Urgent: Jim Chanos Warns of Nvidia’s Risky Debt Market Amid Market Volatility

URGENT UPDATE: Renowned short-seller Jim Chanos, known for his early warning on Enron, has issued a stark warning about Nvidia. He claims the surge in GPU-backed loans has led to a precarious new segment of the debt market that could spell trouble for investors.

As of today, the S&P 500 has risen by nearly 5% over the past five trading days, bringing its total gain to about 17% for the year. However, experts caution that the typical December rally might not materialize this time. Concerns are escalating regarding Nvidia-linked corporate debt, as the market grapples with the potential for a 25 basis points interest rate cut, which 88% of traders predict ahead of next week’s Federal Reserve meeting.

Despite the optimistic outlook surrounding rate cuts, futures indicate a turbulent opening. S&P 500 futures are down approximately 0.8%, while Dow futures are sliding 0.5%, and Nasdaq futures are down by about 1%. Small-cap stocks are feeling the most strain, with futures pointing to an opening drop exceeding 1%. Additionally, market volatility is surging, with the VIX index climbing over 11%.

Chanos warns that Nvidia’s booming market has allowed loss-making “neocloud” firms to accumulate tens of billions in debt secured by Nvidia chips. “If those assets depreciate faster than expected,” Chanos states, “there’s going to be debt defaults,” raising alarms for investors and potentially impacting the broader market.

Meanwhile, consumer spending is showing mixed signals. Reports indicate that Black Friday sales exceeded expectations, rising by 10% from last year, driven by strong in-store traffic at retailers like Walmart. Despite this surge, retail experts warn that the holiday season still has a long way to go. “Retailers seem to have had a successful start to the season, but there are still 28 days to Christmas,” cautioned Michael Brown, a partner at Kearney.

As the financial landscape evolves rapidly, all eyes will be on Nvidia’s debt situation and how it could influence investor sentiment in the coming weeks. Market participants must remain vigilant as developments unfold, especially with the critical Fed meeting just around the corner.