Investing.com -- Short seller Jim Chanos criticized the upcoming SpaceX initial public offering on Wednesday, stating the company’s $1.75 trillion valuation relies on unrealistic expectations rather than solid fundamentals.

SpaceX plans to go public in New York on Friday in an offering aimed at raising $75 billion. The IPO is set to be the largest on record, nearly three times bigger than Saudi Aramco’s 2019 listing. The firm intends to list under the ticker SPCX.

"The company is not worth, in my opinion, $1.75 trillion based on any reasonable assumptions over the next five years," Chanos said at an iConnections conference in New York.

The founder of Kynikos Associates noted that concerns about the valuation and governance issues make SpaceX appear as a potential short candidate. Some short sellers are hesitant to bet against the company, particularly after recent gains in large technology stocks have caused losses for bearish positions.

"We really can build whatever stories we want — colonies on Mars, factory tunnels, data centers in space — to justify the valuation. In bull markets, you put a premium on promises and in bear markets, you put a discount on reality," Chanos said when asked about shorting the company.

Chanos distinguished SpaceX from Tesla, Musk electric car company. He noted SpaceX trades at 90 times its sales, while Tesla trades at 14 times sales. Short sellers betting against Tesla have lost $27 billion on paper since June 2021, according to S3 Partners. Tesla shares have climbed more than 2,500% over the past decade.

Chanos also expressed negative views on the data center sector, describing it as a "bad business" with low-single-digit returns on capital. He has maintained a bearish stance on data center operators since 2022, arguing they function more like REITs or equipment leasing companies than technology growth companies.

The short seller said companies that purchase chips from suppliers like Nvidia and lease them to hyperscalers face substantial depreciation risks and limited pricing power.