Welcome to the Risk Reversal podcast. I am Dan Nathan. That's Guy Adami.
I'm so excited. Sometimes the stars line up, the moon aligns with Jupiter and Mars, and you have a situation like we're about to have.
By the way, so this is where you usually say, 'Holy [__], we have...'
I don't want to be predictable, but if you... I'll go back and say, no.
All right. Holy [__]. We have Jim Chanos. He is the founder of Chanos & Co. He is not only a friend of the pod, but he's a great friend of ours. Jim, thanks for being here.
Thanks for having me. It's quite the intro. I know now I can't live up to that.
Well, you know, I mean, Guy, don't we usually say, or the media says, famed short seller? Very low bar, Jason.
All right, but here's the thing.
Famed is correct. I mean, you know, Jim does a lot of different things.
100%. And I really love to start by talking about Chanos & Co. for a second. But I just want to... you were last on with us late June. You had a lot of really prescient sort of ideas, and you had a lot of them that you were in the markets with, and so we're going to review some of those. Obviously, these, you know, Bitcoin treasury or crypto treasury things, you were all over that. We're going to kind of break that down, see what you think. We're recording this Thursday, Feb 5th, into the close. I think a lot of folks, if you're listening to this, you know what's been going on over the last couple of weeks. It's been a bloodbath in different parts of the market, and we're going to get your take on all of that. But you also had a lot to say before people were starting to pick apart the AI capex sort of infrastructure, the hyperscaler sort of thing. So we're going to address that because that's, you know, kind of right in the middle of everything. So we got a lot of single-stock stuff to do. We'll talk a little macro, but Jim, I think it'd be helpful to just lay out what you do at Chanos & Co. because Guy and I understand, a lot of your folks in your ecosystem understand, but I think there is often some, you know, whatever you want to call it. You know, the trolls are like, 'Uh, you know, short... I'm a perma-bear, by the way, just so you know.' And so, give us the 411 on Chanos & Co. and how you structure your portfolios.
Well, so first and foremost, it's a family office, number one. But we do have an institutional advisory business where we advise clients on the short side and in hedging, and we do things like tail-risk advisory and lots of other things that all revolve around a core portfolio of companies we still follow. We have 40 companies in our model portfolio. But again, clients are using us basically as either an outsourced seat for hedging or short. And we've been doing it for 40 years: fund business, advisory business, now family office advisory business. And it's really what I've been doing my whole career on Wall Street. So it's a great group of people that work for me, work with me, and we have a great bunch of clients, you know, large institutions that, you know, and some you don't know.
I think that's really important context. You know, and Guy, I think you appreciate this. We talk about this with certain guests all the time. I mean, your transparency is really important. Okay. So, some of the ideas we're going to talk about, you put out into the world. They are timestamped. And I think that is important. And your Twitter feed is a bit of a must-follow.
But Guy and I have been going back and forth enough. Guy, I'd love for you to jump in with Jim. I have the benefit... we are in a... well, you're in that chat, too. It's Vinnie, Porter, Danny, Jim, you, and me. And we have a lot of fun in there. But Guy, mix it up a little bit here, man, because you and I are going off air. I mean, Fast Money, you're going to love this, gone for two weeks during the Olympics. So, you know, this is going to be the...
Women's Curling will certainly have higher ratings, I think.
Be that as it may, Jim. Yes, we're going to be off air for two weeks, and typically some of the most ridiculous things happen when Fast Money goes away. It's happened before.
But going back to what Dan said about, you know, being a famed short seller and your Twitter account and people taking shots, it's easy to be part of the crowd. And the crowd is typically, you know, directionally one way. It's very difficult to be contrarian, and not for the sake of being contrarian, but because you do the rigorous work required to see the potential pitfalls. So speak about that.
Well, first and foremost, I mean, I think, guys, you know, we ran our funds for the most part, and certainly now advisory, you know, hedged, right? So we're long various different indices versus our short portfolio. It's really important to know that. So I think Nathan might be actually more bearish than I am. Therefore...
Because he's directional and we're not directional. You know, we're idiosyncratic, we're episodic in terms of looking for individual ideas that are going to basically bifurcate from the market. And hedging portfolios is, again, the best reason to be short historically, and in our case always was, that you could be long or be more long, and shorting is a way to finance your long portfolio. It's often a little bit more exciting than that when the rubber hits the road, but that's really at the end of the day what it is. And so we're really looking at individual names. That's always been our thing. I have no idea where the market's going. I have no idea where Bitcoin's going, you know, and really are trying to focus just on individual situations where the reality is quite a bit different from the perception.
Yeah. You know, and we spend a lot of time talking about correlations, right? So nobody knows where anything's going, right? But I guess if you're running a directional portfolio and it's fundamentally driven and there's a catalyst, you know, like you got to have a view, right? And so some of the things that I think that some folks are probably ignoring right now, especially if you don't, you know, stare at a fact machine all day as we do. You know, the S&P is 3% from its all-time highs. The NASDAQ 100 is 5% from its all-time highs. You know, you have the semiconductor index that is really just off an all-time high in the last week. It's down 10%. Okay. Well, we could say there's been a lot of excess there and the outperformance has been pretty dramatic. But the software ETF, the IGV, is down 30%. Now, there's a pocket of risk that exists in the private markets like we've never seen before. We're going to get to some of that too with some of the expected IPOs, but a lot of those companies like an OpenAI is driving a lot of the train. And if you see what's going on obviously, or you really drill down on what's going on in software, it happens to be the innovation that's happening in some of those companies, whether it's Anthropic or something like that. When you see this sort of disconnect again within technology, within public and private markets, within the major industries, what does that lead you to believe? Because this is going to be the story at least for the time being as it relates to the markets and how people participate in them.
Well, so one of the things we told our clients, you know, going back to '24 and early '25 was if AI is going to be as disruptive as the bulls think it is going to be, and so far it appears to be the case, then there's going to be another side to that coin, right? There's going to be, just as there was when the internet turned analog businesses into digital, it wiped out a whole, you know, class of companies that couldn't adapt into the new digital age. You know, Blockbuster Video, Yellow Pages, I mean, we can go on and on. Barnes & Noble, we want to do that one. There you go.
And the same thing is inevitably going to happen in the AI phase. And so the market, in its infinite wisdom, finally came about to the idea that in effect corporations are going to be able to write their own programs using AI and not need software as a service. Thus the bloodbath which has been going on since about October. But there's lots of other businesses where that's the case that people haven't thought of yet, where AI is going to just decimate a profit margin or a moat. And I think that if AI is as big as the money being spent on it seems to indicate, you're going to have lots of losers, lots of winners.
Let's drill down on the AI capex because this is something again I think you've been prolific. You've been early about it. I know it was probably not an easy stance to take for a good part of, let's say, the last six months or so, but you've been talking about depreciation of some of the major components that go into the servers that go into the data centers, and you've been talking about access to energy and, you know, a whole host of different things that a lot of people just wanted to believe. And it kind of goes to that question about process that Guy kind of got into a little bit. Just lay it out for us because, you know, we've seen it back and forth just in the last week in the stock market. You know, Meta went up on their capex spend and their monetization. It's an internal thing. They don't have, you know, this cloud business the way AWS or Azure or GCP. And then you see just last night, you see Google go from the prior expectations of $120 billion in capex for '26...
50%, and the stock's fine, you know. And so again, by the time people are listening to this, we're going to know what happened to AWS, but Microsoft last week expected 39% Azure growth year-over-year. It comes in at 38%, stock's down 8% like that. So just walk us through this a little bit and how you think it is likely to play out over the next couple of quarters.
So the thing we've been saying to simplify our thought process on this is if you want to play AI, you want to be long the people who are producing the magic from the chips. You don't want to be long where the chips reside. Okay? So an awful lot of companies are being lumped in that are AI companies that are either simply landlords, they're REITs, or they're equipment lessors like CoreWeave, where they're just simply buying chips and immediately renting them out to a hyperscaler. And so there was a period, it's started to bifurcate now, where all of them were being traded at really premium prices, hyperscalers as well as landlords and equipment lessors.
Now it's begun to bifurcate and people are beginning to realize, well, maybe me renting out an old Bitcoin mine to Microsoft for a 5% return on capital isn't a business I should be paying 50 times cash flow for. And so that's where we are and have been over the past year plus is simply saying, okay, Microsoft will produce what it's going to produce, Meta will produce what it's going to produce, AWS will do the same, Oracle, who knows. But I can't handicap that because we're in such early innings of the magic being produced. What I can do is analyze a REIT and analyze an equipment lessor and just look at, okay, I have an asset, I'm renting it for a contractual rate of return, and the asset will depreciate over so many years.
Up to question, but if I'm really conservative and say, okay, I'm going to have these GPUs, I'll give you a good example, CoreWeave...
CoreWeave, if CoreWeave basically has as its assets GPUs, they rent the capacity for the buildings and the air conditioning and everything else from other people. So they simply buy the chips for someone and rent them right out. If CoreWeave, at least based on the September quarter, if CoreWeave depreciated its GPUs over 10 years, not five, not four, not six, 10, they would be unprofitable. So it's an equipment leasing company with silly accounting. It's not an AI play. It's not a data center.
So, explain this to me like I'm a child. Okay? Because I've been looking at this name. It's got huge customer concentration, right? It's got a [__] ton of debt. The company would not have been able to do their IPO late last March if Nvidia, which was already a shareholder, didn't come in and put an order in. So, the stock, you know, had been floundering for, I think, a lot of the reasons that you kind of laid out. But I think a lot of folks realize that these are going to be the first bag holders if the capex spend slows down, right? And there's not demand for the compute.
I don't know if I'm a bear, I want them to capex for those guys to keep going.
Well, right. And that makes perfect sense. So I guess my question, you know, as it relates to like a CoreWeave, is that Nvidia just invested $2 billion in them. Okay. So we want to get to some of this stuff, too. And the stock rallied for like a day. You remember you're short, and then it's since come in like 25%. So is the market already calling, or investors are already calling [__] on this strategy? They're starting to come around to what you're saying about the depreciation, but they're also, if they're going to remain competitive, they're going to have to buy Rubin and, you know, Blackwell, then Rubin, and then whatever the stupid name is that comes next.
Yeah. So I mean, it's in Nvidia's interest obviously to keep them as a buyer, right? So we get to the whole thing you're implying, the circular finance story. Nvidia is so damn profitable that they have the ability to do this now, right? They may not always have the ability to do this, but they can do it now. They can help support their customers. It doesn't mean that the customers have a good business model. It means that they have someone who can keep financing it, right? So let's understand that. But it doesn't improve Core's returns just because Nvidia keeps writing checks for them to basically buy Nvidia chips. And that's one of the misconceptions that was out there, you know, in the summer and fall as people said, 'Oh, well, they have a backstop.' Yeah, they have a backstop, but it's not a great business.
So I think you have to differentiate when it comes to that. I think, look, the capex, I mean, Google's numbers reported last night before this podcast were stunning, right? The capex is going to be 50% greater than they thought, you know, last quarter for this calendar year. But what was really interesting to me, and I'm in effect long Google because it's in the indices, when I looked at the numbers, one of the things that caught my eye immediately was Google is increasing their capex estimate for 2026 by $60 billion. 2027 estimates for operating income and net income barely budged.
Bad. Yeah, I think so. It means that your return on incremental invested capital is dropping.
100, Jim. I was just going to say it's all about, and this goes back about four minutes ago, it's all about return on invested capital. And for a long time, the market said, you know what, we're not focused on that now. For some reason over the last couple of weeks, in some instances specific stocks longer than that, but the market seems to be focused on, okay, what's your return going to be? And you mentioned there are going to be some winners, and the one that I continue to turn to is Walmart. If you look at Walmart's quarters now, it's probably six or seven quarters of this, you know, their margins have improved, and in large part because of their adoption and integration of AI. But as far as I can tell, there are not a lot of those types of success stories, and it seems like the market's finally starting to lift up its head out of the sand and acknowledge that.
So we looked at the third quarter of all the hyperscalers and we annualized their sort of increase in profitability relative to their increase in capital employed, to basically rate of change divided by rate of change. And the two that are basically earning well above their cost of capital now in the hyperscale space are Microsoft and Meta. Now, Google's numbers last night were pretty good, and Google before was kind of right at their cost of capital, and last night's numbers took a nice step up. So we'll have to see what Amazon looks like and Oracle. But you might be right, Guy. It might be that the profitability is first going to show up in the people who are wisely using this to cut costs or increase productivity. So it might happen at the enterprise level. And by the way, let's not forget that was the biggest source of ultimate return in the internet age. It wasn't the internet infrastructure companies. It was the companies that used the internet wisely, at least at the beginning. And so I think we might see that again. Again, it's in early innings, and AI is moving so fast, we don't know for sure, but I think the companies that are spending lots and lots and lots of money to just build out plant, I think that's where disappointment is going to lie.
Well, let's talk about a company that's not building out plant, but they're giving a trillion and a half dollars of commitments for others to build out plant, right? And build the compute. Let's just call it that, right? And so let's just look at... So in September, OpenAI basically threw out two $300 billion contracts, one to Oracle, right, to build out data centers, and one to AMD to secure, you know, chips and the like, and doing a second source from Nvidia at a time that Nvidia had just committed to invest a hundred billion dollars. I mean, I know it's like you got to keep your brain... it's really hard, it kind of breaks your brain thinking about all this stuff, right? And so Oracle, you know, they didn't have the money. This goes back, I know you agree with a lot of things that come out of Elon Musk's mouth, but do you remember the time, it was like days after the inauguration... You remember Masa and Sam Altman and Larry Ellison? They're in the Oval Office and they're talking about Stargate, right? And they're going to spend half a trillion dollars over four years, good until January, you know, until the end of the first administration. And what did Elon, who was heading up DOGE at the time, he tweeted out, 'They don't have the money.' Do you remember that? Or something to that extent. Okay. So the market came around that Oracle doesn't have the money. Negative free cash flow for the first time since the early '90s. Almost immediately the story starts coming undone, and then we know they're going to have to raise, you know, tens and tens of billions of dollars. And then AMD, the same thing, you know, they got an investment, they got warrants and that sort of thing. So AMD is starting to fill in that gap too from back then. So help us think a little bit about OpenAI and the likelihood that they're able to fulfill a lot of these commitments, you know what I mean? Because isn't that like... forget Nvidia, they've already sold the chips, right? It's the underpinning of what OpenAI is able to do.
And can they monetize it? Right? I mean, they're going to do it. The question is, can they monetize it?
Well, can they do it? Right? So they're out there. They're trying to raise a hundred billion dollars right now. They raised six months ago at a half a trillion. They raised, you know, nine months before that at 250 or something like that. If they can't raise at a meaningful uptick from where they did last time, will they be able to continue to do this?
That, I mean, that's a slightly different question. Can they produce the product? If they can produce the product and investors are enamored with it, they probably can do the raise. If they're falling behind to Gemini and others, then the raise becomes much more difficult. So you've got kind of a paradox here, right? Can they raise enough money to keep ahead of the curve on AI development? And if they can't, do they become an also-ran and then can't raise more money? And then it becomes a, you know...
But the market is saying at least right now, and just going back to Google for a second, you know, you talk about this 50% bump, this is, we're talking about $60 billion, right? Well, they are able to fund a lot of that with cash flow.
They can still, still positive cash flow. And by the way, they've doubled MAUs in the last year for Gemini. You know, and they're right behind OpenAI. OpenAI had a first-mover sort of thing. And then they're going to be, you know, placing ads on those queries. They're going to be able to monetize it really well. So I think it's hard. I don't mean to be too negative on OpenAI, but it's hard to see how at some point when Google takes, you know, the lead, that OpenAI is able to catch them.
Yeah. Well, again, we'll have to see. I'm placing my bets, if you will, you know, much further down the food chain in the guys who are basically landlords. Because I can't handicap the AI, you know, going from AI to AGI horse race better than other people.
Guy, are you more focused on AGI or superintelligence? Where do you see?
I mean, I am fascinated by it all. And I had my ChatGPT up the other day and I asked that specific question and it's still trying to come up with a response. It's such a difficult question. But let me ask Jim the following. Obviously, it's hard to get a handle on these private companies, mark-to-market, and where they are and what they're winning, what they're losing, those types of things. But you could see it through the lens of some of these private equity firms that are actually publicly traded. And I ask you that, are names like, and I'm not specifically talking about these names so long or short, but are names like Apollo, have they been trying to tell you something basically since, I don't know, the fall of 2024? If you go back to like January of '25, December of '24, when these stocks made their all-time high. That was seemingly when a lot of these private equity firms sort of went in with both feet, and now they're starting to pay the price with going in with both feet.
Yeah. I mean, I think that what's going on there is a lot more nuanced because it's not just software investments, but it's more broadly the fact that private equity returns relative to public market returns have been basically converging. And we've been talking about that with clients for the better part of 10 years now, that private equity was kind of too good to be true for years and years and years. You were basically buying leveraged equity and with lots and lots of fees, and in an auction process in which you bid for a company in the public markets typically up 20 or 40% and then allowed other people to outbid you if in fact you had uncovered some gem. Really hard to beat efficiency in the markets if you do that and then charge lots of fees on top of it. And so they benefited from what Cliff Asness said is volatility laundering and lots of other things. But now the math is just continuing to work against them. So you've got diversification into other areas, but I'm just not so sure that some of that diversification was as smart.
The other problem you have, all of this is happening with credit spreads at pretty much all-time lows, right? You know, and so just in the debt markets, people just have not bifurcated risk a lot. And I think that's a shoe, if you want to talk about a macro idea that nobody's worried about, that could come out of left field, is that spreads begin to widen out. If that happens, equities will reprice almost across the board, but an awful lot of business models might just blow up.
Well, yeah, but let's talk about that. That's really important and we're just starting to see some people talk about it. I mean, the correlations between the equity and debt markets are increasing, right? And so because you're seeing that a lot of this investment-grade debt is finding itself into these portfolios and they're becoming bigger and bigger as it relates to AI, and I kind of wanted to go there. So this Hyperion data center in Louisiana, I know that you've looked at this, right? And so Meta wants to build this thing out, but they don't want to actually fund it.
They want to Enron it. They want to ensure...
I'm going where you're going. All right. So they do this joint venture with Blue Owl, who raises the money from, you know, some of the big banks or KKR, right? And I'm sure the banks are on the hook for capital to KKR, right? And so Meta, they're building this thing out. It's primarily off balance sheet. They own 20% of it. They have four-year, you know, like these cliffs where they can get out of it or something. Just explain that a little bit and the importance of it because I think a lot of investors, you know, are not paying attention to this. We just talked about how Google and Microsoft can finance this stuff. Well, why can't Meta? And why are they going to these great lengths to do this sort of deal?
Well, they can, but the rule of thumb in my world is if a company jumps through about eight hoops to get something off its balance sheet and not show you what it's doing, there's generally a reason for that. And so again, I think that they're worried about showing too much leverage or, you know, back to Guy's point, a low return on invested capital and actually owning the assets as opposed to renting the assets or generating software returns on them. You know, there's probably a myriad of reasons why they're doing it. And so I think that it's why Microsoft is doing deals with Bitcoin miners to rent capacity. Microsoft can do it themselves. They just don't want the hard assets on their balance sheet. I find it interesting that probably the two most in-tune profitable enterprises so far in AI, which are Nvidia and Microsoft, are both going out of their way to get chips off their financial statements.
And so I think that these deals have to be scrutinized. Any good analyst should consolidate them at the right proportions and figure out profitability. And the fact that they're using a cutout like Blue Owl is just, in my opinion, not a good sign.
Jim, let's stay with this for a second in terms of what you just mentioned. You said that if things start to move in the credit world, which they haven't yet, it's going to be a repricing across the entire market. So people are listening to this, probably nodding their head, but they're also saying, 'Well, how do I know that that's happening?' What do you look for? What do you see? Is there an instrument, security, ETF that you watch?
I mean, we look at the same things a lot of credit analysts would look at. We look at credit spreads, you know, AAA to BAA, BAA to Treasuries. We watch the securitization market. We're short a lot of companies that are highly dependent upon the securitization market. And so far, you know, everything is fine. Nobody cares on some of this stuff. And yet when it happens, everybody forgets how fast it can unwind. You know, for example, at the individual company level, a number of shorts in the solar area completely vaporized almost overnight when they were shut out of the ABS market, the asset-backed securities market. They couldn't sell the solar lease debt back into the market. And since they were all running such negative cash flow, once that market shut down, they all blew up. If you look at the used car market, the entire used car market was the first subprime blowup back in 1997, 1998, when credit spreads blew out due to Asia and Russia and Long-Term Capital Management, and all these companies that existed that were financing low-credit car buyers vaporized in the space of 12 months, including the predecessor of Carvana.
So DriveTime, which was at the time called Ugly Duckling. And so, you know, again, people forget that when you're wholly reliant on third-party financing through securitizations and that's your entire business model, you are really at a knife's edge if credit markets blow out and ABS buyers pull away from the market. And by the way, there was another example of that in '07, '08, and we ended up in the global financial crisis because that's what was happening in mortgages.
So another crisis that appears to be global right here, and you've been talking about this very publicly for a while, are these crypto treasury companies, right? And if you're listening to this, Jim just... well, you heard the snicker, but the facial gesture was pretty funny. So, you know, you don't just kind of find your way into these sorts of things because for shits and giggles, right? You do your work. And this... so you've been talking to us about MicroStrategy in particular, and, you know, at the depths of COVID, Michael Saylor, and you guys have all heard the story, right? Like decides a whole host of things about the balance sheet for his software company, the value of the dollar. He gets religion about Bitcoin. He's obviously very committed. He attracts, maybe a dozen, even Elon Musk started putting Bitcoin right on Tesla's balance sheet, and it was a good one-way trade for a while, right? And so just describe what the structure is of this whole idea, how you thought it was going to play out. You put, and you said this to us in June, and you had done this months and months earlier. You basically said, 'I put the same trade on as Michael Saylor did. I sold a stock and I bought Bitcoin.' Okay. So describe a little bit about, A, what the impetus was, and B, what the structure that you saw presented an opportunity, and then how did it shake out for you?
So it's really important to remember, and I think I said so to you guys in June, we were Bitcoin price agnostic. I have no idea what it's worth. Nor does anybody else. But what I do have a pretty strong opinion on is that when the market gives you the ability to sell $1 for $2 or $5, you should take a look at that. And historically, those kinds of arbitrages don't last long or are really not investable. One side of the trade, typically the short, you can't borrow because other people have the same idea, and consequently it's an academic exercise.
In the case of the Bitcoin treasury stocks, it wasn't an academic exercise. In fact, in my 40 years, I've never seen anything like it. The arbitrage between MicroStrategy's Bitcoin holdings and the value of the stock, I think at one point almost got to $100 billion. I think it was 80, 90 billion at its peak.
And not only could you do the trade, you could do the trade in whatever size you wanted to. The short was so-called general collateral, so you actually earned interest on the short side of the component. But what was most remarkable of all, and again we talked about it in June, was you had the companies themselves helping close the gap, right? They were selling stock as fast as they could to buy the underlying asset. So they were doing the same trade you were, and they were basically on the same side of the trade as you were, and they were doing it billions of dollars a week. Again, I've never seen a setup like that. We called it our big short of 2025 because it's just rare that you get a convergence of all of those factors: silly structure, doable with incredible amounts of liquidity, and a catalyst by the companies themselves helping you. They were accelerating it for you. They were basically giving you the roadmap, and they were accelerating it, and you just had to sort of get... it's like you're drafting in a bike race. You know, you get behind the lead bike and they pull you along. And I think that's what was going on here.
So Jim, let me ask you this question. I have thought, and I'm not suggesting I'm right, it's my view that a lot of people, a lot of the crypto enthusiasts, the overlap between those investors and those groups with the AI, semi, high-valuation, high-growth tech names is substantial. And that if Bitcoin did what I think it would do, which was go to the average price that MicroStrategy owned their Bitcoin, which was 76,000. By the way, as we're sitting here, Bitcoin is either side of 65,000, that some bad things would start to happen in the broader market. And to a certain extent that's playing out. Is that sort of... do you think about it that way? Is that something that makes sense to you?
Just observationally, Guy? I mean, we were... before we started the cast, Dan and I were chatting, and, you know, to me, the price of Bitcoin is a retail barometer. Even though there are more institutions in it than, you know, there were before, it's still basically to me a retail risk-on, risk-off barometer. So I think it's concurrent with what's going on. It may be leading it slightly, but it's a barometer of how the average retail investor is feeling. And clearly in the last handful of weeks, they're not feeling well. I don't know if I could impugn anything beyond that to it. But it does seem to me to be, and certainly by the amount of people, you know, trolling me and threatening me on my Twitter feeds, it seems to be a sore spot. But I'm Bitcoin price agnostic. I have no idea where it's going to trade, what it's worth, and don't play that game.
From a sentiment standpoint. Obviously, you know, we talked about you're a prolific tweeter, and you have been for a long time. You know, I'm not on Twitter. I haven't been, you know, in a couple of years. And I remember what it was like in '21 with memecoins and SPACs and crypto and NFTs and all that [__]. It was a bit of a, like a, I don't know, cesspool back then. Is it... does it remain that way? Like...
I think it's worse. I think it's worse today. I don't know that the speculation in '25 was as bad as '21. '21 was kind of the craziest thing I've ever seen. You know, people paying $3 million for digital apes. But...
But in terms of the amount of retail participation, maybe not pricing, but in terms of broad retail participation of people, by the way, who in many cases have no idea what they're doing.
You can just tell by the quality of what I see out there. It's greater than 2021, and I think the numbers back that up. If you look at option trading, retail flows, and...
Well, the ODT, that stuff is absolutely...
Well, look at Robinhood's makeup of its business. I mean, they give you really good granular monthly data.
Yeah, well, we'll talk about that because at your big short conference in November or early December, you laid out...
It's not called the Big Short. What is it called?
We call it Bears in Hibernation.
Bears in Hibernation, which is much more accurate.
Well, I know Danny, and Danny was there, and I think maybe he just made his own moniker for it. And you did lay out a short, much higher obviously, in Robinhood. But I want to drill down for a second here. So we just talked about some of the speculation. We talked about the way retail is probably losing money in this sort of thing because it wasn't that they were just buying Bitcoin and other coins. They were buying MicroStrategy. They believed in Michael Saylor, and he became this like kind of, you know, godlike figure in the ether, you know what I mean?
And they were buying the Bitcoin treasury companies. Yeah.
Yeah. And so when I think about it now, we have SPACs coming out. I just read, you're going to love this SPAC. It's called Columbia Acquisition 3. They just did this. This is from 1789, which is one of the Trump kids. Laura Ingraham is on the board. They raised 200... Oh, and Chamath is on the board. $260 million, and they're going to probably go out and buy some piece of... and the SPAC's going to go to zero. I mean, like, but think about it. How many of Chamath's SPACs went to zero the first time around, right? And I think it's the number, maybe you have the data, 80-some percent of the SPACs that came out in 2020 and '21 and early...
Or close. Yeah, went down quite...
Like low. We can't even say a high side. Low, low single digits. So, you know, IPOs. All right. And let's talk about this because, you know, supposedly we're going to have trillion-dollar market cap IPOs, low floats, I'm sure, that sort of thing. So...
Let's talk about that. If you can't bring them now, I don't know when the hell you're going to bring them.
Well, I think so. Issuance is a big friend of the bears. So during the SPAC period, we've talked about 2021. One of the things that kind of set alarm bells off for us was that in February of 2021, SPACs were raising two to three billion dollars a night, you know, for three, four nights a week. And it worked out, if you did the math, it worked out to 100% of the US savings rate was going into SPACs that month.
You laugh, but I mean, you know, I kind of pointed out at the time, and people were like, yeah, you know, shut up, bear, and go back in hibernation.
Yeah. And we had issuance really throughout the first half of that entire year, you know, on the back of meme stocks and SPACs and NFTs. And so far, in the run from, you know, '23 to '25, we didn't see monster amounts of issuance. But that may be about to change because now you're talking about these monster IPOs that are, you know, waiting in the wings. Seems like Elon Musk can't get SpaceX out fast enough based on what we're hearing today about him trying to get a stock symbol and fast-tracked into indices. So we're going to see issuance, it looks like, unless the market keeps dropping, that will, you know, start to echo 2021's issuance. And that's just not a good sign for investors.
You mentioned issuance is the friend of the bears.
All right. So, you know, we know there's a whole list, right? So, you know, Sam Altman wants to beat Anthropic, right? Obviously, Elon wants to beat them all. We know there's Databricks. There's, you know, Stripe. There's a whole host of others that have literally, you know, operating very well. Databricks and Stripe and there's a few others, right? But let's kind of drill down for a second on Elon and his motivations. Like, it probably didn't surprise you that he announced that, you know, SpaceX was going to buy xAI, right? I don't know why this headline came out. It was like almost seemed like there was a dual track. Maybe SpaceX or Tesla, you know what I mean, was going to buy xAI. So I don't know if that complicates the story, makes it simpler, adds to the valuation, whatever it is. xAI is losing what, a billion dollars a month or something like that. So I can't imagine that's particularly helpful. What do you think's going on with...
And then we floated, don't forget, we floated data centers in space.
Okay. Well, and we're going to... we're all right. So that's why I was actually going with... Okay, so xAI is, of course, part of SpaceX because of... and then that kind of made it out there. So that's kind of attached to each other. I have a follow-up, Mr. Chanos, but hit all that for me.
Well, I mean, clearly it seems to me that the grand plan in the Elon sphere is to get SpaceX public as fast as they can.
And so when we started to see the data centers in space story, like, okay, here we go. And then that made the justification for them, SpaceX, to buy xAI and wrap it all up in one great big narrative because, as you know, with Elon, it's all about the narrative.
And he owns, I think, about 40, 50% more. Yeah. But he owns more of xAI proportionally, right? So this was a good deal for him. But, you know, then the other, you know, dare I say, cynical part of me said, oh, maybe there's some other reasons that Elon wants to divert attention away from certain things, right?
So I think that we're watching it like everybody else. I think that the whole data centers in space, and I put a tweet out sarcastically a few days ago that people jumped on incorrectly, saying, well, if you know there's going to be data centers in space, all of this stuff that we're building, you know, on Earth is going to be worthless. And people, oh my God, he thinks it's all going to be worthless. What did I say to you at the time? It's like, we really need a sarcasm font.
And because we're not going to be building data centers in space anytime soon. And so the whole thing was literally sarcastic, but it didn't come across that way apparently because the 8,000 trolls that jumped down my throat about that. Oh, now you believe...
I think you retweeted this. It was out at Cisco's AI conference, and the head of AWS was there, and he said, 'Yeah, we're ways off.'
Yes, for lots of reasons, not the least of which is launch costs, redundancy, insurance. I mean, this is, you know, this is silly.
Six months ago when you were on, we had a quick conversation about Tesla. You know, I think we all agree that the bulls and bears, for the first time in Tesla, agree on one thing: that their EV business is horrible.
