Steve Eisman, known for correctly predicting the 2008 housing crisis, has sold his Google stock to reduce his investment in artificial intelligence (AI). He believes the entire market is now overly reliant on AI and is holding cash instead.
He hasn’t replaced it yet. According to Eisman, traditional defensive investments aren’t likely to succeed right now, as investors are focused solely on artificial intelligence – if they’re interested in investing at all.
Eisman Sold Google Near Its Record High
Appearing on CNBC’s Squawk Box, the ex-Neuberger Berman portfolio manager said the decision to sell was intentional. He previously gained recognition for successfully betting against subprime mortgages while at FrontPoint Partners.
Eisman recently sold his shares in Google after being a longtime investor. He explained that he decided to lessen his investment in artificial intelligence.
So far, the timing appears favorable. Alphabet reached its highest price ever – $408.61 – on May 18th. However, by July 24th, the stock closed at $319.74, which is about a 20% decrease over roughly two months.
A single day of trading caused much of the decline in Alphabet’s stock price. On July 23rd, following the release of its second-quarter earnings, the stock fell 7.1%. This drop came after the company announced it planned to increase its capital spending to between $195 and $205 billion by 2026.
Eisman did not rotate into safety. He explained why in one line.
He explained that companies are generally either interested in purchasing artificial intelligence solutions or they aren’t, and they wouldn’t choose a more traditional product like Clorox over AI.
The money remains available, and he confirmed he’s currently holding onto it. He doesn’t anticipate a resolution to the AI discussion for at least two weeks.
Why Eisman Says the Market Is ‘One Trade’
His worry is concentration, not valuation.
“It’s all one trade. It’s literally one,” Eisman said.
He then showed his math on a standard portfolio.
Many investors believe they’re well-diversified with a portfolio of 60% stocks and 40% bonds, but they’re often mistaken. A large portion – over half – of their stock holdings are actually concentrated in technology and artificial intelligence companies. Furthermore, most of the new bonds being issued are also linked to AI, meaning even the bond portion of their portfolio isn’t as diversified as they think.
Do Eisman’s Numbers Hold Up?
Overall, a significant portion of the stock market is driven by just a few sectors. As of July 24th, Information Technology made up 37.19% of the S&P 500, and Communication Services accounted for another 9.34%, totaling almost half – 46.5% – of the index.
If you include Amazon and Tesla, both retail companies, the total reaches 51.5%. So, while the claim of “over 50%” is technically correct, it relies on a broad interpretation.
The concentration itself is not in doubt. The 10 largest constituents make up 36.85% of the index.
Corporate bonds with lower credit ratings are performing relatively poorly. In the second quarter, high-tech companies accounted for 14.2% of new US corporate bond offerings, while financial companies led the way at 46.4%. Despite the growing interest in artificial intelligence, bonds related to AI don’t make up the majority of new bond issuance.
The core of his argument remains valid, and recent figures actually strengthen it. The Bank of England found that five major AI companies held only 3% of US investment-grade debt as of the end of 2025, but they were responsible for more than 15% of all new debt issued so far this year by early May.
High-yield bond issuers are increasingly focused on growth. This year, they’ve accounted for 41% of new high-yield bonds issued in the US, despite initially representing only 1% of the overall market.
The large amounts of money raised explain how quickly these companies acted. Amazon issued $37 billion in notes on March 10th – the biggest single offering, according to documents filed with the Securities and Exchange Commission. Meta secured $30 billion last October and followed that up with another $25 billion in April.
There’s a small catch in the documents. They indicate that any money raised will be used for general company needs, and isn’t specifically designated for funding artificial intelligence projects.
Is a Correction Coming if AI Fails?
When asked about the potential for artificial intelligence to fail in the market, Eisman gave a direct answer: he believes there would be a significant downturn. He declined to specify how large that downturn might be.
“What… scares me is that it’s all one trade. So it better succeed,” he added.
Central banks are all noticing the same potential problem. The Bank for International Settlements cautioned in June that investments in fixed income could be at risk if major tech companies reduce their spending.
What It Means for Crypto
Like other investments, cryptocurrency carries risk. Bitcoin, currently trading around $64,980, has decreased in value by roughly 45% in the last year.
The connection between tech stocks and Bitcoin became clear in June, as a drop in Big Tech companies also pulled Bitcoin’s price down. This year, individual investors have generally preferred investing in ETFs focused on semiconductors rather than cryptocurrency funds.
Many experts are noticing a similar trend. Chinese investment funds are beginning to sell off some of their most successful AI stocks, suggesting a shift in investment strategy. One analyst who accurately predicted the 2008 financial crisis is now warning that AI stock values could fall by as much as 70%.
Where the Thesis Breaks Down
Eisman doesn’t predict a market downturn. In fact, he wouldn’t bet against the current market and believes the underlying technology will perform well.
“It’s going to be… something really good. That doesn’t mean that everybody succeeds,” he said.
The difference between the potential of AI and its current market situation represents the inherent risk. Even if the technology itself proves successful, the financial activity surrounding it could still decline.
He’ll face immediate challenges as major companies like Microsoft, Meta, and Amazon announce their financial results over the next few days. We’ll also get updates on their spending plans in quick succession – within three days, in fact.
2026-07-27 22:09