Warning of Potential "Capital Destruction"
A billionaire investor and renowned American hedge fund founder has warned that astronomical investments in artificial intelligence (AI) infrastructure could lead to "capital destruction."
On September 26, Yonhap News Agency, citing Bloomberg, reported remarks made by David Einhorn, founder of the hedge fund Greenlight Capital.
During a panel discussion at the New York Stock Exchange, Einhorn remarked that the multi-trillion-dollar expansion of AI infrastructure by companies such as Apple, Meta Platforms, and OpenAI is so extreme that the ultimate outcome is highly uncertain.
Einhorn predicted that AI will ultimately exceed today’s optimistic expectations. However, he expressed doubts about whether spending $1 trillion or $500 billion per year would yield positive results for investment firms.
He stated, "The numbers being presented (for investment) are so extreme that they are truly hard to comprehend," and added, "While I am confident the answer is not zero, there is a reasonable possibility that this (investment) cycle could result in massive capital destruction."
In the financial industry, capital destruction refers to cases where enormous investments are made but fail to generate sustained economic value such as profits, resulting in wasted money.
Bloomberg interpreted Einhorn’s remarks as a warning that even if the unprecedented spending on AI infrastructure is later proven to be transformative, the process could still result in substantial capital destruction.
Einhorn also argued that the slowdown in job growth and stagnant productivity could be signs of an economic recession. He said, "I am of the view that we are either entering a recession or have already entered one," adding, "Jobs are not increasing, working hours are declining, and productivity is not particularly strong."
Previously, in a letter to investors in January, Einhorn mentioned, "We have now reached the ‘Fartcoin’ stage," referring to one of the recently surging meme coins.
This coin recently reached a market capitalization of $2.5 billion and has gained significant popularity, rising about 60% this year. However, Einhorn pointed out that aside from trading and speculation, this coin has no particular use.
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