One of the investors who made massive returns after shorting the housing market during the 2008 Global Financial Crisis is unveiling a bear-case scenario for the artificial intelligence trade.
In a new episode of The Real Eisman Playbook, Steve Eisman says that tech titans, including Google, Meta, and Amazon, are sinking hundreds of billions of dollars into AI models and infrastructure.
The investor draws a line back to 1999, noting that overinvestment in the Dot-Com rush helped trigger the 2001 recession and that tech underperformed for years afterward, a potential analogue to today’s tech capital expenditures (CapEx).
“My answer is that I’m not worried about this yet, but I’m starting to think about it. 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 a massive investment in the 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, et cetera, are spending combined over $300 billion in AI-related CapEx. Everyone is chasing AI. 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 GPT 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, then investment will slow from the current torrid pace, and we will go through a painful digestion period just like in 2001.”
About 20 years ago, the NASDAQ fell about 78% from its March 2000 peak (5,048) to its October 2002 trough (1,114). The Dot-Com bubble erased roughly $5–7 trillion in market value from US equities, most of it in technology.
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