Steve Eisman, the investor of The Big Short fame, said he reduced his exposure to artificial intelligence after selling his longtime stake in Alphabet, warning that investors may be underestimating the risks if the AI boom doesn’t meet lofty expectations. “I feel lighter. I sold Google a few months ago. I’ve owned Google. I don’t even know how long I’ve owned Google,” Eisman said Monday on CNBC’s “Squawk Box.” “We wanted to reduce our exposure to AI.” His comments came after a lull in the relentless rally in tech stocks. The S&P 500 and Nasdaq Composite fell for consecutive weeks, dropping 0.6% and 2.1%, respectively. Last week, Google and YouTube owner Alphabet fell nearly 8% after raising its capital spending forecast, highlighting the need for huge investments in building out AI infrastructure. Eisman said investors are still focused solely on AI, rather than consumer staples or other traditionally safer corners of the market, and have not reallocated profits to defensive sectors. “People either want to buy AI or they don’t want to buy AI,” he said. “They don’t want to get out of there and buy Clorox.” Asked what would happen if AI doesn’t succeed, Eisman said, “I think there’s going to be a big correction.” Eisman said he was not betting on the broader market, but was concerned that investors were too focused on a single theme. “It’s all one transaction,” he said. “Even people who think they are diversified because they own 60% in stocks and 40% in bonds are missing the fact that they are actually not diversified, because 60%, more than 50%, is technology and AI related. Yes, out of the 40% of bonds, most of the new bond issuance is AI-related…What scares me is that it’s all one transaction.”The investor said he is sitting on a lot of cash until he decides what to do.
