Famed short-seller Jim Chanos has targeted the highly anticipated SpaceX initial public offering, cautioning that the valuation of the Elon Musk-led space technology firm is built on "hope and dreams" and cannot be justified.

SpaceX is set to list in New York on Friday, with the IPO aiming to raise $75 billion and achieve a valuation of $1.75 trillion. This would be the largest IPO to date, nearly triple the size of Saudi Aramco's 2019 listing.

"In my view, the company is not worth $1.75 trillion under any reasonable assumptions for the next five years," Chanos stated on Wednesday at the iConnections conference in New York.

Given market skepticism towards SpaceX's $1.75 trillion target valuation and concerns over its corporate governance, some analysts believe shorting SpaceX is a reasonable strategy.

However, some short-sellers are approaching the idea with caution, adopting a wait-and-see stance, especially after recent surges in trillion-dollar tech giants—a club SpaceX could potentially join—have inflicted heavy losses on bearish investors.

When questioned about whether he would short the company, Chanos expressed a similar sentiment.

"We can really make up any story—colonizing Mars, factory tunnels, space data centers—to justify the valuation. In a bull market, people pay a premium for promises; in a bear market, they discount for reality," he said.

Shorting another of Musk's companies, Tesla, has typically resulted in losses. According to data from S3 Partners, short sellers of Tesla have incurred mark-to-market losses of $27 billion since June 2021, including one-way bets against the stock and index hedges related to its inclusion in the S&P 500. Tesla's share price has surged over 2,500% in the past decade.

Nevertheless, Chanos described Space Exploration Technologies as a "different animal" from Tesla. He pointed out that the aerospace company's valuation is 90 times its sales, compared to Tesla's valuation at 14 times sales.

Data Center Industry Labeled a "Bad Business"

The veteran short-seller also cast doubt on the economics of the data center industry, calling it a "bad business" with capital returns in the low single digits.

Chanos has been bearish on data center operators since 2022, arguing that both traditional operators and emerging cloud service companies resemble real estate investment trusts or equipment leasing firms more than high-growth technology companies.

He stated these companies face significant depreciation risks and limited pricing power, as they purchase advanced chips from suppliers like Nvidia and then lease them to hyperscale data center operators.

Chanos further added that such enterprises are essentially price-takers and should not command higher valuation multiples than the semiconductor manufacturers that control the hardware supply.

Jim Chanos is a well-known American investment manager and the founder of Kynikos Associates. As a prominent short-seller, he is most famous for accurately predicting and profiting from the collapse of Enron in 2001.