Steve Eisman, the man who bet against housing on the cusp of the Great Financial Crisis, hasn’t been nearly as bearish on the AI boom as you’d think, at least not half as bearish as Dr. Michael Burry, who also shorted housing before its collapse back in 2008. Eisman, who’s moved on from Neuberger Berman to run his own show with The Real Eisman Playbook, recently had a sit-down with CNBC, warning that China could cause an AI price war of sorts.
Whether Chinese models, which are leading the charge lower on costs, end up steering the AI race in another kind of direction, remains the multi-trillion-dollar question. And while Eisman has one of the most balanced approaches amid this AI revolution, he did remark on one important risk that could have a far-reaching impact across much of big tech, perhaps more far-reaching than most investors and analysts realize.
Steve Eisman noted that there might be an “Achilles’ heel” in this AI revolution, especially if “something bad happens to Anthropic and OpenAI.”
Indeed, a big chunk of big tech has far too many eggs in the baskets of either or both AI labs. And if China were to start taking market share with their cheaper open-weight model, perhaps Eisman is right to shine a light on the rise of very capable and affordable new Chinese models. In my view, Eisman is right to highlight the risks that few investors may consider as they prepare for the big IPOs of Anthropic and, eventually, OpenAI.
This wouldn’t be the first time a Chinese model upended the AI trade
Having a look at the large language model (LLM) leaderboards, you’ll see that Anthropic and OpenAI models are still at the top of the pack. But not too far behind lie some models from Chinese companies that are leading on price. Whether we’re talking about Kimi K3, Qwen 3.8 Max from Alibaba (NASDAQ:BABA | BABA Price Prediction), GLM-5.2 from Z AI, or DeepSeek V4 Pro from DeepSeek, the Chinese AI innovators are more than worth keeping tabs on.
Even if it’s unlikely that Chinese models crack the top three over the medium term, these Chinese firms are serious challengers on price, and with all the buzz surrounding open-weights, questions linger as to whether their very unique take on AI could be the one that ultimately gains share and wins the race from out of left field.
So, while OpenAI and Anthropic may be in the top two spots for now, questions linger as to how long they’ll stay there and what could happen if they’re forced to lower the bar on price more aggressively in response to dirt-cheap Chinese models.
Indeed, both companies are spending obscene sums of cash. And any price cuts would push them even further away from breaking even. With OpenAI recently slashing prices for two of its popular ChatGPT-5.6 AI models, it feels like a price war of sorts has already begun.
Chinese AI models are on the ascent, and they do pose a serious risk to the AI trade
Though it’s too early in the game to tell if Chinese model makers have put their foot on the gas in a race to the bottom in pricing, I do think that the commoditization of AI models is a gigantic question mark for investors to ponder, especially given how much the hyperscalers and Oracle (NYSE:ORCL) stand to benefit from the success of OpenAI and Anthropic.
As for Nvidia (NASDAQ:NVDA), a price war is less than ideal, at least in my humble opinion. If OpenAI and Anthropic start lowering prices, and signs point to a more rapid commoditization curve, perhaps the only reasonable thing for the hyperscalers to do is to put a cap on CapEx, or worse, trim into that CapEx. Despite strong AI demand, I do think that a price war warrants CapEx discipline, which, in turn, might lead to moderating growth for some of the top semi plays moving forward.
Of course, if Chinese AI labs do end up taking significant share and Nvidia can’t gain ground in the Chinese market, the firm might be in for a bit of a nasty correction, perhaps one that jolts Dr. Burry’s short. Any way you look at it, Eisman is right: Chinese AI is a risk that AI investors need to keep tabs on, especially given the hefty negative cash flows of OpenAI and Anthropic, and how much skin the hyperscalers and other tech titans have in the game.
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