Famed short seller Jim Chanos sees risks in growing debt market backed by Nvidia’s AI chips: 'There's going to be debt defaults'

Core Viewpoint - Nvidia's AI chips are driving a new debt market, with concerns raised by short seller Jim Chanos regarding the risks associated with GPU-backed debt [1][3]. Group 1: Debt Market and Financing Trends - Emerging AI cloud computing companies are securing large loans backed by Nvidia's GPUs, using this capital to purchase more AI chips and scale operations [2]. - Four firms in this sector have accumulated over $20 billion in debt using Nvidia's GPUs as collateral, raising concerns about their profitability and ability to repay the debt [3][6]. - The financing trend, initiated by CoreWeave, represents a form of asset-based lending, allowing loss-making companies to use their assets as collateral to access capital [4]. Group 2: Company Performance and Risks - CoreWeave and Fluidstack each have approximately $10 billion in GPU-backed debt, while Lambda and Crusoe have $500 million and $425 million, respectively [6]. - CoreWeave reported a loss of around $65 million in 2024, while Fluidstack's loss was less than $1 million during the same year [7]. - A significant risk in AI chip-backed debt is the potential rapid depreciation of Nvidia's GPUs, which may not be accurately accounted for by the companies [7].