‘Big Short’ Investor Steve Eisman Issues Warning on Large Tech Firm Overspending on AI – Here’s His Outlook

One of the investors who called and profited off the subprime mortgage collapse of 2008, Steve Eisman, is now warning about the artificial intelligence (AI) boom.

The Wall Street investor says on his YouTube channel that large tech firms are investing massive amounts in AI, but if the innovation doesn’t start delivering on results the market may implode like the dot-com bust of the early 2000s.

“If you go back to 1999, the internet analysts back then were all pontificating that the internet would conquer the world. And they were right – eventually. But at that time, there was massive investment in that gold rush. Too much, too soon, it turned out. And overinvestment largely caused the recession of 2001. By the way, even after that recession was over tech stocks then did nothing for a number of years. There is something of an analogy to be drawn potentially, and I emphasize potentially, to the current day.

Large tech companies like Meta, Google, Amazon, etc., are spending combined, over $300 billion in AI-related CapEx (capital expenditure). Everyone is chasing AI.”

He also says there may be early warning signs that the results of AI innovation are slowing.

“Now, I’m the first to admit this is not my area of expertise, but there are some critics out there who are arguing that the current model of building AI is to just keep scaling large language models. And that method, some argue, is beginning to lose steam, such that the new ChatGPT 5.0 that was just released is apparently not much better than ChatGPT 4.0.

What we just don’t know is what the return on investment is going to be for all this spending. And if it turns out that the returns at least at first are disappointing, that investment will slow from the current torrid pace, and we will go through a painful digestion period just like in 2001.”

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