Wall Street billionaire sends one-word AI warning

• Meta Platforms: $17.01 billion.

• Alphabet: $22.4 billion.

• Microsoft: $24.2 billion ($17.1 billion excluding finance leases).

• Amazon: $31.4 billion.
  
  Source: Company SEC filings.

The money being spent is undeniably eye-popping, and CEO's believe it's necessary, including OpenAI's Sam Altman, who recently said:

You should expect OpenAI to spend trillions of dollars.

The stakes are high and have caught the eye of investors, including Wall Street billionaire David Einhorn. Einhorn is the portfolio manager behind Greenlight Capital, a hedge fund with $2.3 billion in assets under management.

Einhorn recently commented on the AI spending frenzy, and given his 30+ years on Wall Street, investors may want to consider his opinion.

Companies are slated to spend between $500 billion and $1 trillion a year on the nuts-and-bolts necessary to support artificial intelligence.

Much of that money is being spent on data centers equipped with super-fast next-generation graphic processing unit (GPU) chips from Nvidia, which are much better suited to handling the compute-heavy workloads associated with training and operating AI chatbots and agentic AI programs.

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Those programs are data intensive, requiring significant upgrades to preexisting network servers and switches connecting them. As a result, the spending has been a boon not only for Nvidia, which controls 90% of the AI GPU market, but makers of servers, like Dell and Supermicro, memory chips, like Micron, and storage, including Seagate.

Today's action is reminiscent of the flood of IT spending in the late 1990s, at the dawn of the Internet.

That's worrisome to Einhorn, who described the sheer size of the dollars earmarked for AI with one word: "Extreme."

“The numbers that are being thrown around are so extreme that it’s really, really hard to understand them,” said Einhorn in Simplify Asset Management panel.