Investor and entrepreneur Kevin O’Leary warned investors that excessive borrowing can quickly destroy the value of an otherwise strong investment when markets turn against them.
O’Leary Warns About Investment Leverage
On Wednesday, O’Leary said on X that excessive leverage is one of the biggest risks facing investors, arguing that even fundamentally strong businesses and real estate projects can suffer when debt levels become too high.
"The biggest killer of investment value is too much leverage," he said.
He noted that investors can have "a great company or real estate project," but excessive borrowing can leave them vulnerable when market conditions deteriorate.
"When you’re overleveraged and the market turns against you, your equity can get wiped out fast," O’Leary said.
O’Leary Flags 30% Leverage Risk
O’Leary acknowledged that leverage can be useful and is sometimes necessary for investors. However, he cautioned against treating borrowed money as an inherently positive tool.
"Leverage is not always your friend," he said. "You have to use it sometimes."
He added, "Once you’re taking on more than 30% leverage, you should understand exactly how much risk you’re putting on the table."
High Leverage Risks
Last month, JPMorgan Chase & Co. (NYSE:JPM) CEO Jamie Dimon warned that high leverage across financial markets could amplify disruptions and volatility, while hidden borrowing could increase risks.
He said leverage alone did not create systemic risk but could trigger rapid market moves and higher collateral requirements.
Previously, SkyBridge Capital CEO Anthony Scaramucci warned investors against excessive leverage in cryptocurrency trading.
Analysts pointed to the October crypto flash crash, which triggered the market’s largest liquidation event, as an example of how leverage could amplify losses.
Gerber Warned About AI Investment Leverage
In August, Investor Ross Gerber said the collapse of former OpenAI researcher Leopold Aschenbrenner’s AI-focused hedge fund Situational Awareness highlighted the dangers of excessive leverage rather than undermining the AI investment thesis.
He warned that leverage could amplify gains but quickly magnify losses when markets reversed, potentially wiping out years of gains.
Gerber contrasted leveraged investing with Warren Buffett’s approach of building wealth through long-term compounding without excessive leverage.
Disclaimer: This content was partially produced with the help of AI tools and was reviewed and published by Benzinga editors.
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