Investor Steve Eisman, known for accurately calling the 2008 financial crisis, is sounding the alarm once again, this time on the growing disconnect between America’s booming tech sector and its stagnating broader economy.
GDP Growth Entirely ‘Composed of Large Tech Companies’
On The Real Eisman Playbook podcast last week, Eisman pointed to new GDP estimates and said what's fueling growth is far narrower than headlines suggest.
“It's become clear that the 1.8% estimated growth in US GDP this year is almost 100% composed of large tech companies,” he said, adding that their capex related to AI makes up a bulk of this growth, while noting that “the rest of the US economy is barely growing.”
He called it “a tale of two economies,” warning that the divide between AI-fueled CapEx and the real-world experience of workers and businesses is growing more stark. “The impact on people's lives is real and cannot be overstated,” he said.
While investors continue to pile into tech stocks, Eisman cautioned that the long-term payoff is still uncertain. “Right now, there is just an incredible AI capex feeding frenzy,” which he said is adding to the “bullish sentiment.”
However, he notes, that in the long run, the companies “must generate very strong returns on investments in order to justify themselves and their stock prices.”
The U.S. Is ‘On The Cusp of A Non-AI Recession’
Economist Justin Wolfers echoed similar concerns during his appearance on CNN’s Laura Coates Live this week, saying that “the non-AI parts of the economy” are flatlining, adding that “we’re on the cusp of a non-AI recession.”
“We are in some sense lucky to be held up by AI right now,” he said, while acknowledging that the “AI boom doesn't create a lot of jobs,” since there are very few people who work at data centers, which are primarily filled with machines.
According to the Chief Economist at Moody’s Analytics, Mark Zandi, 22 states in the Union are currently seeing their economies contract, while 16 continue to grow, and 13 others are “treading water.”
Zandi also warned that “Lower-income households are hanging on by their fingertips financially,” while adding that despite having a job, spending and remaining engaged in the economy, the grip of such households “feels more tenuous because no one's getting hired.”
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