Hedge fund manager Daivd Einhorn: Gold will significantly outperform the Nasdaq in the next 3-5 years.
David Einhorn, founder of Greenlight Capital, predicts that gold will significantly outperform the Nasdaq over the next three to five years, with the gap potentially being quite substantial.
In a recent interview with Morgan Stanley, David Einhorn warned that Nasdaq's large-cap tech stocks are facing a shift from "asset-light monopolies." The business model is undergoing a fundamental shift towards capital-intensive competitive businesses , while the long-term upward trend in gold prices continues to strengthen.
Einhorn characterized this assertion as a "bold prediction," stating that the continued out-of-control US fiscal situation, the erosion of the dollar's reserve status, coupled with the global trend of "de-dollarization," are systematically enhancing the long-term strategic value of gold.
At the same time, he believes that the wave of AI capital expenditure is creating long-term risks to the profits of tech giants.
This assessment is directly reflected in Greenlight Capital's portfolio structure. Einhorn revealed that gold is currently the fund's largest long macro position, and it has been held since 2008. He emphasized:
As long as the federal budget is out of control, gold is my friend.
Gold: The preferred safe-haven asset amid fiscal stagnation
Einhorn's bullish logic on gold is rooted in long-standing concerns about the global fiscal and monetary order.
He believes that the fiscal deficit problem in major economies, especially the United States, is far from under control. He directly named the US Treasury Secretary's 3% deficit-to-GDP target, stating:
I don't know how he plans to achieve this goal; so far, there seems to be very little progress.
At the monetary system level, Einhorn pointed out that the Western countries' freezing of Russia's foreign exchange reserves is a landmark signal, prompting many countries to reassess the safety of holding dollar assets . He stated:
The significance of reserves lies in their ability to be used when needed. If they cannot be used, then what kind of reserves are they?
He added that after the parabolic surge in gold prices from January to February this year, it may enter a period of consolidation in the short term. Einhorn pointed out:
I wouldn't be surprised if gold remained stagnant for a year or even a year and a half.
He emphasized that this is a long-term judgment over several years, and that gold should digest the speculative peak and resume its upward trend within five years.
Tech Giants: The Painful Transformation from "Capital-Light" to "Capital-Intensive"
Einhorn's pessimistic outlook on Nasdaq stems from a sober analysis of the AI capital spending frenzy.
He believes that the current profits in the technology sector are seriously inflated, and the lag effect of depreciation will gradually erode profitability in the future.
He used memory chips as an example to illustrate this mechanism: if memory prices rise to five times their original level, memory suppliers' profits explode, but the high-priced equipment spent by hyperscale cloud computing providers is capitalized, with zero current expenses and deferred depreciation pressure to the future.
Einhorn stated:
I saw a calculation that, based on the current scale of AI construction, by 2033, depreciation expenses will be on par with the profits of existing businesses of hyperscale cloud computing providers, and this is under the assumption that existing businesses continue to grow at the historical rate.
This means that corporate profits will then depend entirely on the incremental returns from AI business, and these returns will face extremely high competitive pressure.
The more fundamental assessment is that large tech companies are losing the foundation for their high valuations. Einhorn emphasizes:
They are shifting from asset-light, monopolistic businesses to capital-intensive, highly competitive ones. In capital-intensive industries, capital chases returns, and excess returns are eventually consumed by competition. Once this happens, Nasdaq valuations will face reassessment.
AI Value Chain: Users, Not Providers, Are the Beneficiaries
Regarding the long-term industrial landscape of AI, Einhorn holds a view that contradicts the mainstream market narrative: the value created by AI will ultimately flow primarily to users rather than providers.
He pointed out that the AI field lacks the "moat" necessary to build long-term monopolistic profits. Unlike the network effects of social platforms such as Facebook, the user experience of AI is highly personalized, and users do not form mutually reinforcing network value.
Unlike the economies of scale in traditional software, AI is a capital-intensive business, and its marginal costs do not approach zero. Einhorn points out:
If 10 AI providers can offer roughly the same service, and users can switch between them at any time with low cost, then the providers will not be able to take much profit from it, and the pricing will approach the marginal cost.
In terms of investment strategy, Einhorn did not directly invest in AI-themed stocks that are widely recognized in the market. He stated that these stocks "are not cheap, and everyone is watching them."
Greenlight Capital's approach is to hold companies that inherently possess investment value and are expected to benefit from AI's cost reduction and efficiency improvement in the long term.
He cited the example of health insurance giant Centene (CNC), noting the significant potential for AI applications in data processing and document automation.
Even if the AI benefits don't materialize, I still like this stock for other reasons.
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