AI Narrative Switched, Debt Yields Spike | The Weekly Wrap

Tesla

Across the shows: 14 speakers in other episodes, 13 bullish and 9 bearish calls, past 30 days

• Steve Eisman · The Real Eisman PlaybookBearish

  Merging Tesla with SpaceX is a very bad idea; the combined company would be too complex.

  Musk disclosed that a committee was formed to discuss merging Tesla with SpaceX. Eisman thinks this is a very bad idea because SpaceX is already complicated enough. Tesla would bring an EV business that has lost massive market share to the Chinese, an autonomous vehicle division he calls questionable, and a solar business that is not very good. The combined company would be incredibly complex, difficult to manage, and hard for investors to understand.

  “Now I think this is a very bad idea. SpaceX is already complicated enough.”at 10:12

• Steve Eisman · The Real Eisman PlaybookBearish

  Tesla's flat revenue and unproven autonomous driving make its results poor and the stock a bearish story.

  Tesla's total revenue grew 0%. Automotive revenue fell 1% to $20.5 billion, and energy generation and storage fell 16% to $2.9 billion. Services was the one bright spot, up 33%. EPS fell 4% to $0.48. Eisman says the EV business has lost massive market share to Chinese competitors, and the solar business is not very good. He argues the future of Tesla depends on autonomous driving succeeding, and there is no real indication that it is succeeding.

  “Total revenues grew 0%. ... The future of Tesla hinges on the success of autonomous driving and I have to say there is no real indication that Tesla is really succeeding here.”at 11:54

CoreWeave

Across the shows: 44 speakers in other episodes, 11 bullish and 39 bearish calls, past 30 days

• Steve Eisman · The Real Eisman PlaybookBearish

  CoreWeave's rising debt yield means AI data center economics no longer work.

  CoreWeave's cost of debt climbed from 9% to 15%. Eisman argues that when a neocloud company with a weak balance sheet raises future debt at 15%, the economics of building AI data centers stop working, so the cost of building them becomes prohibitive for some builders. The debt-market repricing hit the whole AI complex last week and this week and now matters more to the market than earnings. Nebius is in the same weak-balance-sheet position. He says fixed income investors care about math, not stories, so CoreWeave will struggle to fix its bad fixed-income narrative. Eisman notes this could change if AI financing conditions improve.

  “The cost of [CoreWeave's] debt climbed from 9% to 15%. ... At a debt cost of 15% I believe the economics of an AI data center don't work.”at 4:11

Equifax

• Steve Eisman · The Real Eisman PlaybookUncertain

  Equifax's mortgage-scoring exposure is hit by the FHFA attack; results not great but not a disaster.

  Equifax is down 19% this year as Bill Pulte, head of FHFA, attacks the mortgage credit scoring system, including FICO and all three credit bureaus. Equifax has the largest share of its business from mortgage scoring. Revenue rose 10% and US mortgage revenue rose 15%. Q4 EPS guidance was 3% below consensus. The stock rose on earnings day because the results were not as bad as expected after a year of declines.

  “Equifax has the largest percentage of its business coming from mortgage scoring. I would call Equifax's results not great, but not a disaster.”at 8:06

Space Exploration Technologies

Across the shows: 27 speakers in other episodes, 21 bullish and 11 bearish calls, past 30 days

• Steve Eisman · The Real Eisman PlaybookBearish

  SpaceX's massive capex plans will turn it into a cash drain needing large capital raises.

  Eisman calls SpaceX's quarterly results strong, with SI revenue up 161% and profitability turning positive, but he is concerned about capex. Quarterly capex was $29.6 billion, up 185% quarter over quarter. Management signals large further plans, including a $100 billion Starbase Louisiana budget and capex for Grok models and data centers. Starlink, once a cash cow, now faces competition from carriers such as T-Mobile and is becoming a cash drain. Eisman expects SpaceX to need multiple billions in new capital, a large number he cannot yet size. He also says CoreWeave's funding stress shows the environment for raising AI capital has worsened, so SpaceX's cost of capital has risen and could become a major future problem.

  “My concerns about SpaceX are not this quarter's results, It's the CAPEX. ... SpaceX is going to have to raise multi billions in capital. How much? I don't know yet but it's a huge number.”at 10:34

Netflix

Across the shows: 15 speakers in other episodes, 9 bullish and 11 bearish calls, past 30 days

• Steve Eisman · The Real Eisman PlaybookBearish

  Netflix is going ex-growth as streaming matures and YouTube takes share in newer media.

  Netflix's EPS beat slightly, but revenue of 11.8% growth only met expectations. Fourth-quarter revenue and EPS guidance came in below the street. The company is laying off staff and removed its chief content officer and chief film officer. Eisman identifies three problems. Streaming was revolutionary but is now mature. New media has moved beyond films and series into short-form video and podcasts. YouTube has conquered these newer forms, while Netflix has been slow and stubborn.

  “Streaming was revolutionary and now it's mature. ... YouTube has conquered these newer aspects of media and Netflix has been slow and stubborn.”at 13:06

Moody's

• Steve Eisman · The Real Eisman PlaybookUncertain

  Moody's oligopoly is durable, but rate-driven slowdown in bond issuance is hurting its ratings revenue.

  Eisman says he has owned Moody's for a long time because it and S&P hold a powerful oligopoly. He argues the company is not immune to market forces, especially interest rates, because rising rates chill bond issuance. Moody's EPS of $4.14 beat last year's $3.60 but missed the $4.27 estimate. Ratings revenue at Moody's Investors Service fell 1% on slower bond issuance.

  “Full disclosure, I've owned the stock for a long time because Moody's and S and P occupy a powerful oligopoly. But that does not mean that they are immune to market forces, especially interest rates.”at 16:42

Meta Platforms

Across the shows: 37 speakers in other episodes, 38 bullish and 17 bearish calls, past 30 days

• Steve Eisman · The Real Eisman PlaybookBearish

  Meta's $825 billion AI infrastructure commitment, with no positive cash flow, is a major negative.

  Meta's results were strong: revenue rose 26%, EPS beat, and the average price per ad rose 14%, which suggests its AI products are helping ad revenue. The stock still fell sharply. Eisman's criticisms are that costs rose 68%, and that Meta has agreed to spend about $825 billion on leases and contracts for computing power and AI infrastructure. He calls that a huge commitment from a company that no longer has any positive cash flow. That spending is the negative data point he thinks the market focused on.

  “It has agreed to spend about $825,000,000,000 in the future on leases and contracts mostly related to computing power and infrastructure for artificial intelligence. Now that is a huge commitment from a company that no longer has any positive cash flow.”at 18:07

Blackstone

Across the shows: 1 speaker in other episodes, 1 bullish and 0 bearish calls, past 30 days

• Steve Eisman · The Real Eisman PlaybookBearish

  Higher rates are hurting Blackstone through real estate write-downs and deal curbs despite strong inflows.

  Blackstone's EPS fell 13% to $1.32. The positive is inflows of $63 billion, which show investors still want to invest with Blackstone despite negative publicity around private equity and private credit. The negative is that higher rates cause write-downs of real estate property valuations and curb deal making. Eisman sees rates as the main drag on the business.

  “On the positive side, inflows were $63,000,000,000 ... But on the negative side, higher rates cause a write down of real estate property valuations and higher rates are curbing deal making.”at 19:25

Comcast

• Steve Eisman · The Real Eisman PlaybookBearish

  Comcast lost 144,000 broadband customers, showing intense competition; stock is down over 20% this year.

  Comcast beat on EPS, driven by media, Peacock, and good free cash flow. Eisman says the thing investors care most about is broadband subscribers, and Comcast lost 144,000 of them. That loss means competition remains intense, which is why Comcast is down over 20% this year.

  “the thing investors care the most about is broadband subscribers. And here Comcast lost 144,000 customers. Which means that competition remains intense”at 19:45

NVR

• Steve Eisman · The Real Eisman PlaybookBearish

  Even a good homebuilder like NVR cannot withstand higher mortgage rates; EPS and orders missed.

  NVR is a very good Mid-Atlantic homebuilder, but even good operators cannot withstand higher mortgage rates. EPS fell 20% to $89.45 and missed consensus. New orders of 4,391 missed the 5,043 consensus.

  “It is a very good operator but even good operators cannot withstand higher mortgage rates.”at 20:07

Europe's economy

• Steve Eisman · The Real Eisman Playbook

  French sovereign bonds are in trouble: debt at 120% of GDP and spreads widest since 2011.

  France's debt is 120% of GDP, which Eisman says is too high. This week the premium on French 10-year bonds over Germany rose 16 basis points to 175, the highest since 2011, when Europe had a sovereign bond crisis. He says the riots are not the whole story. Unlike the US, France has no reserve-currency advantage, and no one has to own French sovereign bonds.

  “French sovereign bonds are in big trouble and it's not just because of the riots. France's debt to GDP is at 120% and that in my view is too high.”at 2:58

US deficit & government debt

• Steve Eisman · The Real Eisman Playbook

  US debt at 120% of GDP is safer than France's, given dollar reserve status and Treasury demand.

  Eisman acknowledges that US debt is also 120% of GDP and that lower debt would be better. He argues the US has advantages France lacks. The dollar is the reserve currency of the global financial system, and that system functions on Treasuries. Many large investors worldwide must own Treasuries, which creates structural demand that France's bonds do not have.

  “But The US has advantages [that] France does not. The dollar is the reserve currency of the world and the entire global financial system, and I can't emphasize this enough, functions on treasuries. That means that many large investors all over the world must own treasuries.”at 3:36

Telecom & connectivity

• Steve Eisman · The Real Eisman Playbook

  Starlink is becoming a viable wireless competitor, the 'telepocalypse', pressuring carriers.

  Eisman coined the term 'telepocalypse' for SpaceX's Starlink becoming a much more viable competitor to existing wireless carriers. On SpaceX's call, Musk reaffirmed plans for a fourth major mobile operator in the US. Eisman says creating such a carrier would be unbelievably expensive, but no one wants to spoil a good narrative. T-Mobile, Verizon and AT&T fell 2% to 6% the day after, even though AT&T's own results were okay.

  “The telepocalypse stands for SpaceX's Starlink division becoming a much more viable competitor to existing wireless carriers.”at 15:50

Enterprise AI adoption & AI software

• Steve Eisman · The Real Eisman Playbook

  LLMs and agentic AI apps have no moats, so Meta's Muse success is vulnerable.

  Meta has momentum from the early success of its agentic AI product Muse. Eisman says he holds the view that LLMs and agentic AI apps have no moats. He argues it will be interesting to see how well Meta does when Muse is challenged, since competitors can replicate such products.

  “I am of the view though that LLMs and agentic AI apps have no moats and it will be interesting to see how well Meta does when Muse is challenged.”at 18:02

Software & SaaS

• Steve Eisman · The Real Eisman Playbook

  IBM's software and consulting face AI disruption, and its 5% growth is paltry.

  Eisman argues IBM is no longer an important company. At a $240 billion market cap it is too small to challenge large tech companies, and most people don't care when it reports. It is now mostly a software and tech consulting company, and both divisions run the risk of being disintermediated by AI. IBM beat on revenue and EPS, but revenue grew a paltry 5%.

  “It's now mostly a software and tech consulting company and both of these divisions run the risk of being disintermediated by AI.”at 18:54

US housing

• Steve Eisman · The Real Eisman Playbook

  Buying a home no longer builds wealth; home prices more likely than not fall for years.

  Eisman says mortgage rates above 7% lock in sellers with 3% to 3.5% loans. For a buyer's monthly payment to match the seller's, the price has to be about half the seller's original purchase price, so existing home sales are at multi-decade lows. Insurance, property taxes, and land fees have also risen, so housing is unaffordable even at lower rates. He concludes that the days of buying a home to create wealth are over, and that prices will more likely than not fall in most parts of the country for several years.

  “I think the days of people buying a home and creating wealth are over. In fact, I think it is more likely than not that housing prices will go down in most parts of the country for the next several years.”at 21:55