Nvidia's Reported Lepton AI Buyout A 'Huge Red Flag,' Says Short Seller Jim Chanos, Warns Of Inventory Risk

Prominent short seller Jim Chanos has raised questions about Nvidia Corp. NVDA amid reports of the company’s potential acquisition of Lepton AI, a server rental startup.

What Happened: Chanos wrote on the social media platform X that attempting to buy out resellers could signal deeper financial complications. “Trying to buyout your resellers is usually a huge red flag,” he noted, suggesting the move might be a strategic attempt to manage inventory costs or avoid receivables provisioning.

The semiconductor giant is reportedly nearing a deal to acquire Lepton AI for several hundred million dollars, according to The Information. Founded two years ago, Lepton AI raised an $11 million seed round in May 2023 from investors CRV and Fusion Fund.

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Why It Matters: This potential acquisition comes amid broader challenges for Nvidia, including potential trade restrictions and market uncertainties. The company faces potential regulatory hurdles in China, with new energy efficiency rules potentially blocking access to its specialized processors.

Despite these challenges, Nvidia remains a dominant force in the semiconductor and AI chip market. The company’s fourth-quarter revenue reached $39.3 billion, a remarkable 78% increase, with projections of $43.0 billion for the first quarter.

Price Action: Nvidia traded at $113.76 on Wednesday, down 5.74%, and slipped further to $112.21 in after-hours trading, down 1.36%.

While Nvidia outperforms Intel Corp INTC and Advanced Micro Devices Inc AMD in growth and momentum, it lags in valuation metrics, according to Benzinga Edge rankings. For deeper insights, sign up for Benzinga Edge.

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Disclaimer: This content was partially produced with the help of AI tools and was reviewed and published by Benzinga editors.