“The Achilles’ Heel”: Steve Eisman Warns the AI Boom Is Dangerously Dependent on Just Two Firms

Steve Eisman is warning that the AI boom may be relying too heavily on just OpenAI and Anthropic. Indeed, the “Big Short” investor told CNBC that the two startups generate roughly 70% of AI-related revenue at Microsoft (MSFT), Amazon (AMZN), Alphabet (GOOGL), and Oracle (ORCL). He estimates that they also account for about 25% to 35% of those companies’ cloud revenue. Therefore, he sees them as the “Achilles’ heel” of the industry, since trouble at either could have a big negative impact.

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Unsurprisingly, Eisman believes that the biggest threat may come from China. Chinese companies are releasing open-source AI models that can be much cheaper to use than leading U.S. models. If those alternatives keep improving and begin taking meaningful market share, Eisman believes OpenAI and Anthropic may be forced to lower prices.

That could eventually start an AI price war. Lower prices would be good for customers, but they could negatively impact the economics of OpenAI and Anthropic. In turn, that could reduce the amount of money they spend with major cloud providers and create problems for companies that have invested heavily to support their growth.

Eisman Isn’t Alone

Interestingly, Eisman isn’t the only investor from the “Big Short” to warn about the huge spending on AI infrastructure. In fact, Michael Burry has taken an even more bearish position by questioning whether the industry’s current demand truly comes from end users. He believes that some AI spending is instead supported by circular financial arrangements between companies.

Burry has also backed up that view with bearish trades against major AI beneficiaries, including Nvidia (NVDA).

Is NVDA Stock a Good Buy?

Turning to Wall Street, analysts have a Strong Buy consensus rating on NVDA stock based on 36 Buys, one Hold, and zero Sells assigned in the past three months, as indicated by the graphic below. Furthermore, the average NVDA price target of $309.94 per share implies 37.4% upside potential. (See NVDA Stock Forecast).