"Big Short" Steve Eisman says China’s AI models are "Achilles’ heel" of AI trade

Investing.com -- Steve Eisman said the artificial intelligence boom depends largely on the success of just two companies: OpenAI and Anthropic.

The investor, known for betting against the housing market before the global financial crisis, said Tuesday on CNBC’s "Fast Money" that the two AI startups represent about 70% of AI-related revenue at Microsoft, Amazon, Alphabet’s Google and Oracle. He added they account for 25% to 35% of cloud revenue at these companies.

"The futures of these massive companies, in a sense, are a bet that OpenAI, Anthropic are going to succeed," Eisman said.

The podcast host and former Neuberger Berman senior portfolio manager said the biggest revenue threat could come from China, as Chinese open-source AI models cost less and appear to be gaining market share.

"The Achilles’ heel of this whole story ... is if something bad happens to Anthropic and OpenAI ... the Chinese open-end models, open-weight 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," he said.

Michael Burry, another investor featured in "The Big Short," has taken a more bearish stance. Burry has questioned whether current and future AI demand comes from end customers, suggesting a portion is financed through circular arrangements.

Burry has placed bearish bets against Nvidia and disclosed bearish positions tied to the broader semiconductor sector.

You May Also Be Interested In

• Wolfe Research Upgrades Moderna (MRNA) to Peerperform
• Citi Opens Catalyst Call on Signet Jewelers (SIG)
• Arm Holdings (ARM) PT Raised to $641 at Raymond James