David Einhorn Sees ‘Tremendous’ Capital Losses From AI Spending

David Einhorn

(Bloomberg) -- Hedge fund manager David Einhorn cautioned that the unprecedented amount of spending on artificial intelligence infrastructure may destroy vast amounts of capital, even if the technology itself proves transformative.

The Greenlight Capital founder said the trillion-dollar build-out by companies overall, such as Apple Inc., Meta Platforms Inc. and OpenAI is so extreme that the eventual returns are highly uncertain. While he expects AI will ultimately surpass today’s bullish forecasts, he questioned whether “spending a trillion dollars a year or 500 billion a year” will deliver good outcomes for the firms making those investments.

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“The numbers that are being thrown around are so extreme that it’s really, really hard to understand them,” Einhorn said. “I’m sure it’s not zero, but there’s a reasonable chance that a tremendous amount of capital destruction is going to come through this cycle.”

OpenAI’s Sam Altman has said he wants to spend “trillions” on infrastructure over the “not very distant future,” while Meta’s Mark Zuckerberg has also talked about spending hundreds of billions of dollars on data centers. In February, Apple said it plans to spend $500 billion domestically over the next four years.

Einhorn drew a sharp line between the long-term importance of AI and the immediate economics of funding it. He said many projects will be built, but investors may not see the payoffs they anticipate.

At a panel discussion hosted by Simplify Asset Management at the New York Stock Exchange Thursday evening, Einhorn broadened his critique beyond AI spending. He pointed to weak job growth and stagnant productivity as signs that a recession may be looming. He also reiterated his longstanding claim that markets are fundamentally broken, a condition he argued has eroded the investment process itself.

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