Greenlight Capital's Q3 2025 full letter to investors can be found below in PDF format. First a poignant excerpt from David Einhorn about AI followed by the full PDF (which can be found below).
Significant scientific breakthroughs in model architecture, learning paradigms, computing efficiency, or something fundamentally new will be required to achieve AGI. The experts in the field simply believe they will come. Perhaps they will be proven right, or perhaps the challenge of getting computers to genuinely reason like humans will prove far more difficult than expected. What we do know for certain is that the BSDs that want the world to spend trillions have huge financial incentives to be believers. In case you haven’t noticed, Wall Street is also being paid a lot to promote the story.
And promote it they do. Recently, a leading bank published a report that anticipates $1.1 trillion of AI revenues in 2028 at 70% margins. Regardless of whether this prediction proves accurate, we must question what is truly AI revenue, and who stands to profit from it.
Here is how we see it (these numbers are illustrative):
• The consumer or business user spends $1 on a ChatGPT subscription (OpenAI revenue).
• OpenAI provides the service by spending $2 on Microsoft AI infrastructure (Microsoft revenue).
• Microsoft spends $0.60 on leasing GPUs from CoreWeave to handle the compute load (CoreWeave revenue).
• CoreWeave spends $2.40 on chips from NVIDIA (NVIDIA revenue) and $2.40 on other Capex (revenue to a variety of companies).
So altogether, $1 of loss-making customer revenue cascades into more than $8 of aggregate AI revenue across the supply chain. Microsoft and NVIDIA show excellent margins that are subsidized by the losses of OpenAI and CoreWeave. In fairness to CoreWeave, its capital spend can be reused until it depreciates, and we are stating these amounts because CoreWeave’s Capex goes directly into the reported revenue of NVIDIA and its other suppliers.
Rather than external enterprises or consumers spending new money, much of the AI revenue comes simply from AI companies buying products and services from each other. The largest announced third-party deal is KPMG’s annualized $400 million spend with Microsoft, which includes cloud services that might not be entirely AI related. In the context of this discussion, $400 million is but a pittance.
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As we all know, investing in the internet in the late 1990s and holding through 2002 proved to be a very poor decision. It is often difficult for investors to separate the importance of innovations from the merits of the related investments. The capital spending numbers being thrown around today are so extreme that it’s really, really hard to understand them. There is a reasonable chance that a tremendous amount of capital destruction is going to come through this cycle, even if AI ultimately turns out to be everything it’s cracked up to be... and more.
Chevy Chase’s SNL line about no math was a good joke. But when it comes to AI, doing math is essential. The figures simply must add up, and right now the math is... challenging.
We write all of this to explain why we are refusing to participate in the excitement. It has been a good year for the S&P 500 and a great year for the few dozen companies central to the AI story. It has been harder to make money on long investments outside of this ecosystem, because most of the rest of the economy has been floundering. While others are doing better than us for the time being, many are taking risks that we find hard to get comfortable with.
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We are ignoring expenses to other vendors like electricity providers. Next year CoreWeave is projected to only spend $1.50 of Capex per dollar of revenue. We estimate the $8 of revenue is amplified into $100-$200 of stock market wealth.
In our experience, when the tide turns, it does so quickly and without warning. Even 25 years later, it’s still not clear why the internet bubble popped when it did. Our view is that it was due to the last buyer buying and the last short seller covering – a phenomenon that is very difficult to time. This remains the most expensive market we have experienced, and we don’t see a better option than continuing to be cautious.
See Greenlight Capital's full investor letter here.
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