Steve Eisman has pointed to what he sees as the Achilles’ heel of the artificial intelligence (AI) boom, and it traces back to just two companies sitting at the center of it.
The “Big Short” investor made the case on CNBC’s Fast Money. He argues the fortunes of the largest US technology companies now hinge on two startups.
Steve Eisman Sees the AI Boom’s Achilles’ Heel
Eisman put OpenAI and Anthropic at roughly 70% of AI-related revenue at Microsoft, Amazon, Alphabet’s Google, and Oracle. He added that the two accounted for 25% to 35% of cloud revenue at those four.
“The futures of these massive companies, in a sense, are a bet that OpenAI, Anthropic are going to succeed,” he said.
Eisman sees a key threat coming from China. Chinese open-source models cost far less and appear to be winning customers. Sustained share gains by those models could set off a price war across the sector, he said.
“The Achilles’ heel of this whole story … is if something bad happens to Anthropic and OpenAI … the Chinese open-end models, are much cheaper. And if they start really taking a lot of market share and it sounds like, from what I’m hearing, that they’re starting to, you could have a big price war. And then we have a problem,” Eisman explained.
Last month, he sold his Google stake and moved to cash. The executive noted that he wanted to reduce his “exposure to AI.”
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Burry Bets Against the AI Trade
Eisman is not the only one. Michael Burry, the investor who shorted subprime mortgages before the 2008 crash, ranks among Wall Street’s loudest AI skeptics.
He is short on iShares Semiconductor ETF (SOXX), Micron, Nvidia, Caterpillar, Palantir, Tesla, and Applied Materials. Burry also forecasted that US stocks could suffer a 1987-type crash.
Not everyone agrees. BitMine Chairman Tom Lee reads AI capex fear as bullish. Mad Money host Jim Cramer also claimed that the AI data center trade is regaining market leadership.
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Source: BeInCrypto
