David Einhorn: Investors Are Confusing Innovation With Investment Value
Wednesday, October 22, 2025 · Johnny Hopkins
In his Q3 2025 Greenlight Capital investor letter, Einhorn wrote that the funds “returned -3.6% in the third quarter of 2025, net of fees and expenses, compared to 8.1% for the S&P 500 index, bringing our year-to-date return to 0.4%, compared to 14.8% for the index.” He begins the letter with humor: “It was my understanding that there would be no math during the debates.” Yet math, he argues, is precisely what the AI boom refuses to do.
“In that context, let’s discuss Artificial Intelligence (AI)… Some BSDs are throwing around some very big numbers.” He notes that “Tim Cook promised President Trump that Apple would spend $600 billion in the U.S. over the next four years,” and that “Mark Zuckerberg promised President Trump that Meta would spend at least $600 billion in the U.S. through 2028.” Not to be outdone, “Sam Altman of OpenAI claims he wants to invest trillions in data centers and related infrastructure.”
Einhorn observes that “McKinsey & Company estimates cumulative total spending of $6.7 trillion on data centers globally through 2030.” The problem, he says, is clear: “Where will the nearly $7 trillion come from?”
Even if the Magnificent 7 cut dividends and buybacks, “they can’t do the whole AI spend without taking on a lot of leverage.” He warns that “the capital spending numbers being thrown around today are so extreme that it’s really, really hard to understand them.”
The letter continues: “There is a reasonable chance that a tremendous amount of capital destruction is going to come through this cycle, even if AI ultimately turns out to be everything it’s cracked up to be… and more.”
To him, investors are repeating the late-1990s mistake—confusing technological importance with investable value. “It is often difficult for investors to separate the importance of innovations from the merits of the related investments.”
He dissects AI’s current economics with sharp clarity: “$1 of loss-making customer revenue cascades into more than $8 of aggregate AI revenue across the supply chain.” The math, he repeats, “is essential. The figures simply must add up, and right now the math is… challenging.”
For Greenlight, that means restraint. “We are refusing to participate in the excitement.” Einhorn cautions that “while others are doing better than us for the time being, many are taking risks that we find hard to get comfortable with.” He adds, “In our experience, when the tide turns, it does so quickly and without warning.”
He closes by reminding investors that “this remains the most expensive market we have experienced, and we don’t see a better option than continuing to be cautious.”
You can read the entire letter here: