Prof G Markets · Friday, July 31, 2026
Jim Chanos explained that the current surge in S&P profits is partly due to an accounting identity problem related to AI capital expenditures. He pointed out that while companies spending on AI capitalize and depreciate these costs over years, the companies receiving the revenue book it immediately, creating a profits mismatch.
“Because like the dot-com boom, we have an accounting identity problem that follows these CapX booms, namely that the companies that are spending the money do not expense immediately most of that money that is being spent. It's capitalized and depreciated over five to 10 years.”
“The companies receiving a lot of that money, the Nvidias of the world, the Caterpillar tractors of the world, the utilities, they are receiving in terms of revenues and profits immediately.”
“So the same dollar is contributing to profits in a far greater extent than it does in a more normalized economy, um, where it would be recognized as revenue by one company and expense by another.”
“And that's why S&P profits have taken off in the last two years, it's because of this mismatch.”