Kyle Bass, who has been predicting serious pain in the U.S. office market, is taking a different view toward data centers as a new wave of artificial intelligence applications drives tech firms’ needs for more computing power.
“People that are developing data centers don’t even get them developed before one of the FAANGs leases it for 30 years,” Bass, the founder of Hayman Capital Management, said in an interview with Bloomberg Television on Thursday.
The Dallas-based investor made the comments after chipmaker Nvidia Corp. surprised analysts with a surging revenue forecast, propelling a jump in stocks linked to AI. Nvidia is the biggest maker of advanced chips that are required to train a nascent generation of AI services that can create new content. Examples of generative AI include OpenAI’s ChaptGPT and DALL-E.
Bass, 53, rose to fame from his bet against subprime mortgages before the housing crisis of 2008. While he doesn’t consider himself a tech specialist, he said he expects more upside for Nvidia, even after a 109% run-up this year through Wednesday. The shares surged 24% Thursday to close at $379.80.
“I wouldn’t short Nvidia,” Bass said. “It just has a long way to run here.”
To capitalize on the demand for AI and growth in computing power, investors should look at developing data centers and buying industry-related securities, Bass said.
President Joe Biden signed the CHIPS Act last year to incentivize chip production in the U.S.
Taiwanese Semiconductor Manufacturing Co., which provides chips for Apple Inc. products, is building a $12 billion factory in Phoenix, and Samsung Electronics is constructing a $25 billion-plus plant outside Austin. Texas Instruments plans to invest $30 billion in Sherman to build as many as four semiconductor fabrication plants.
“Data centers are white-hot. Nvidia is white-hot,” Bass said.
Shelly Hagan, Alix Steel and Guy Johnson, Bloomberg
