David Einhorn Issues a Warning About Extravagant Spending on Artificial Intelligence

Hedge fund manager David Einhorn warned that the unprecedented size of spending on artificial intelligence infrastructure could destroy vast amounts of capital, even if the technology itself turns out to be transformative.

The founder of Greenlight Capital said that the trillion-dollar infrastructure build-out by companies such as Apple Inc., Meta Platforms Inc. and OpenAI is so extreme that the future return is highly uncertain. Although 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 bring good results for the companies making these investments.

“The numbers being mentioned are so extreme that it is really, really hard to make sense of them,” Einhorn said. “I am sure the result will not be zero, but there is a real chance that during this cycle a tremendous amount of capital will be destroyed.”

Sam Altman of OpenAI said he wants to spend “trillions” on infrastructure in the “not very distant future,” while Mark Zuckerberg of Meta also spoke of expenditures of hundreds of billions of dollars on data centers. In February, Apple said it plans to spend $500 billion in the US over the next four years.

Einhorn drew a clear distinction between the long-term significance of artificial intelligence and the immediate economics of funding it. He said many projects will be built, but investors may not receive the returns they expect.

During a panel discussion organized by Simplify Asset Management at the New York Stock Exchange on 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 approaching.

“I am rather of the opinion that we are heading into or are already in a recession,” he said. “Jobs are not growing, the workweek is shrinking, and productivity is not particularly good.”

He also repeated his longstanding claim that markets are fundamentally broken — a condition that, according to him, has undermined the investment process itself.