Investor Steve Eisman said Monday that the stock market will suffer a big correction if the artificial intelligence boom fails to meet expectations [1, 2].

Eisman, known for his role in "The Big Short," said that the current market valuation relies heavily on AI's success. If the technology does not deliver tangible results, the resulting downturn could be significant because investors may have underestimated the structural risks of the sector [1, 3].

Speaking during an interview on CNBC’s "Squawk Box" program, Eisman focused on the concept of "moats," or durable competitive advantages that protect a company from competitors [1, 2]. He said that many AI companies lack these protections, which makes their long-term dominance unlikely [3].

"AI has no moats, which is not a recipe for longevity," Eisman said [3].

Eisman, a former Neuberger senior portfolio manager and host of "The Real Eisman Playbook" podcast, said that the primary risk factor in the U.S. markets has shifted [1, 2]. While previous concerns often centered on the stability of financial institutions, he believes the AI narrative has overtaken other indicators [4].

"Bank credit quality may no longer be the warning sign; AI is now the biggest story in markets," Eisman said [4].

He further said that the market's reliance on AI growth creates a vulnerability if the technology fails to succeed [1, 5]. "If AI doesn't succeed, the market will have a big correction," Eisman said [1].

“"If AI doesn't succeed, the market will have a big correction."”

Eisman's warning highlights a growing concern among value investors that AI valuations are based on speculation rather than sustainable business models. By arguing that AI lacks 'moats,' he suggests that the ease of replicating AI tools prevents companies from maintaining the pricing power necessary to justify current stock premiums. This perspective frames the AI boom as a potential bubble where the lack of proprietary advantage could lead to a rapid devaluation of tech stocks.