much of the technology sector, Chanos’s perspective represents a minority view among market participants. The data center boom has been among the dominant market trends of 2025, as technology companies rushed to build infrastructure supporting their AI ambitions. Nevertheless, his track record of identifying overvalued investments lends credibility to his skeptical analysis of current AI investment strategies.
The investment community will likely continue monitoring data center companies’ financial performance and profitability trajectories in coming quarters. Whether Chanos’s warnings prove prescient or overly cautious remains uncertain, though increased scrutiny of AI infrastructure investments appears inevitable as the sector matures and investors demand clearer paths to sustainable returns.
