Steve Eisman sold his Google position a couple of months ago to reduce his artificial intelligence exposure, the investor told CNBC's Squawk Box. Eisman, the former Neuberger Berman portfolio manager who built his reputation shorting subprime mortgages at FrontPoint Partners during the 2008 housing market collapse, now holds cash instead of rotating into defensive stocks. He warned that the entire market has become concentrated in a single AI trade, with investors either wanting AI exposure or wanting nothing at all.
Eisman Sold Google Near Peak as Stock Dropped 20%
Eisman stated he wanted to reduce his AI exposure when explaining the Google sale. "I sold my Google a couple of months ago. I've owned Google. I can't even tell you how long I've owned Google, but I felt I wanted to reduce my exposure to AI," Eisman said.
Alphabet peaked at $408.61 on May 18, its record high. The stock closed at $319.74 on July 24, a drop of roughly 20% in about two months. One session did much of the damage—Alphabet fell 7.1% on July 23, the day after Q2 earnings. The company had raised 2026 capital spending guidance to a range of $195 billion to $205 billion.
Eisman did not rotate into defensive stocks. "People either want to buy AI or they don't want to buy AI, but they don't want to shift out of it to buy Clorox," he said. The cash remains uncommitted. "I'm just sitting... I've got cash," he said. He does not expect the AI debate to settle "within the next two weeks."
Eisman Identifies Market Concentration in AI and Tech
Eisman's concern centers on concentration rather than valuation. "It's all one trade. It's literally one," Eisman said.
He explained his calculation for a standard portfolio: "Even people who think they're diversified because they own 60% stocks and 40% bonds are missing the fact that they're actually not diversified... more than 50%... is tech and AI related. And of the 40% of bonds, most of the new issuance of bonds is AI related."
Information Technology represented 37.19% of the S&P 500 on July 24, and Communication Services added 9.34%, totaling 46.5% combined. Adding Amazon and Tesla from Consumer Discretionary brings the figure to 51.5%. The 10 largest constituents make up 36.85% of the index.
Bond Market Shows AI Hyperscaler Dominance in New Issuance
High Technology made up 14.2% of US corporate bond issuance in the second quarter, according to SIFMA. Financials led with 46.4%.
The Bank of England reported this month that five AI hyperscalers held 3% of outstanding US investment-grade debt at the end of 2025, yet accounted for over 15% of this year's issuance by early May. In the high-yield market, those issuers took 41% of non-refinancing US high-yield issuance this year, from a 1% index weight.
Amazon priced $37 billion of notes on March 10, the largest of these deals, per its SEC filing. Meta raised $30 billion last October and another $25 billion in April. The filings state proceeds go to general corporate purposes, so none of this debt is formally earmarked for AI.
Eisman Warns of Correction Risk if AI Fails Commercially
Asked what happens if AI fails commercially, Eisman stated, "I think we have a big correction." He would not size the potential correction.
"What... scares me is that it's all one trade. So it better succeed," he added.
The Bank for International Settlements warned in June that fixed income is "one obvious vulnerability" if hyperscalers slow capital spending.
Crypto Trades in Same Risk Category as AI Stocks
Bitcoin trades near $64,980 and is down about 45% over the past year. The link between crypto and AI stocks showed up in June, when a Big Tech selloff dragged Bitcoin lower. Retail flows have favored semiconductor ETFs over crypto funds this year.
Chinese hedge funds have started trimming AI winners in a visible rotation, and one 2008 bubble forecaster has warned of a 70% drawdown.
Eisman Expects AI Technology to Succeed Despite Trade Risk
Eisman is not calling a crash. He said he would not short this market and expects the technology to work.
"It's going to be... something really good. That doesn't mean that everybody succeeds," he said.
Microsoft and Meta report earnings on July 29, and Amazon follows on July 30. Three more capital expenditure updates land inside 72 hours.
FAQ
What did Steve Eisman do with his Google position?
Steve Eisman sold his Google position a couple of months ago to reduce his exposure to artificial intelligence. He told CNBC's Squawk Box that he has owned Google for an extended period but decided to exit the position. He now holds cash and has not bought a replacement stock.
Why does Eisman say the market is one trade?
Eisman stated that the entire market has become concentrated in AI-related investments. He explained that even investors who believe they are diversified with 60% stocks and 40% bonds actually have more than 50% exposure to tech and AI-related assets. He noted that most new bond issuance is also AI related, making the market "literally one" trade.
How much did Alphabet stock drop after Eisman sold?
Alphabet peaked at $408.61 on May 18 and closed at $319.74 on July 24, representing a drop of roughly 20% in about two months. The stock fell 7.1% on July 23, the day after the company reported Q2 earnings and raised its 2026 capital spending guidance to a range of $195 billion to $205 billion.
