AI's Mixed Results Fuel Fears of Looming Collapse, Einhorn Warns

The tech sector's rush to embrace artificial intelligence is echoing the reckless exuberance of the dot-com bubble, according to David Einhorn, the hedge fund manager who famously shorted the 1990s internet frenzy. Einhorn, who now runs Greenlight Capital, told Bloomberg that Americans are "turning a deaf ear" to AI risks, with a potential collapse worse than the 2008 financial crisis looming if current trends continue. His warning comes as enterprise AI companies like C3 AI and Palantir Technologies post mixed results, highlighting both the sector's promise and its fragility.

C3 AI (NYSE: AI), a pioneer in enterprise AI applications, recently announced deeper integrations with Microsoft's Copilot, Fabric, and Azure AI Foundry platforms. The partnerships aim to streamline AI deployment for businesses, enabling users to query data, invoke applications, and automate workflows through conversational interfaces. However, the company's financial struggles underscore the sector's volatility. C3 AI reported a 19% year-over-year revenue decline in its most recent quarter, with a net loss of $117 million. Leadership turmoil, including founder Thomas Siebel's departure due to health issues, and a withdrawn full-year guidance have further eroded investor confidence. Despite these challenges, C3 AI maintains strong ties to Microsoft, with roughly 90% of its business now flowing through Azure, AWS, and Google Cloud.

In contrast, Palantir Technologies (NASDAQ: PLTR) has emerged as a dominant force in AI-driven data analytics. The company's Q3 2025 results showed a 62.8% year-over-year revenue surge to $1.18 billion, driven by its Artificial Intelligence Platform (AIP) and expanding contracts with the U.S. military and commercial clients. Palantir's partnership with NVIDIA, which combines its ontology framework with NVIDIA's CUDA-X and Nemotron models, has positioned it as a critical infrastructure provider for enterprise AI. The firm's Rule of 40 score-a metric combining growth and profitability-hit 114, far outpacing peers, while its 51% operating margin and $6.44 billion cash reserves highlight its financial resilience.

UiPath (NASDAQ: PATH) is also leveraging AI to reignite growth, with its agentic automation engine driving faster customer acquisition and higher-margin contracts. The company reported 450 active customers using agent-based workflows and nearly 1 million agent runs since the platform's launch. While UiPath's stock has underperformed in recent months, its focus on AI-powered automation aligns with broader industry trends, mirroring the strategies of Palantir and C3 AI.

Einhorn's concerns stem from the sector's rapid expansion and the tendency to overlook risks. He cited parallels between today's AI hype and the dot-com era, noting that "the loudest voices are those profiting from the narrative, not those sounding the alarm." The warning is particularly relevant for companies like C3 AI, which faces pressure to deliver results amid a competitive landscape dominated by better-capitalized rivals. Meanwhile, Palantir's success demonstrates that profitability and growth can coexist, but Einhorn argues that the broader market is not prepared for a correction.

As enterprises continue to adopt AI at breakneck speed, the question remains whether the sector can avoid repeating past mistakes. With C3 AI's stock trading at a 6.4x price-to-sales ratio and Palantir's at over 100x, valuation disparities reflect divergent paths. Einhorn's message is clear: ignoring the risks of unchecked AI adoption could lead to a crash more severe than the 2008 crisis, especially if regulatory or technological hurdles disrupt current momentum.