After a famed short seller came out against data center real estate investment trusts (REITs), the managing partner of a venture capital firm has called it "a very dangerous short."

But GGV Capital's Jeff Richards' critique of the position misstates investor Jim Chanos' short position, and partially argues in favor of it.

This week, short seller Jim Chanos said that he was shorting data center REITs. He argued that the big three cloud hyperscale companies were building out their own infrastructure, and when they turned to wholesale data center operators, they were able to push for lower margins than traditional colocation and wholesale, which will cause data center REITs to decline.

When asked about the short by CNBC, Richards argued that "it's a very dangerous short, because you're betting against a long term trend."

He continued: "I think that the thing that folks who are short the data center market and the cloud overall perhaps miss are how complex the technology architectures are that are run by these companies.

"I mean, if you look at Goldman Sachs, 30 percent of its employees now are developers. If you look at Domino's Pizza, it's been one of the best performing stocks of the last decade - why? It's all been a bet on technology, they run on multiple clouds, they run on Azure, AWS, they run Snowflake, Atlassian, Adobe. These companies that have billion-dollar plus IT budgets are running, in some cases, thousands of applications to build out their architecture and infrastructure."

Chanos is not shorting the cloud market, nor is his company shorting data centers as an infrastructure asset. Instead, he is particularly targeting REITs, and called the cloud a growth story.

Richards did comment on that difference, saying that companies are "not just going to wholesale move away from data centers to run everything in the cloud" (of course, cloud is itself just a collection of data centers).

But later on in the conversation, he added: "Look, building your own cloud infrastructure is expensive, it is the reason folks spend money with GCP, Azure, and AWS. Very few companies can afford to do it. So [when] these companies grow up, they grow up in the public cloud.

"And what we've also seen over time is that Amazon and Microsoft and Google do a very good job of bundling in some of the core tools and technologies that you'd otherwise have to go purchase from other vendors."

Ultimately, he argued, larger companies are embracing the cloud, but they are not just choosing one provider - they are also using other cloud companies, and building private clouds.

This is borne out by industry trends, with companies indeed turning to two or more of the big three hyperscalers, as well as maintaining some in-house data center footprint, and colocation contracts.

Chanos' bet, however, is that cloud will continue to grow, reducing the amount companies directly spend on data center REITs.

"Their three biggest customers are becoming their biggest competitors," Chanos told the Financial Times. "And when your biggest competitors are three of the most vicious competitors in the world then you have a problem.”