Nvidia’s (NVDA) AI chips have created a brand-new type of debt market, but short seller Jim Chanos is warning that it may be far riskier than it looks. New AI cloud companies, known as “neoclouds,” are taking out huge loans using Nvidia GPUs as collateral, then buying more chips to quickly build out data centers. These firms rent out computing power for training AI models, and according to The Information, four of them now hold more than $20 billion in GPU-backed debt, with Nvidia investing in three of them.
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Chanos, who famously predicted Enron’s collapse, says the problem is that many of these companies still lose money and don’t have a clear path to profitability. That makes it hard to see how they will repay such large loans. CoreWeave (CRWV) and Fluidstack each have roughly $10 billion in GPU-backed debt, while Nvidia-backed Lambda and Crusoe carry $500 million and $425 million, respectively. CoreWeave lost about $65 million in 2024, and Fluidstack lost under $1 million. The other firms’ financials aren’t public.
Another big concern is how quickly the chips may lose value. Most cloud firms assume their GPUs will stay useful for six years, but Amazon (AMZN) recently cut its estimate to five. Chanos says depreciation could be even faster because Nvidia releases more powerful chips every 18 months. If chips become obsolete sooner, neoclouds may not earn enough to cover the cost of their loans, and the value of the chips could fall below what was borrowed against them. If GPUs last only three years, Chanos warned, “the whole economics” of these deals could break down.
Is CRWV Stock a Good Buy?
Turning to Wall Street, analysts have a Moderate Buy consensus rating on CRWV stock based on 12 Buys, 11 Holds, and one Sell assigned in the past three months, as indicated by the graphic below. Furthermore, the average CRWV price target of $148.32 per share implies 99% upside potential.
