Steve Eisman, the investor made famous by “The Big Short,” says this week marked the moment investors stopped rewarding runaway AI spending, with Alphabet Inc. (NASDAQ:GOOGL) the biggest casualty.
“A year ago, it was all rah-rah for AI. When companies raised their capex budgets, the market cheered,” Eisman said on his podcast, The Real Eisman Playbook. Now, he says, “everyone is nervous and that nervousness was on full display this week.”
Strong Quarter, Negative Cash Flow
Google’s revenue climbed 24% and Cloud revenue hit $24.8 billion, up 82%.
But the company raised its 2026 capex guidance to as much as $205 billion, well above the roughly $186 billion analysts expected, and free cash flow swung to negative $5.9 billion, its first quarterly outflow since 2004.
“That’s a lot of billion,” Eisman said, adding the market is “beginning to lose patience with all this crazy spending.” The stock fell more than 6% Thursday, while Tesla Inc. (NASDAQ:TSLA) dropped 14.5% on its own negative cash flow, dragging the Nasdaq down more than 2%.
Prediction market traders are not panicking yet. Polymarket’s “AI bubble burst” market, with over $2.3 million in volume, prices just a 16% chance the bubble pops by the end of 2026.
‘Like Fighting a Ghost’
Even blowout results offer no escape.
Intel Corp. (NASDAQ:INTC) slid despite its best revenue growth in 15 years, weighed down by its own $20-billion capex plan. Strong chip sales, Eisman argues, are just the other side of the spending scaring everyone.
The nervousness is punishing strong operators too. ServiceNow grew revenue 24%, yet the stock is down 38% this year. “Fighting the AI narrative is like fighting a ghost,” Eisman said.
Blackstone, meanwhile, boasted on its earnings call that it is the biggest financier of AI data centers. That, Eisman said, “may or may not prove to be a great bet.”
Nowhere to Hide
Even banks offer no shelter, Eisman argues, because the investment banking cycle now runs on AI financing. Owning Morgan Stanley, Goldman Sachs, and Bank of America “is just one more aspect of the AI trade,” he said.
Eisman previously flagged concerns about the sustainability of Nvidia’s melt-up. This week, the market may have caught up with him.
Read Also: Google Goes Cash Flow Negative for First Time Since 2004, Is Apple the Anti-CapEx AI Trade?
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