Chanos bluntly stated that SpaceX's valuation of $1.75 trillion is filled with blind enthusiasm for grand narratives in a bull market, completely detached from reality. However, when asked whether he would short the stock directly, he did not give a clear answer.

Source: Jin Ten Data

SpaceX is about to conduct its initial public offering (IPO), but market divisions are intensifying. Jim Chanos, a notable short-seller and founder of Kynikos Associates, publicly questioned the valuation foundation of the company, believing it relies more on "hope and dreams," making it difficult to support the current pricing level.

According to the issuance arrangement, SpaceX plans to be listed on Friday local time, aiming to raise $75 billion at a valuation of $1.75 trillion. This scale would set a global IPO record, nearly three times the size of Saudi Aramco's listing in 2019.

Chanos stated at the iConnections conference held in New York on Wednesday: "In my view, based on any reasonable assumptions over the next five years, this company is not worth $1.75 trillion."

He believes that grand narratives surrounding Mars colonization, underground tunnel networks, and space data centers are used to support the high valuation and pointed out: "We can completely fabricate any grand narrative we want—Mars colonies, underground factory tunnels, space data centers—to justify this valuation. In a bull market, people will pay a premium for promises; in a bear market, people will heavily discount reality."

Chanos is known for successfully predicting the collapse of Enron in 2001 and profiting from it, making him one of the most representative short-sellers on Wall Street.

Bearish but not shorting

The doubts about the $1.75 trillion target valuation and concerns about corporate governance have caused some analysts to view SpaceX as a potential shorting candidate. However, several short-sellers have not taken immediate action but have chosen to wait and see.

This cautious attitude is related to the high risks of shorting large tech companies in recent years. As several trillion-dollar tech companies continue to rise (with SpaceX also believed to potentially join this camp), short trades have faced severe setbacks. When asked if he would short SpaceX directly, Chanos similarly did not give a clear affirmative operational stance.

Taking Tesla, which is under Musk, as an example, investors shorting the company have long endured significant losses. According to data from S3 Partners, since June 2021, Tesla short sellers have accumulated paper losses of $27 billion, which includes direct shorts on the stock and hedging positions due to its inclusion in the S&P 500 index. Over a longer period, the stock has gained over 2500% in the last decade.

Nevertheless, Chanos emphasized that SpaceX is "entirely different" from Tesla. He pointed out that SpaceX's current valuation is about 90 times its sales, while Tesla's price-to-sales ratio is around 14 times, showing a significant gap between the two.

Questions on the data center business model

At the same conference, Chanos also criticized the data center industry. He believes the capital returns in this field are only in the low single digits, making it a "bad business."

Since 2022, Chanos has held a bearish stance on data center operators. He stated that these companies, whether traditional operators or emerging cloud service providers, are essentially closer to real estate investment trusts (REITs) or equipment leasing companies rather than high-growth tech firms.

He pointed out that these companies typically purchase high-end chips from suppliers like NVIDIA (NVDA) and then lease computing power to hyperscale cloud computing customers, thereby facing significant depreciation pressure while lacking pricing power.

Chanos further stated that these companies are fundamentally price takers, and thus their valuations should not exceed those of semiconductor manufacturers that control key segments of the hardware supply chain.