Dependency on Key Players
Investor Steve Eisman, known for his successful predictions regarding the housing market prior to the global financial crisis and featured in the film “The Big Short,” has issued a warning regarding the artificial intelligence sector’s current trajectory. Eisman suggests that the rapid growth of AI is overly reliant on the success of just two major companies: OpenAI and Anthropic.
During an appearance on CNBC’s “Fast Money,” Eisman noted that these two AI startups are responsible for approximately 70% of the AI-related revenue generated by technology giants including Microsoft, Amazon, Alphabet’s Google, and Oracle. Furthermore, he stated that they contribute between 25% and 35% of the cloud revenue for these corporations.
The Open-Source and Geopolitical Risk
The former Neuberger Berman senior portfolio manager believes that the fundamental risk to the industry involves the performance of these market leaders. Eisman pointed out that the primary vulnerability could arise from China, where open-source AI models are significantly more cost-effective and appear to be gaining market traction.
Eisman cautioned that if issues arise concerning Anthropic and OpenAI, the cheaper, open-weight models originating from China could dramatically increase their market share. “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,” he said. This warning contributes to an ongoing industry debate regarding whether the tremendous capital spending fueling the AI boom will translate into sufficient returns.
Contrasting Views from Market Skeptics
The caution expressed by Eisman adds to a growing body of skepticism regarding the AI market’s sustainability. Michael Burry, another investor whose prior short bets against the housing bubble were documented in “The Big Short,” holds an even more pessimistic outlook. Burry has questioned whether the current and projected AI demand truly originates from end consumers.
Instead, Burry argues that a substantial portion of this demand is funded through what he has characterized as circular financial arrangements. In line with his bearish stance, Burry has taken positions betting against some of the largest beneficiaries of the AI boom, including Nvidia, and has targeted other segments within the broader semiconductor industry.
