The big news was that a Chinese AI

company announced the release of its new

LLM model but for a fraction of the

cost. Now, the possibility of a price

war looms closer. Domino's is a poster

child for the K-shaped economy. [music]

It's down 20% this year. A bunch of very

important companies reported. Google,

[music] Tesla, ServiceNow, and IBM.

Let's take them one at a time. A year

ago, it was all rah-rah for AI. As the

AI story has somewhat [music] matured,

the story has shifted. China AI players

have produced great models that are much

cheaper and might create a price war.

Everyone is nervous and that nervousness

was on full display this week.

>> [music]

[music]

>> Hi, this is Steve Eisman and this is

another episode of the weekly wrap. This

is for the week ending Friday, July

24th, but recorded Thursday night, July

23rd. Before we get to the wrap, I would

like to remind everyone about our move

to Substack and explain the value add.

Substack is an exciting community of

like-minded investors and the

conversations are dynamic. The Substack

ecosystem is well-established with a

large variety of podcasters that I

interact with regularly. As a free

Substack subscriber, you will receive

emails sent directly to you every time

we release a new premium episode and a

sneak peek preview of both the video and

newsletter. You'll also have access to

our notes and restacks. The link to join

for free is in the description. Let me

quickly flag what is in our premium

Substack subscription of late. On

Wednesday, July 22nd, we released an

interview with recurring guest Ken

Sahawski, the payments analyst at

Autonomous. We discuss how AI and

agentic AI are changing the payments

landscape. And on Wednesday, July 29th,

we will release an episode with

recurring guest Brad Safalow. Brad has a

specialty in providing research where he

recommends shorting certain companies.

He also has a vast expertise in the real

estate brokerage business. We discussed

how the real estate brokerage ecosystem

is changing, and we also delved into

some of his shorts, including companies

in the for-profit education industry.

The link for premium is in the

description. Before I get to the wrap,

let me point out that Charter is

reporting this Friday, but because we

record the wrap Thursday night, I will

be commenting on it next week. On this

week's wrap, we will discuss the war in

Iran, AI developments, a whole bunch of

companies reported, investors are

showing their displeasure with

ever-mounting AI CapEx, and two

mailbags. Let's get started. Over the

weekend, the US and Iran traded blows,

and it was reported that several US

soldiers had been killed. Things seem to

be escalating. Later in the week, the

Houthis decided to get involved and

bombed some Saudi tankers. As a result,

oil prices climbed to 100, and the yield

on the 10-year reached 4.7%.

President Trump threatened more attacks

on Iran. Last week, the big news was

that a Chinese AI company, Moonshot,

announced the release of its new LLM

model called Kimi K3. Moonshot claimed

that Kimi K3 is as good as any LLM out

there, but for a fraction of the cost.

Prior to last week, we were worried

about AI capital intensity and the lack

of moats. Now, the possibility of a

price war looms closer. Moving on.

SpaceX is now well below its IPO price.

I'm not sure what this means yet, but it

does not bode well for the IPO market.

And let's get to companies that have

reported. First up, Domino's Pizza

reported, and the stock was up a bit on

Monday on the print. Domino's is a

poster child for the K-shaped economy.

It's down 20% this year. In the March

quarter, EPS was down 5%, but in this

quarter, EPS was up 7%. However, EPS

missed expectations, but revenue beat,

and the revenue beat caused the stock to

climb 2% on Monday. Don't get carried

away. Domino's same-store sales growth,

which is the best indication of growth

for a consumer-facing company, fell to

its lowest pace in five quarters, a mere

0.1%.

After Monday, Domino's gave back all of

its gains plus. Now, normally companies

don't report on Monday. Domino's is an

exception. Tuesday witnessed more

reports. Equifax reported. Now, we have

not really spoken about Equifax before,

except in the context of my short thesis

on FICO. Equifax is one of the three

credit bureaus. Now, while all three

credit bureaus provide consumer

information for scoring purposes, they

also have different business mixes. On

the scoring side, Equifax is heavily

mortgage-dependent, but Equifax's

largest business is not scoring nor

scoring-related. It's largest business

is called Workforce Solutions division,

EWS.

And that is a data and technology

business that provides automated

verification of income and employment.

EWS provides this service to businesses

and to federal, state, and local

governments. In other words, EWS is a

software business. So, Equifax's EWS has

been part of the SASpocalypse debate.

Bears have been arguing that EWS is

bound to lose share to AI-powered

verification services. Now, because of

the SASpocalypse, there is no room for

error. Unfortunately for Equifax, Q2

government revenue growth was down

mid-single digits, and was below both

management guidance of flat

year-over-year and below street

expectations. Third quarter EPS guidance

is 3% below consensus, and the implied

Q4 EPS guidance is also 3% below street

estimates. The lesson here is that

Equifax management might have a

legitimate reason for the weakness in

government EWS revenue. And the company

blamed state government budget concerns.

But in an environment where the cesspool

narrative still reigns supreme, no one

is interested in excuses. Prior to

Tuesday, Equifax was down 17% this year

and down 30% over the last year. On this

news, the stock was down an additional

4%. Moving on. It's been a tough period

for most auto companies, but General

Motors has been executing well. The

company reported earnings per share of

357 versus 253, which is 41% growth,

which is impressive. And that's versus

expectations of 319. So a big beat. It

raised full-year profit guidance and the

stock was up on the news. However, not

all is great. Despite the raising of

earnings guidance, US sales fell

year-over-year, including sales of large

pickup trucks and SUVs, which make up

most of GM's earnings. Moving on. Given

the geopolitical situation, it is

unsurprising that defense companies are

doing well. Northrop Grumman reported.

The company reported earnings per share

of 768 versus 815 and versus

expectations of 682. Revenue beat as

well. The backlog increased by 20

billion to reach a record of 105 billion

and the company raised EPS guidance. But

the stock was down on the open anyway,

then it recovered. But it was not up on

these good results. Why? The cost growth

on the company's missile programs seem

open-ended and that is hurting current

margins. Lockheed Martin also reported

and reported great numbers. Lockheed

posted very strong 2Q 26 results with

sales up 11% and earnings per share of

794 versus a dollar 46 last year and

versus 720 expected. Revenue beat as

well. The backlog reached a record of

230 billion, up 24% in 3 months.

Clearly, the geopolitical situation is

benefiting defense companies. Moving on.

GE Vernova reported Wednesday morning.

The results were great, but the stock

went down anyway. First, the facts. GEV

is one of the best AI-related power

stories. Its power division produces gas

turbines for utilities. There are only

three companies in the world that

produce large gas turbines: GE,

Mitsubishi, and Siemens. Its

electrification division manufactures

all kinds of equipment used by utilities

and other power producers. GEV got spun

out of GE in April 2024 at $143.

Because it's one of the best AI power

stories, the stock has climbed to over

$1,000. This quarter, EPS was 247, 33%

growth, but a miss versus expectations.

Revenue of 11.1 billion was 22% higher

than last year. More importantly, orders

of 24.2 billion were up 88% versus last

year, and that lifted the backlog to 176

billion. The company raised revenue and

EPS guidance, but the raise was below

some of the whisper numbers out there.

That's why the stock was down on the

print. I don't think that most investors

are focused on the EPS miss. This is a

very long-tail business. The most

important metric is orders, and that was

up 88%. I still own the stock, and even

at these nosebleed elevations, I remain

confident in this investment. Moving on.

Moody's reported. I've owned this stock

for years because it is a duopoly with

pricing power. Moody's reported a very

good quarter. Earnings per share was

468, up 31% versus last year. Now,

Moody's is down a bit this year as some

investors have assumed that AI could eat

into the Moody's and S&P duopoly. I do

not believe that is possible, so I

continue to be an owner. The stock has

been flat since the fall of 2024, so the

multiple has come down. The 2026 PE

multiple is now sub 30 times, which is

the cheapest the stock has been in quite

some time. Wednesday night, wow,

Wednesday night was a big night. A bunch

of very important companies reported.

Google, Tesla, ServiceNow, and IBM.

Let's take them one at a time.

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Google. In my view, these were very

mixed results at best. Google had

massive gains on its investments, which

it reported as part of earnings per

share. So, I take that out. Adjusted EPS

was 285 versus 231 last year, but a miss

versus expectations of 289. But, revenue

increased an impressive 24%.

Google Cloud revenue reached 24.8

billion, up an incredible [snorts]

82%. So, so far, not bad. On the bad

side, however, because of the massive AI

CapEx spending, free cash flow turned

negative. It was negative 5.9

billion. Moreover, Google upped its 2026

AI CapEx spend from 190 billion to 205

billion. That's a lot of billion, and

the market is beginning to lose patience

with all this crazy spending. The stock

was down after hours. Tesla, very mixed

results. EPS was 33 cents versus 40

cents last year, and versus 51 cents

expected, so a big miss. Revenue was

good at 28 billion versus expectations

of 26 billion. The problem here is

margins. They were under pressure

partially because of a 67% decline in

regulatory credits, which the Trump

administration has largely eliminated.

Also, and maybe even more importantly,

Tesla grew its CapEx spending to 5.8

billion, thereby sending its free cash

flow into the red for the first time in

2 years, despite the nice growth in

revenue. Free cash flow was a negative

1.1 billion. Like Google, Tesla was down

after hours. IBM, we spoke about IBM

last week because IBM negatively

pre-announced, and the stock was down

last week on that day 25%.

The problem the company is facing is

that the price of tech equipment is

soaring, and companies are trying to

lock in purchases. They are, at least

for now, abandoning IBM's varied

services, and the company reported

results that were basically in line with

its pre-announcement. So it reported

earnings per share of 293, up 5% versus

last year. But there was more bad news.

The company cut its revenue forecast and

is now expecting revenue growth to be up

only in the range of 4 to 5%. Part of

the problem is that sales of data center

mainframes were down 42% in the quarter,

and infrastructure revenue was down 7%

versus last year. IBM is clearly

struggling. ServiceNow, one of the best

software companies in the world, but the

stock is down 38% this year because of

the SaaS apocalypse. The irony is that

ServiceNow has executed really well,

continues to grow, and shows no signs

that AI is negatively impacting its

businesses. But, fighting the AI

narrative is like fighting a ghost. This

quarter, once again, ServiceNow

performed well. Earnings per share of 90

cents was up 10% versus last year, not

bad. Revenue reached 4 billion, and that

was up 24% versus last year. I don't see

any weaknesses in these numbers. Even

so, the stock was down almost 4% on

Thursday. This is fairly typical for how

the market reacts to ServiceNow results.

ServiceNow has had great quarters, and

then seen the stock get swamped by the

AI narrative. So, here we go again. This

coming Monday, by the way, on our free

episode, we will explore who will be the

winners and losers in the software world

with tech analysts Dan Ives and Gil

Luria. On Thursday, Blackstone reported.

I'd say the results were good, but also

mixed. Blackstone reported earnings per

share of $1.52 versus $1.21 last year,

and versus $1.36 expected. Blackstone

beat the street on higher transaction

revenues and strong performance fees

thanks to better-than-expected

realizations. Fundraising was very

strong at 68 billion. However, not

everything is clicking right now, like

slow base management fee growth and only

modestly positive performance in certain

asset classes, like real estate and

credit. Yes, the numbers were pretty

good, but there are two major issues

facing Blackstone and the private equity

sector. The first, the time it takes to

sell companies and give investors their

money back keeps lengthening. And

private credit's problems with software

will really start to matter until next

year when the refinancing cycle begins.

Nothing in today's Blackstone report

alleviates any of these concerns. By the

way, on the conference call, management

bragged that it is the biggest financier

of AI data centers. Given the intensity

of the current AI debate, that may or

may not prove to be a great bet. For me,

the takeaway from this week's earnings

results is that the terms of debate on

AI have truly shifted. A year ago, it

was all rah-rah for AI. When companies

raised their CapEx budgets, the market

cheered. As the AI story has somewhat

matured, the story has shifted. It's not

all positive. The business has become

capital intensive. Investors question

whether there are any moats. China AI

players have produced great models that

are much cheaper and might create a

price war. Everyone is nervous, and that

nervousness was on full display this

week. That's why when Google raised its

AI CapEx from 190 billion to 205 billion

and posted negative free cash flow,

[snorts]

the market did not cheer. Google was

down 7% on Thursday, and because of the

negative cash flow, Tesla was down 14

and 1/2% on Thursday as well. The news

from Google and Tesla caused Nasdaq to

be down more than 2% on Thursday.

Finally, Intel reported Thursday night,

and the results were great. Earnings per

share of 42 cents versus a loss of 10

cents last year blew away numbers.

Revenue growth was the best it had been

in 15 years. Sales in the data center

segment soared 59% versus last year. The

stock was up after hours, but Intel's

results, I don't think are going to

quell AI nervousness. Given CapEx

budgets, it would be surprising if Intel

did not have a good quarter. But it's

the AI CapEx budgets themselves that are

making investors nervous. And now for

the mailbag. Our first mailbag is from

Pedro, who asks, "Quote, hi Steve. Two

questions for you regarding banks. One,

what do you think of Bank of New York? I

know it's a bit on a league of its own,

but I would love to get your thoughts on

how it compares to the other major

banks. Two, if in general you see the

banks as much safer now, have you

considered adding one of them to your

portfolio? What was the last time you

were long a bank stock? That context

would be very appreciated if you

wouldn't mind sharing. Thanks in

advance." With respect to Bank of New

York, I have to confess that I have

never paid that much attention. Bank of

New York and State Street are trust

banks and operate in a world all their

own. I have never found that much value

to focusing on them. Like every other

large bank, Bank of New York has done

well. It's up over 30% this year, but

you could get the same performance by

buying just about any other of the large

cap banks. As for my portfolio, it's

true that I don't own any banks right

now. The last time I owned a bank was

when I owned Citigroup, but that was

before Jane Fraser became CEO, and I

sold it after Citi experienced its

umpteenth trading scandal. I had the

right thesis, but the wrong management.

I should have bought an alternative, but

I've spent most of my research time on

tech stocks, which has proven to be a

pretty good decision. My hesitation in

buying bank stocks now is twofold.

First, after experiencing a great run,

they are at peak valuations. Perhaps

more importantly, the strength of the

investment banking cycle right now is

heavily dependent on AI financing needs.

So, in a sense, owning Morgan Stanley,

Goldman, Bank of America, Citigroup,

etc. is just one more aspect of the AI

trade. Simply put, buying banks to me

does not provide diversification from

tech. I am releasing a masterclass on

how to analyze banks and how to value

them in the near future, where I do a

deep dive on the entire sector. And our

second mailbag is from Colin. Colin

watched our recent premium episode with

payments analyst Ken Sahousky. And in

that episode, Ken mentioned that many

hedge fund managers have shorted

payments stocks as funding shorts. Colin

asks, quote, I don't grasp the concept

of shorting a stock for funding purposes

while breaking even on a stock. Great

question. Let me answer it carefully.

First, let's just review what happens

mechanically when you short a stock.

First, you borrow someone's stock. You

then take that stock and sell it. Let's

say you were shorting one share and the

stock is $100. When you sell the stock,

you now have $100 in cash. Let's say the

stock goes to 50. You then buy the stock

back at $50 and give the stock back to

the owner. You have made $50 less the

fee you pay for borrowing the stock.

That's how most people think of

shorting. But let's say I think the

stock I'm going to short is not going to

do that much, but I want to use it as a

way to fund buying something I really

like. So again, I borrow the stock and I

sell it at $100. I now have $100 in

cash. I take that $100 and buy stock in

a company I really like. Essentially,

I'm using the short to fund a long in a

different stock. I'm hoping to make a

lot of money on the long and either

break even or make a little on the

short. That's a funding short. This last

Monday, July 20th, we released an

interview with Ben Kallo, the

sustainable energy and mobility analyst

at Baird. We discussed how the buildout

of AI data centers has upended the

entire sustainable energy landscape,

creating a hypergrowth story. So check

it out. And this coming Monday, July

27th, we will release an interview with

Dan Ives and Gil Luria, two tech

analysts who cover the full gamut of

tech. We discussed how the debate around

AI has shifted from being all positive

to a much more nuanced discussion. We

talked about capital intensity, the lack

of moats, the potential for an AI price

war, and how real the threat is to

software companies from AI. And we also

discussed private equity's overexposure

to software. So, please tune in. The

best way to support the Real Vision

Playbook is to subscribe to Substack and

to YouTube. Subscriptions are free, and

we appreciate your support.

>> [music]

>> And that's the wrap.

>> This podcast is for informational

purposes only and [music] does not

constitute investment advice. The hosts

and guests may hold positions in stocks

discussed. Opinions expressed are their

own and not recommendations. Please do

your own due diligence and consult a

licensed financial advisor before making

any investment decisions.