Steve Eisman Reduces AI Exposure Amid Monetization Concerns

Investor Steve Eisman reduced risk in his portfolio, warning that the artificial intelligence trade is approaching a tipping point. While he is not net short on AI, Eisman argued that frontier algorithm models use fear-based narratives to establish regulatory moats and obscure weakening fundamentals.

Eisman specifically pointed to capital efficiency declines in the initial IPO filing of Anthropic. He noted that the company's revenue-to-equipment-expense ratio dropped from 2.08 in the second quarter to 1.7 in the third quarter.

These concerns coincide with financial pressure at Alphabet Inc., whose stock declined following earnings reports. The company found that AI queries are replacing traditional internet searches, which has led to lower monetization. Philipp Schindler, Google's Chief Business Officer, confirmed that the growth in AI mode queries impacted revenue due to this lower monetization, though he noted that experiments with new ad models have shown promising results.