The S&P 500 is up over 10% for the year

and NASDAQ is up 15%. [music] However,

there are a few areas of weakness. There

was some good news in the home building

sector in a year of mostly bad news.

[music] It looks like there is a mini

M&A wave. Crypto investing seems to have

lost its mojo. It's unclear to me how

important [music] Bitcoin is anymore.

Microsoft's GitHub Copilot moved all

customers to token-based pricing [music]

from a subscription model that had

drastically underpriced token usage. If

customers start to use AI less because

of the change in pricing, the AI story

could weaken.

>> [music]

>> Hi, this is Steve Eisman and this is the

weekly wrap. This is for the week ending

Friday, June 5th, but recorded Thursday

night, June 4th. Today's wrap is a mix

of news, thoughts, and a mailbag. The

wrap includes one, my SpaceX of

evaluation and responses to comments

that I missed the trees for the forest

last week. Two, what's new with

Anthropic and Open AI. Three,

push-through versus pull-through

business models and thoughts on Calshi

and business models that deliberately

create dependency and in some cases

addiction. Nvidia's entrance into the PC

market. Five, a stock market review and

some thoughts about home builder M&A.

Six, private credit news, of course.

Seven, two earnings reports. And

finally, a mailbag question whether now

is a time to buy a house. In premium

next week, on June 10th, we do a deep

dive into Citigroup and the recent

investor day conference. I examine why

it's been a terrible stock and company

for ages and why the story and valuation

has improved under the new CEO, Jane

Fraser. This is a prequel to my future

masterclass on the banking industry and

how to analyze banks. Now, onto the

wrap. Regarding the SpaceX IPO, in last

week's wrap, I chose to take a somewhat

tongue-in-cheek approach to my

evaluation because I think the valuation

is crazy. First, I want to digress a

little into history. Before social media

and meme stocks, IPOs were targeted to

institutional investors. Top management

did what we call dog and pony shows.

Carefully written pitch books explaining

the business models and future

opportunities were distributed and

discussed. Institutional investors

grilled C-suite management in stuffy

conference rooms across the country.

Believe me, I know that's how it was

done cuz I was in some of those rooms.

Stocks were priced to give liquidity to

management and private investors while

usually making sure fairness and equity

guaranteed room in the valuation was

left for investors. The investment banks

hosting the dog and pony show split a

fee, usually 5 to 7% of the amount

raised, and retail was given a very

small allocation. That was the business

model for decades. This approach to IPOs

lasted until the internet age when

retail investors wanted in in a big way.

FOMO raged and thoughtful valuations

didn't matter. Leaving retail out was

un-American. What was actually left out

was the idea that stocks could go down.

Many IPOs in the past have rocketed up

at the opening and given back most of

the gains of the next few weeks and

months. That's exactly why indices

instituted wait-and-see rules before

placing new issues into the indices.

Well, that's no more. With retail demand

being so strong, institutional control

over the process has mostly gone out the

window. Retail wants to buy hot stocks

at the IPO price regardless of inflated

valuations. And investment banks make

bank with an inflated valuation and the

industries have bent their rules. This

is the history of the change in the IPO

business model. This is what led to the

current hyper-valuation of Elon Musk's

SpaceX. Now, SpaceX, in my view, has

priced in all of the potential and

possible good news. Elon Musk is being

rewarded for everything he has done and

might ever do in the future. Investors

are meant to feel honored to be in his

company. FOMO reigns. That is why the

S-1 describes the TAM, the total

addressable market, at a crazy $28.5

trillion.

Now, I got pushback from some viewers

that I was ignoring SpaceX's incredible

technology. The point of my analysis is

not about the technology. Let's assume,

for the sake of argument, that the

technology is world-class, revolutionary

maybe. The valuation assumes that SpaceX

will conquer its $28.5

trillion

TAM. Say what you want about the

technology, the current numbers are just

not that impressive. 1 is fine, but it

is less than every

trillion-dollar market cap company. It

does not even come close to Nvidia's

first quarter 85% revenue growth. I'd

also point out, and this is crucial,

that the bulk of the $28.5 trillion TAM

is in the AI category and Grok is not

yet considered a world-class AI product.

When and if the stock price crashes, we

can do a deep dive into the trees and

discuss entry valuation points. For now,

it's still a sci-fi story and will

become the punctuation point on the

revolution of IPOs going from being

priced in corporate boardrooms to being

priced on Reddit boards. One more very,

very important point about SpaceX. It

has three divisions, space,

connectivity, and AI. And AI is a recent

addition. Prior to AI, SpaceX's need for

capital was not that large. SpaceX

raised around $9 billion to fund its

Falcon rockets and Starlink satellites.

Now, that might sound like a lot, but

it's tiny compared to what OpenAI and

Anthropic are raising. The non-AI prior

version of SpaceX was relatively capital

efficient, partially because it could

reuse its rockets. By adding AI to its

business mix, SpaceX is now playing in a

far more capital-intensive business

against gargantuan competitors like

Google. Here's some data from the S-1

that shows how much more

capital-intensive SpaceX has become

because of its entrance into the AI

game. For those of you who can't see the

table on the screen, let me summarize.

In fiscal year 2023, SpaceX generated

10.4 billion in revenue and spent 4.4

billion on CapEx. That means that back

then, the CapEx divided by revenue ratio

was 0.42,

or 42%. In 1Q26, the company reported

revenue of 4.7 billion with CapEx of

10.1 billion. Thus, the CapEx-revenue

ratio has jumped to 2.15, or 215%

from 42%. In other words, by adding AI

to its business mix, SpaceX has gone

from a capital-efficient company to an

incredibly capital-intensive one. That

means that the SpaceX story has become

far riskier. Moving on. Not

surprisingly, this week Anthropic filed

its own S-1 for a future IPO. However,

the filing was done confidentially, so

there is nothing yet to review. And

OpenAI is expected to file its own

confidential S-1 soon. In other AI news,

the state of Florida sued OpenAI for

violations related to safety concerns.

The lawsuit alleges that OpenAI has

created an addiction model to get

consumers to use ChatGPT. This is not

the first such lawsuit in the United

States. Both Meta and Google have been

sued for similar reasons, and a few

months ago Meta lost a lawsuit on this

very issue. There is plenty of evidence

that social media companies have

programmed their algorithms to keep

people engaged via an addiction model.

There are multiple lawsuits all over the

country on this very point. And on June

17th, we will post an interview on

premium with Ben Zuppersky, a tort

professor at Fordham Law School, where

we will explore these addiction

lawsuits. If you are interested and not

yet a subscriber to our premium service,

go to premium. real aismanplaybook.com.

Addiction models seem to be all over the

place of late. In the case of Calshi and

its competitors, here too there is

evidence of the fostering of addiction.

Calshi is not an area I have ever

covered, but I feel that it needs to be

mentioned. Calshi and its competitors

have made anything and everything a

betting opportunity. But that's only

part of the actual story. There are more

subtle points. The story is their

modeling of human psychology to realize

that people mistake a near miss as an

almost opportunity. Every time a gambler

nearly misses on winning, instead of

being disappointed and walking away from

gambling, that same person is actually

motivated by the almost win and driven

to bet again and more often. Calshi has

taken gambling, which used to take place

in regulated environments, and brought

it everywhere, including classrooms.

It's a lot to take in, so I'll leave it

there with one more observation. Crypto

investing seems to have lost its mojo.

Coincidence or not, this occurred as Cal

She exploded. Let's now discuss agentic

AI a bit. All industries are now

impacted by AI. It's an undeniable

change in our world since the

introduction of agentic AI. In short,

the pull-through business model of

building demand through algorithms that

promote dependency and potentially

addiction is being merged with and

somewhat replaced by agentic AI's

business model of push-through. Prior to

agentic AI, tech companies created

algorithms that fostered dependency.

Now, agentic AI can offer tremendous

value, but there are tremendous hidden

costs. We will be weaving the impact of

agentic AI into all of our future

conversations to try and discern how

companies and industries are coping with

the adoption and their successes and

failures with the new technology. We

have entered the age of corporate FOMO.

There is a path many companies are

currently following from trying agentic

AI to then requiring it, and not just

requiring it, but forcing employees to

use it all the time. Some commentators

call this token maxing. Thus, some

companies are basing continued

employment on the expanded use of AI

regardless of results and costs. Now,

many issues come to mind here starting

with a herd mentality, and I do not

believe that token maxing is a long-term

strategy. In more thoughtful approaches,

a company chooses to seed some software

development to agentic AI, and software

engineers become highly engaged editors.

I was chatting recently with an engineer

who was raving about the role of agentic

AI and how it freed him to have time to

oversee a greater range of software

development. He is in a heavily

regulated industry, so there is no room

for error. Sophisticated engineers

working closely with a genetic AI is

perhaps the future of corporate America.

That is the AI bull case. On the other

hand, there is some evidence that

companies and individuals are getting

more cost-conscious in how they use AI.

Until now, users have paid a

subscription to use AI, and that

subscription price is far lower than the

actual cost of the tokens they use.

Partially because of this subsidization,

customers have used AI without any

thought as to cost. In example of token

maxing, Uber burned through its entire

token budget in just 4 months. Axios

reported that an unnamed company

accidentally spent $500 million in only

a month on Anthropic models because it

failed to set any spending limits. In

perhaps the most important piece of

news, on June 1, Microsoft's GitHub

Copilot moved all customers to

token-based pricing from a subscription

model that had drastically underpriced

token usage. Microsoft is getting a lot

of pushback on this higher pricing. This

bear is watching, no pun intended,

because if customers start to use AI

less because of the change in pricing,

the AI story could weaken. Moving on,

there was important news about how PCs

will be made in the new world of AI.

Nvidia is the king of the GPU that is

made for data centers, but it is now

expanding to chips that will serve as

the main processor for personal

computers, entering an arena that's long

been ruled by Intel, AMD, and Qualcomm.

During a keynote address at Taiwan's

Computex conference on Monday, Nvidia

CEO Jensen Huang unveiled a new N1X

processor made alongside Microsoft. It

will be incorporated into a new

superchip debuting in the fall on a

fresh line of Windows PCs from

Microsoft, Dell, HP, and Lenovo. Huang

also pointed out that a Gent AI will run

across all the new computers. Nvidia's

initial plan is to release more than 30

laptops and 10 desktops with the new

chip over time. Moving on with some

thoughts on the overall market. The

trends remain strong across the board

among the major indices. With not just

the S&P and QQQ's at the highs, but also

the small caps and equal weight. The S&P

500 is up over 10% for the year and

Nasdaq is up 15%. However, there are a

few areas of weakness. Financials remain

weak on a relative basis and weakness in

financials could be a leading indicator

that investors deep down are still

worried about the economy. Also, it's

worth pointing out again that Bitcoin

remains weak. It's unclear to me how

important Bitcoin is anymore. It used to

be an indicator of risk tolerance. As I

mentioned before, feels like the young

investors who were consumed by Bitcoin

have moved on to playing prediction

markets. It just feels like Bitcoin has

lost its important to many of its former

cheerleaders. I'd also point out that

the 10-year has pulled back below 4 and

1/2% which for me is the Rubicon level

for rates. I got nervous about the

market when the 10-year climbed above 4

and 1/2% and I'm watching it still very

closely. Moving on. Google made what I

think was some shocking news. It is

raising $80 billion in capital but not

via debt, but via stock. This shows how

capital intensive the AI CapEx story has

become. In 2025,

Google spent $90 billion on AI CapEx and

funded most of that with its own cash

flow plus some modicum of debt. This

year, Google will spend $180 billion and

at that level, Google cannot fund that

CapEx solely with cash flow and debt.

Hence, the sale of $80 billion in stock.

There was some good news in the home

building sector in a year of mostly bad

news. It looks like there is a mini M&A

wave. On Sunday evening, Berkshire

Hathaway announced an agreement to

acquire Taylor Morrison in an all-cash

deal for 7250 per share. This represents

a 24% premium to TMHC's most recent

closing price and equates to a price to

tangible book value multiple of 1.25

times.

The deal would make Berkshire Hathaway

the fourth largest site home home

builder in the United States and

continues recent M&A activity across the

sector, including Sumitomo Forestry's

recent acquisition of Tri Pointe Homes.

Before the acquisition, Clayton

Properties Group, owned by Berkshire,

was building roughly 10,000 homes

annually and this deal brings it roughly

to 23,000 homes per year. The M&A wave

in the home building industry could

continue, but it is dependent on small

and medium-sized builders being willing

to sell at fairly modest premiums to

book value. Over the last few years,

most deals have been completed at 1.3

times book value as large cap builders,

Japanese builders, and Berkshire

Hathaway remain extremely disciplined

about acquisition valuation. With

respect to the home builder that I have

been recommending, Meritage, the stock

is currently valued at 90% of tangible

book value. So, there is upside in the

buyout. Meritage's market cap is 4.5

billion, which is in the area of the

size of the M&A transactions that have

taken place. Moving on. News about

private credit, of course, remains bad.

We are now entering the period where

funds announced redemption requests for

the second quarter. The largest private

credit fund in the world is BCRED, a

Blackstone private equity fund with

assets of $79 billion.

In 1 Q 26, BCRED received redemption

requests of 8% of assets. BCRED just

announced redemptions for 2Q, and they

climbed to 10%, but they only allowed

redemptions at the 5% cap. And it looks

like the problems in private credit are

beginning to spill over into other areas

of alternatives. Partners Group is a

European alternative asset manager,

largely in the private equity space. It

has a private equity fund that is

evergreen called Global Value SICAV

fund. As is well known, private equity

has been having monetization problems

for years as the IPO market has been

weak. The Global Value fund received a

quarterly redemption notice of 9.8% of

assets, but Partners Group only allowed

for redemptions at the quarterly 5% cap.

This is a bad sign that investors are

beginning to question not just private

credit, but the entire alternatives

space. Needless to say, on Tuesday when

this news came out, the stocks of

European and US alternative asset

managers were weak. It was a very light

week for earnings. I'll flag two. First,

Palo Alto. With the exception of

software, tech has mostly outperformed

this year. Within hardware, investors

have played bottlenecks. Hence, the

strong performance of CPU and memory

chip manufacturers. Software has mostly

underperformed because of AI fears. But

recently, there has been a strong rally

off the bottom. However, not all

software stocks have been bad. There is

a growing recognition that the advent of

AI creates even more need for

cybersecurity because old software

systems are increasingly vulnerable.

That is why Palo Alto, the largest and

supposedly best company in the space, is

up 60% this year. Despite the positive

narrative, Palo Alto's numbers, when

they reported, were not great. Earnings

per share was up 6% versus last year,

just 6%, which is not stellar and a

deceleration from recent quarters. The

85 cents in EPS was a beat, but on

lowered expectations after the company

gave disappointing guidance in February.

The stock was down 6% on this weak

print. Nevertheless, the narrative

around this stock remains powerful and

these days narrative trumps all.

Broadcom also reported and it was also

disappointing, very disappointing, which

is somewhat surprising. Broadcom

reported $2.44

versus $2.40 expected. That's fine. And

revenue climbed 48%, but it still missed

on revenue versus expectations, which

given the huge move in the stock is a

big no-no. The stock declined in the

teens Thursday and took the entire

semiconductor group down with it. And

now for the mailbag. Own or rent? Last

week, I gave a lecture to a high school

class and then answered questions. One

question was whether owning a home is a

good decision. My response was that if

you want to own a home, own one, but

don't assume it will make you money. Own

it under the assumption that when you

sell, you will hopefully break even.

Right now, buying a home, I believe, is

not a good investment decision because

most homeowners refinance during COVID

when rates were zero. These homeowners

have mortgages of 3 to 4%. They can't

sell because the buyers are getting

mortgages at seven. The housing market

is locked and inventory across the

country has dried up. Because of the

lack of inventory, housing prices, in my

view, are artificially inflated. Also,

never forget, buying a home is just the

beginning of your financial obligations.

There are local taxes, the cost of

maintenance on the home, and don't

forget the cost of maintenance on the

property. My advice to anybody who wants

to buy a home is not to be aspirational,

but rather to buy one below what you can

afford, so when the hidden costs appear,

you can afford them. This last Monday,

June 1, we posted an interview with Gary

Marcus, professor emeritus at NYU and a

well-known critic of AI. Gary sums up

his thoughts on what might break the AI

story. This coming Monday, June 8, we

will post the whole interview with

recurring guest Stacy Rasgon, the

semiconductor analyst at Bernstein. We

touched on the explosion in revenue

growth in his sector and its level of

sustainability. Hope you tune in. Be

sure to check out our website

realvisionplaybook.com.

Thanks for joining, and that's the wrap.

>> [music]

>> This podcast is for informational

purposes only and does not constitute

investment advice. The host 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.

>> [music]