In this interview with Bloomberg, Jim Chanos discusses the risks of investing in disruptive technologies like AI, emphasizing that such technologies can themselves be disrupted by newer innovations.
He highlights the example of DeepSeek, which suggests AI could be developed with lower capital expenditure and fewer chips, challenging existing models. Chanos warns about the dangers of overvaluing companies trading at historically high revenue multiples, citing examples of 20-40x revenues.
He draws parallels to the late 1990s internet boom, where many businesses were ultimately disrupted. While AI holds revolutionary potential, he cautions that it will likely render many business models obsolete, a risk investors should consider.
Here’s an excerpt from the interview:
What I pointed out when it came out, and I know nothing about LLM models or any of that, which one is is better, is it underscores the risks of disruptive technology. And that is when you are betting on disruptive technology you have to always consider the risk that that technology will be disrupted itself by a better mouse trap, the kid in the garage.
We can talk about all of the possible risk and that’s something coming out of left field that I think can change the argument.
So I think that’s what DeepSeek underscored was that wait a minute maybe there’s a way to do AI with less capex, less chips, cheaper, and nobody had kind of really considered that until DeepSeek.
Now I don’t know that DeepSeek dethrones the other models, it’s beyond my pay grade but it does underscore the risks of paying multiples of revenue that are historically considered egregious.
And we have companies routinely trading at 20 30 40 times revenues. So that gives you an idea of the risk in those businesses.
And the other thing that I’ll just mention about disruptive technology is in the the up-phase of it as we saw in the late 90s when the internet which was certainly a disruptive technology, everything is a positive. the internet will affect all things positively.
And in fact what we found, and what I and my clients made a lot of money on from 2000 to 2010 was how many businesses got unfortunately disrupted by the internet. How many businesses went away.
And I suspect that’s going to be the same thing in AI that not a lot of people are talking about yet.
I mean AI it is a very revolutionary technology and will be benefiting lots of things and hopefully humanity but by definition it will put a lot of business models out of business.
You can watch the entire interview here:
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