Legendary hedge fund investor David Einhorn is positioning his firm for the AI boom through an unconventional strategy: betting on affordable tech stocks like HP rather than chasing expensive, high-profile AI plays. The Greenlight Capital founder revealed his contrarian approach in a recent Bloomberg TV interview, explaining why he believes computer hardware manufacturer HP represents a compelling AI investment opportunity.
Einhorn’s thesis centers on the emerging “AI PC” market and natural replacement cycles. He notes that many personal computers were purchased during the COVID-19 pandemic in 2020 and 2021, making them due for replacement. More importantly, if AI-enabled PCs become mainstream—a trend many tech analysts predict—HP could experience stronger-than-normal sales cycles. This positions the company to benefit from AI adoption without the premium valuations attached to pure-play AI stocks.
The financial metrics make HP particularly attractive to value-oriented investors like Einhorn. Trading at just 10 times earnings as of Thursday afternoon at $36.21 per share, HP offers a stark contrast to the broader tech sector’s expensive valuations. The stock has already gained over 20% year-to-date, but Einhorn sees significant runway ahead. HP pays a dividend yield exceeding 3% and returns 100% of its free cash flow to shareholders through dividends and buybacks, with the buyback yield alone reaching approximately 7%.
Einhorn projects mid-to-high teens growth for HP over the next several years, driven by the PC replacement cycle and share count reduction from aggressive buybacks. This growth potential at a 10x earnings multiple represents what he calls “very reasonable” value in an otherwise expensive market.
The investor’s caution about mainstream AI stocks reflects broader market concerns. In Greenlight’s latest quarterly letter, Einhorn warned about “nosebleed valuations” in the tech sector, noting the overall market trades at roughly 23 times earnings despite being in a strong economic cycle. For value investors who “pay attention to what I pay for things,” chasing expensive AI darlings has become increasingly unappealing.
This strategy exemplifies a growing trend among sophisticated investors: seeking AI exposure through indirect plays rather than paying premiums for obvious AI beneficiaries.
Key Quotes
PCs are due for a regular replacement cycle, because a lot were bought after COVID in 2020, and 2021, and we could have a better than normal cycle if ‘AI PCs’ turn out to be a thing
David Einhorn explained his bullish thesis on HP to Bloomberg TV, highlighting how the convergence of natural replacement cycles and emerging AI PC technology could drive accelerated growth for traditional hardware manufacturers.
So we see mid-teens, high-teens growth for the next couple of years, just as you go through a cycle share count reduction, and so for this you’re paying just 10 times earnings — which is very reasonable from our perspective
Einhorn outlined the compelling value proposition of HP, emphasizing how investors can gain AI exposure at reasonable valuations while benefiting from shareholder-friendly capital allocation policies.
I think the market as a whole is really quite expensive, considering we’re in a strong part of the economic cycle and we’re about 23 times earnings. So it’s hard for me, as somebody who actually pays a lot of attention to what I pay for things, to want to chase those things
The Greenlight Capital founder explained why he’s avoiding mainstream AI stocks despite their growth potential, citing valuation discipline as a core investment principle even during technological transformations.
Our Take
Einhorn’s HP investment thesis represents sophisticated thinking about second-order AI beneficiaries. While most investors focus on chipmakers, cloud providers, and AI software companies, the real wealth creation may occur in less obvious places. The AI PC concept isn’t hypothetical—Microsoft, Intel, and AMD are already pushing AI-capable processors and on-device AI features. If this trend materializes, HP’s enterprise relationships and manufacturing scale become significant competitive advantages.
The valuation arbitrage Einhorn identifies is striking: paying 10x earnings for potential mid-teens growth in an AI-driven cycle versus 40-50x+ earnings for pure-play AI stocks. This risk-reward profile appeals to value investors while maintaining meaningful AI exposure. However, the thesis depends on AI PCs becoming a genuine upgrade catalyst rather than a marketing gimmick—a question that remains unresolved. Einhorn’s track record and contrarian approach make this a position worth monitoring as the AI hardware cycle evolves.
Why This Matters
Einhorn’s investment approach signals an important shift in how institutional investors are thinking about AI exposure. Rather than crowding into expensive, high-profile AI stocks like Nvidia or major cloud providers, sophisticated money managers are identifying overlooked beneficiaries of AI adoption. This matters because it suggests the AI revolution’s economic impact will be broader and more distributed than current market pricing indicates.
The “AI PC” concept represents a potential inflection point for the consumer technology market. If AI capabilities become standard features in personal computers—enabling on-device AI processing, enhanced productivity tools, and new user experiences—it could drive a massive hardware upgrade cycle affecting hundreds of millions of devices globally. This would benefit established hardware manufacturers like HP that have distribution scale and enterprise relationships.
Einhorn’s valuation concerns also highlight growing risks in the AI sector. With the broader market trading at elevated multiples and AI stocks commanding premium valuations, the potential for disappointment increases if growth expectations aren’t met. His strategy of finding value in AI-adjacent plays rather than core AI stocks offers a roadmap for investors seeking exposure without excessive risk.
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