(Bloomberg) -- Legendary short seller Jim Chanos says no one can see the biggest risks facing US markets over the next six to 12 months — because the challenges are going to be unpredictable events, like last month’s DeepSeek collapse that wiped out roughly $1 trillion in market value from US stocks.

“The real risks will be something like DeepSeek that comes out of left field that changes people’s thinking,” Chanos said in an interview with Bloomberg TV Wednesday. “By definition, we do not know what that is.”

Chanos said he’s seeing signs of speculative froth in the stock market, but added that it hasn’t reached levels seen in the 2021 boom when the S&P 500 soared 27%. But investors need to be able to spot the companies that deserve their rich valuations, and those that don’t, he said.

Chanos is probably best known for his extremely prescient bets against Enron Corp. in late 2000 and early 2001, well before the firm’s accounting fraud came to light. He converted his hedge fund into a family office in 2023, after a nearly four-decade run. He has complained that it’s difficult for bearish money managers to raise capital, even though he sees this as a “golden age of fraud.”

Political Theater

Beyond concerns of another DeepSeek-live event, Chanos sees markets responding most to political theater these days. Indeed, he thinks that will become even more intense. He’s closely watching how President Donald Trump’s proposed tariffs unfold, in particular the 10% levy against China.

“I think 10% is not going to do it,” Chanos said, referring to the size of tariffs needed for the government to generate significant revenues. “You would have to raise them substantially on both China and, the EU, and we haven’t seen that yet. We’ll have to see what exactly comes within 30 days, 60 days. Does it escalate, or does it cool off?”

“If we cannot differentiate valuations, capitalism is broken,” Chanos said. “You do not want to be sending a lot of money to Enron and Theranos. You want to send it to the Amazons.”

Of course, some of Chanos’s recent wagers have been less successful than his Enron call two decades ago. He was short Tesla Inc. for more than five years as the stock soared. And in 2022, he bet against data centers, which have proven to be a lucrative part of the artificial intelligence boom. Over the past two years, the Goldman Sachs AI Data Centers & Electrical Equipment Index has gained roughly 100%, more than twice the rise in the S&P 500 Index.