AI frenzy won't spark new dot-com boom in tech stocks, Chanos says

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Don't expect the AI frenzy to supercharge tech stocks and spark another dot-com boom, short seller Jim Chanos says

"For those of you that think this is tech's 1995 moment, consider that $CSCO traded at less than 4x its FY 1996 revenues, at the end of 1995," the famed short seller tweeted, using Cisco's ticker. Microsoft and Intel were also valued at less than 6 times and 4 times their respective revenues for 1996 at that time, he noted.on the"AI Gold Rush" published by Wedbush analysts on Monday."We view this as a '1995 Internet Moment' … NOT a 1999 Dot.

The Chanos & Company president's tweet suggests he sees less upside for tech stocks now than in 1995, as valuations are significantly higher today compared to almost 30 years ago. Indeed, Microsoft's current $2.4 trillion market capitalization is more than 12 times the $198 billion of revenue it earned last year. Another big player in AI, Nvidia, commands a $1 trillion market cap - 37 times its $27 billion of revenue last year.

Excitement around AI has helped boost the Nasdaq Composite by 27% this year. Meanwhile, the tech-heavy stock index soared more than six-fold between the start of 1995 and the peak of the dot-com bubble in early 2000. Chanos' tweet signals he's doubtful that tech stocks will keep soaring, as they've already seen an aggressive run up and may have priced in the benefits of AI to their businesses.

The veteran investor, best known for sniffing out fraud at Enron and WorldCom then betting on their stocks to fall, has been openly skeptical about the AI craze and the wider tech boom. For example, his fund held bearish put options on Beyond Meat, Carvana, Nvidia, and dozens of other stocks at the end of March, its

 

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