Jim Chanos: A Short Thesis on Data Centers - [Business Breakdowns, EP. 103]

Wall Street Legend Jim Chanos is famed for bringing a skeptical eye to a credulous world. In this episode, he delivers a compelling bear case for the legacy data center market and the commercial real estate market. Watch and learn as a master picks apart a business model with data and logic. The host for this episode is Compound248. For the full show notes, transcript, and links to the best content to learn more, check out the episode page here: https://www.joincolossus.com/episodes... ----- This episode is brought to you by Tegus. Tegus is the modern research platform for leading investors. I’m a longtime user and advocate of Tegus, a company that I’ve been so consistently impressed with that last fall my firm, Positive Sum, invested $20M to support Tegus’ mission to expand its product ecosystem. Whether it’s quantitative analysis, company disclosures, management presentations, earnings calls - Tegus has tools for every step of your investment research. They even have over 4000 fully driveable financial models. Tegus’ maniacal focus on quality, as well as its depth, breadth and recency of content makes it the one-stop, end-to-end research platform for investors. Move faster, gather deep research to build conviction and surface high-quality, alpha-driving insights to find your differentiated edge with Tegus. As a listener, you can take the Tegus platform for a free test drive by visiting tegus.co/patrick. ----- This episode is brought to you in partnership with Roundhill Investments, the advisor to the Roundhill IO Digital Infrastructure ETF – BYTE - which trades on the New York Stock Exchange under the ticker symbol BYTE. The fund tracks the BYTE Index, which measures the performance of 40 leading global digital infrastructure businesses, such as towers and mobile communications, fiber and fixed line connectivity, and data centers. For a prospectus and more information, please visit roundhillinvestments.com/etf/byte. ----- Business Breakdowns is a property of Colossus, LLC. For more episodes of Business Breakdowns, visit joincolossus.com/episodes. Stay up to date on all our podcasts by signing up to Colossus Weekly, our quick dive every Sunday highlighting the top business and investing concepts from our podcasts and the best of what we read that week. Sign up here. Follow us on Twitter: @JoinColossus | @patrick_oshag | @jspujji | @zbfuss | @ReustleMatt | @domcooke Show Notes (00:00:00) - Introduction (00:03:30) - (First question) - His counter-narrative thesis of shorting traditional data centers (00:09:34) - How data center hyperscalers have been shifting the industry since 2016 (00:12:14) - The size, margins, and depreciation profile of the data center industry (00:16:14) - The cash burn problem with digital REITs (00:18:30) - How he thinks about interest rates, liquidity, and leverage in the space (00:20:25) - More on why the value of these data centers is so elusive (00:21:57) - The extent to which macro tech slowdowns intersect with his thesis (00:23:13) - What investors see in these businesses that he discounts (00:26:59) - Risks for the short and the bull case for data centers (00:29:04) - Big concerns about the broader commercial real estate market (00:36:34) - The best way for operators to handle a short thesis about their company (00:39:49) - Critical mistakes he recommends managers avoid #Businessbreakdowns #jimchanos