“When it comes to financial fraud specifically, there’s no question we’re seeing more of it—especially riding the wave of the current AI-driven market boom,” he added.
Chanos’s framework of predicting the rise of fraud is that it is precipitated by periods of mass financial growth. The AI boom is no exception.
“It’s one of my long-held views that the fraud cycle always follows the financial cycle with a lag. And we’re definitely seeing that now,” Chanos said. “I think we’ll see even more of it, as companies do everything they can to hype themselves to unsuspecting investors by claiming they’re AI companies or touting some big technology breakthrough that sounds exciting but doesn’t happen to be true.”
“There’s no doubt that this financial cycle has likely surpassed the dotcom era in terms of enthusiasm, valuations, and capital markets activity,” Chanos said this week. “So now, we just have to see how it plays out.”
