Enron short-seller Jim Chanos warns on Nvidia, AI bubble

The S&P 500 has gained astir 5% implicit the past 5 trading days. That steep emergence looks the much important erstwhile you see that the scale is up astir 17% truthful acold this year. Now investors are asking: Will the Santa rally amusement up next?

Seasonal patterns suggest that December is usually 1 of the best-performing months for stocks. But — arsenic the aged saying goes — past show is nary warrant of aboriginal returns. Experts pass that this year’s script differs from the accustomed playbook, with a imaginable December involvement complaint chopped connected the array and increasing fears of Nvidia-linked firm debt.

Rate-cut expectations person been volatile heading into adjacent week’s Federal Reserve meeting, and traders person swung successful caller weeks betwixt AI-boom euphoria and AI-boom anxiety.

Prediction markets powerfully favour the likelihood of a complaint cut, with 88% of traders foreseeing a chopped of 25 ground points. It’s typically the lawsuit that markets emergence up of specified powerfully predicted cuts.

Still, arsenic of Monday morning, futures looked acceptable to unfastened heavy successful the red. S&P 500 futures ticked down astir 0.8%, portion Dow futures nosed down 0.5%, and the Nasdaq dropped astir 1% heading into the bell. Small headdress stocks were faring worst of all, with futures pointing to an unfastened implicit 1% down. Volatility besides charted steeply higher, with the VIX rising implicit 11%.

Meanwhile, Nvidia — agelong the AI boom’s gravitational halfway — faces a antithetic benignant of year-end test. Short-seller Jim Chanos, astir celebrated for his prescient Enron telephone successful the aboriginal 2000s, is informing that the booming marketplace for GPU-backed loans has created a risky caller country of the indebtedness market.

Loss-making “neocloud” firms person piled up tens of billions successful indebtedness secured by Nvidia chips, Chanos points out, though galore of these aforesaid firms presently person nary wide way to profitability. If those assets depreciate faster than expected, helium argues, “there’s going to beryllium indebtedness defaults.”

At the aforesaid time, user spending appears, astatine once, some beardown and fragile. New York Times reporting suggests that Black Friday spending smashed expectations, with income up immoderate 10% from past year, according to assorted measures, and in-store enactment besides modestly higher.

Despite a macro situation characterized by tariff uncertainty and inflation, American shoppers showed up for steep discounts, peculiarly astatine value-oriented retailers already benefitting from this year’s thriftier patterns, namely Walmart. Retail analysts accidental the aboriginal surge doesn’t warrant a beardown season, however.

“Retailers look to person had a palmy commencement to the season, but determination are inactive 28 days to Christmas and the play is seldom won connected Black Friday and Cyber Monday,” Michael Brown, a Kearney spouse and U.S. retail expert, told The Times.