Billionaire investor Steve Eisman warns of a very different economic reality if one were to remove the gains of AI from the equation.<\/p>\n
The financial analyst best known for predicting the 2008 housing collapse\u2014as made famous by the 2015 film \u201cThe Big Short\u201d\u2014said in a recent episode<\/a> of The Real Eisman Playbook podcast that U.S. economy is a \u201ctale of two cities:\u201d While GDP growth may indicate a robust economy, by removing AI expenditures from the picture, you instead see stagnation.<\/p>\n The U.S. GDP in 2024 was $ 29.18 trillion, estimated to grow by 1.8% in 2025, Eisman said. That 1.8% growth is worth about $530 billion. But if you were to add the AI infrastructure spending by Magnificent Seven companies like Google<\/a>, Amazon<\/a>, and Microsoft<\/a>, it would total about $400 billion, by Eisman\u2019s calculations, meaning if you were to subtract that sum from the projected growth of the U.S. GDP, it would amount to very little.<\/p>\n \u201cThe US economy is not even growing, really 50 basis points outside of AI,\u201d Eisman said. \u201cSo clearly there have to be pockets of weakness.\u201d<\/p>\n A wealth of economists and tech giants have warned<\/a> of an expanding AI bubble as investments in the technology mount with little robust evidence<\/a> so far of the technology\u2019s transformative ability. As concerns over little job growth<\/a> and creeping inflation<\/a> grow, so, too, does worry about the health of the U.S. economy.<\/p>\n Signs of a limping consumer piles onto these fears. According to a New York Federal Reserve Bank report<\/a> released in August, household debt increased by $185 billion to reach $18.39 trillion in 2025\u2019s second quarter, while auto loan balances increased by $13 billion, hitting $1.66 trillion. Student loan balances also inched up $7 billion to total $1.64 trillion.<\/p>\n \u201cThe pain is going to happen across the board,\u201d Lakshmi Ganapathi, founder of investment research firm Unicus Research, told Eisman in the podcast. \u201cIt\u2019s in the retail. It\u2019s in the buy-now-pay-later. It\u2019s definitely in the auto.\u201d<\/p>\n Warning signs in the auto sector<\/strong><\/p>\n Ganapathi points to the auto sector as a case study for a hidden way consumers are struggling. During the pandemic, the stimulus checks many Americans received\u2014totalling 476 million payments worth $814 billion<\/a>\u2014made consumers appear wealthier than they really were to banks, she said. This allowed them to qualify for prime loans, despite not truly having that wealth.<\/p>\n \u201cThe credit score prime was an illusion,\u201d Ganapathi said. \u201cWhatever the prime credit scores that are sitting on the [asset-backed security] are technically subprime.\u201d<\/p>\n The pandemic also marked a period of booming car sales, many above sticker price, as original equipment manufacturers (OEMs) hiked prices as a result of supply chain issues and increased consumer demand.<\/p>\n \u201cA lot of OEMs got a little greedy\u2014a lot greedy,\u201d Ganapathi said. \u201cSo they manufactured a lot of cars, increased the price of the cars because there was money everywhere\u2014too much liquidity\u2014and people are buying Maserati when they can\u2019t even in real life afford Honda<\/a>.\u201d<\/p>\n But dealers started to take on more inventory<\/a> they could sell, compressing prices of new cars and pushing up prices of used cars<\/a> as demand increased, Ganapathi noted. Last month, CarMax<\/a> reported<\/a> a surge in loan loss provisions, with CarMax Auto Finance (CAF) income decreasing 11.2% to $102.6 million for the quarter, and the company noting stronger sales in older, higher mileage vehicles.\u00a0<\/p>\n These older used cars may be cheaper for consumers, but maintenance costs more, Ganapathi said. While these cars may be all consumers can afford, banks aren\u2019t interested in repossessing them because the vehicle\u2019s value is less than its repossession and sale. Car repossessions are not only soaring<\/a>, but a smaller percentage of cars are even able to be repossessed.<\/p>\n \u201cPeople are getting killed when they go to repossess the car, literally getting killed,\u201d Ganapathi said. \u201cConsumers are collapsing.\u201d\n<\/p>\n