In war news, President Trump announced

that he would not resume bombing, but

would instead rely on economic pressure.

And this conflict is going to continue,

[music] I think, for quite some time.

Despite all the doom and gloom out

there, the market is back to all-time

highs. There are, however, many

commentators calling for a crash.

Tension levels are running very high.

The dependency of the hyperscalers on

Anthropic and OpenAI is just huge

[music] and quite scary. Should

Anthropic and OpenAI fail, the margins

of the hyperscalers will compress and

business will return to slower growth.

The [music] entire AI chain goes into

reverse. This is the potential Achilles'

heel of AI. That is what I am watching

most carefully.

>> [music]

>> Hi, this is Steve Eisman and welcome to

another episode of the weekly wrap. This

is for the week ending Friday, August

14th, but recorded Thursday night,

August 13th. First, couple of

housekeeping announcements. We are

taking a 2-week break after this Monday

interview, August 17, with Jason

Trennert and Christopher Verrone of

Strategas. The wrap will also be on a

2-week break and resume Friday,

September 4th. Interviews resume on

Monday, September 7, with a deep dive

into property and casualty insurance

with Ryan Tunnis from Cantor. Note that

Wednesday premium episodes will continue

without a break. Just want to flag that

on premium, we will be dropping a

two-part masterclass called how to

analyze banks after Labor Day. I do a

deep dive into everything you need to

know and understand about bank

accounting and bank functionality. With

banks playing an opaque role in private

credit and the massive AI build-out,

understanding the quarterly earnings

announcements is critical. And this

masterclass will give you the tools to

find the message hidden in the numbers.

A quick update on premium pricing on

Substack. Starting Labor Day, September

7th, premium for new subscribers will

cost $20 a month and $200 a year.

However, all current subscribers,

monthly and annual, are completely

locked in at the existing price for as

long as you stay subscribed. As a

reminder, premium subscribers get all

episodes at free, masterclasses, weekly

Wednesday deep dives, and more access.

Subscribe now before Labor Day and lock

in today's rate. And now for the wrap.

Since this is a slow week for earnings,

it's a good time to give some thoughts

on investing strategy and business

strategy, the role of Upstarts, and of

course AI, and why Bitcoin is no longer

cool. So, on this week's wrap, we will

cover number one, the war in Iran. Two,

investing now. Uncertain times require

patience, not hysteria. Three, AI

check-in. Four, timing is everything.

Five, a check-in on software. Six, a few

earnings reports. And seven, my thoughts

on entrenched businesses versus Upstarts

and how they interact and why the

winners win and the losers lose. In war

news, negotiations have broken down.

However, President Trump announced that

he would not resume bombing, but would

instead rely on economic pressure. Now,

last Wednesday, August 12th, on our

premium Substack service, we interviewed

Stephen Cook of the Council of Foreign

Relations, who is a Middle East expert.

And after speaking to Stephen, I have to

conclude that a strategy relying solely

on economic pressure will have

difficulty succeeding. The Iranian

regime does not care if its people

suffer. They care about the regime

survival. And this conflict is going to

continue, I think, for quite some time.

But, as long as there's no bombing, the

market will probably march higher. Since

it's close to the end of summer, let's

take a step back and discuss some things

beyond the craziness of earning season.

Let's first pivot to investing in times

of deep uncertainty and start with the

market and the role of AI. Despite all

the doom and gloom out there, the market

is back to all-time highs. The S&P is up

13% and Nasdaq is up 14% for the year.

There are, however, many commentators

calling for a crash. Tension levels are

running very high. A few months ago, I

too got cautious and sold some of my

positions, but I'm still quite long. I

just think it is premature to make that

kind of a major market doom and gloom

call. Why? Well, let's go back to the

pre-GFC world. Back then, my research

revealed that the mortgage underwriting

standards had deteriorated enormously.

But, I also had access to an enormous

database that could confirm or not

confirm that thesis. My team and I

purchased access to Moody's

securitization database. Every month,

every securitization, credit cards,

subprime mortgages, autos, commercial

real estate, etc. reported their credit

data. Every month, each securitization

reported 30-day, 60-day, 90-day

delinquencies and real estate owned and

losses. It was and still is an

incredibly rich and robust data set. And

starting in the summer of 2006,

the credit data started to deteriorate

very badly. And every month we would

check the data and every month it

reaffirmed our thesis. That's what gave

me the confidence to short subprime

paper. There is no such data set with

respect to AI. When OpenAI and Anthropic

go public, we will have some real data.

Until then, we have supposition. Relying

on supposition is by definition

uncertain. And uncertainty is

uncomfortable. My message to investors

is today need to deal with it. Stop

rushing to call the top or the bottom.

Accept that we don't have enough

information to make the exact right

calls and work with the information that

we do have. Right now, what do we know?

The economy is quite strong. Despite

last week's weak employment data, the

overall employment picture is still

quite sound. The economy is growing.

Bank credit data just reported mid-July

is benign. And with respect to AI,

hyperscalers continue to increase their

CapEx budgets. And this week, the big

news was Nvidia created a new financing

technique for AI data centers. Nvidia is

partnering with six large asset managers

on a $500 billion financing push

designed to treat compute infrastructure

much like the commercial real estate

toll roads or other assets you can

borrow against. Now, this is not a brand

new concept. It's a tried-and-true way

to create a financial infrastructure to

support a CapEx-hungry growth industry.

AI is here and it's going to grow and

it's going to need financing. So,

picking the winners and losers is a

challenge. Predicting total disaster is

just too emotionally tempting. Now, this

Nvidia deal is potentially very

important. This is a $500 billion

financing deal basically of AI data

centers. And the structure, while

unclear, I'm assuming will involve

securitizations. So, what does this

mean? Until now, AI data centers have

been financed by the cash flow and debt

raised by hyperscalers. Now, some of

that financing will be done via

securitizations financed by major Wall

Street firms. It means that hyperscaler

free cash flow could, I emphasize could,

improve. It also creates a boost in

revenue for the banks and private credit

companies that are participating. Since

this new deal shows that there is as yet

no slowdown in AI CapEx, To understand

where the weakness in AI may lie, we

need to dig deeper. The hyperscalers, at

least on the surface, are not the

problem. The LLM providers are the

potential problem, specifically

Anthropic and OpenAI. There just don't

seem to be any motes around LLMs. Users

switch between models all the time.

Perhaps more importantly, the Chinese

LLMs are open-weight models that are

much cheaper than the LLMs provided by

Anthropic and OpenAI. And enterprises

seem to be using the Chinese models more

and more. Overcharging for tokens is

going to be very difficult with good

enough competition. And Chinese AI seems

to be good enough. It is possible, I

emphasize, possible, that a price war

could break out. The reason this is

important is that Anthropic and OpenAI

account for a very large percentage of

hyperscaler AI revenue. Several research

firms have put out reports estimating

the contribution level of Anthropic and

OpenAI to Microsoft, Amazon, and Google.

These reports state that 70%

of hyperscaler AI revenue, AI revenue,

is from Anthropic and OpenAI, and 25 to

35% of total cloud revenue. Also, Oracle

has a $600 billion backlog, and half

that backlog is from OpenAI alone. The

dependency of the hyperscalers on

Anthropic and OpenAI is just huge and

quite scary, given that both companies

lose billions and are reliant at this

point on raising capital for their

survival. Since the cloud business is an

ever-increasing percentage of the

revenue of Google, Amazon, and

Microsoft, in a sense, the future of

these companies is now very dependent on

the future success of Anthropic and

OpenAI. It feels like a bigger version

of situational awareness, a huge one-way

bet. What's the hedge? There is no hedge

for the LLMs. The hyperscalers have

existing franchises, though. Should

Anthropic and OpenAI fail, the margins

of the hyperscalers will compress and

business will return to slower growth.

Anthropic and OpenAI are racing to IPO.

Again, there is still no data really to

allow us to accurately measure the risk,

but we all know it's there.

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This is the potential Achilles heel of

AI. If something bad ever happens to

Anthropic and OpenAI, like a price war,

the hyperscalers may have to pull back.

And if they have to pull back, the

entire AI chain goes into reverse.

That's the risk. It's an incredibly

important risk to monitor, and I'm

monitoring it. But until this Anthropic

and OpenAI risk metastasizes, the AI

story will continue. One thing I've

learned from shorting is that timing is

everything in investing in markets. This

bear case of Anthropic and OpenAI could

occur, but it might occur a year from

now. And for markets, that is an

eternity. Winners and losers are

beginning to emerge. Amongst the big

companies, Microsoft, Google, and Amazon

seem to be the hyperscaler winners.

Oracle is questionable with its debt

barely rated above junk. Meta is having

problems. It does not have the cloud

business that the other hyperscalers

have. Meta competes in the world of LLMs

with Anthropic, OpenAI, and the Chinese

providers. Meta is getting squeezed. For

example, in its most recent quarter,

revenue grew 28% but expenses soared

55%.

Free cash flow was only 785 billion.

Moving on, in the world of software, the

SaaS-pocalypse narrative seems to have

taken a bit of a of a vacation as

software stocks have all rallied off the

bottom. I think that there will be many

winners and losers. AI will supplant

those companies that have been lazy in

investing in their products. Winners

will be new software companies creating

AI-focused value add enterprises. The

existing software companies that update

their models and provide real value to

clients should also stay competitive.

Uncertainty about private credit

exposure to software is driving a lot of

fear. We need data and that data will

emerge soon. Debt refinancing of private

credit existing software companies that

are owned by private equity is around

the corner, sometime next year. This is

an area I will be spending more and more

time on with future guests. Moving on to

earnings. As far as current AI

conditions go, they remain quite good.

This week both CoreWeave, the AI data

center company, and Supermicro reported.

Now, Supermicro sells servers that go

into data centers. Its chief competitor

is Dell. Both companies had good

results. CoreWeave beat on both the top

and bottom line. Revenue climbed 112%

versus last year. However, CoreWeave is

still an unprofitable company. EPS was a

loss of about a dollar. The market

focused on the revenue and the stock was

up 19% on Wednesday. Also, on the

conference call, management stated that

demand and pricing remain very strong.

Supermicro has had problems executing of

late. However, this was a good quarter.

Supermicro reported better revenue and

EPS and issued strong guidance. Revenue

was up 91% versus last year. EPS of a

dollar 70 was up 315%

versus last year and the stock was up

19% on Wednesday. The results of

CoreWeave and Supermicro should not be a

surprise. As long as the hyperscalers

keep spending, AI infrastructure players

like CoreWeave and Supermicro can't help

but benefit. Again, the potential

Achilles' heel to the AI story is

Anthropic and OpenAI. That is what I am

watching most carefully. Finally, Cisco

reported and like its competitor Arista,

Cisco is a big beneficiary of AI data

centers. EPS was $1.22, up 23% versus

last year. The company raised both EPS

and revenue guidance. Again, not a

surprise, but the stock was down after

hours as the guidance did not meet the

whisper numbers. Moving on, I want to

talk about upstarts and established

franchises and who wins and who loses

and why. One way to frame the last few

decades and AI is a transition of all

industries from analog to digital. Those

entrenched companies that make the

transition successfully survive and live

to compete with the upstarts. Last week,

I gave TV recommendation list. Also last

week, we dropped an interview on premium

on Substack with Peter Hoffman, a movie

producer who was involved in some iconic

films like Terminator 2. This led me to

think about the massive changes in the

entertainment industry and whether those

changes are harbingers for other

industries. Let's go back to life before

streaming. Yes, there was a time before

streaming. Netflix started out as an

upstart disruptor going after

Blockbuster. And for you young people

out there, you're asking, "What's

Blockbuster?" Well, Blockbuster was a

massively successful retailer that

rented DVD movies. The problem was you

had to leave the house and go get your

movie. And then you had to return it in

person. Netflix mailed you the DVD and

you would mail it back. Simple stuff and

not really a great business, but kind of

clever. Here is where it gets even more

clever. Pre-streaming, Netflix was

distributing other people's movies via

DVDs in the mail. They were the

middleman like a specialty retailer.

That means low margins and low

flexibility in pricing. When streaming

started, Netflix pivoted to an entirely

different business model. Netflix went

to all the major entertainment companies

and offered to buy the rights to their

old shows that were not currently in

syndication. The incumbent entertainment

businesses said yes with glee. This was

their Titanic moment. They plunged into

the iceberg confident they had built

businesses that couldn't sink and boy

were they wrong. For the incumbents,

this was found money with 100% margins.

They would brag on quarterly conference

calls about how lucrative the Netflix

relationship was. By the way, Netflix

launched its streaming service in

January 2007 just before the great

financial crisis and Blockbuster

declared bankruptcy in September 2010.

Staying home and watching streaming was

now the new date night. The conduct of

the incumbent entertainment companies is

an example of how short-sighted

managements can sometimes be. CEOs are

compensated annually. Quarterly and

annual earnings drive stocks. Stock

results drive compensation. By selling

rights to Netflix, the incumbents beat

their revenue and profitability

projections. Management got paid. Hooray

for them. Let me quote something that

Lennon supposedly once said, and I don't

mean John Lennon. Lennon said, "We will

hang the capitalists with the rope they

will sell us." And that's what the

entertainment incumbents did. They sold

a rope to Netflix and Netflix hanged

them all. First, Netflix built a

business on old shows. Now they owned

their merchandise and could price it and

distribute it as they chose. Then, they

went into direct competition with the

big producers and created their own

shows. The incumbents did not see that

coming. They thought they owned the

production market and had motes that

were too deep to breach. They were wrong

and slow to adapt to their new

competition because they had an existing

high margin entertainment business and

they feared that migrating to streaming

would kill margins. And they were right

about that. Streaming is a lower margin

business. They chose margin over growth

and it cost them everything. To preserve

their margins, they sold their souls and

eventually lost their businesses. Today,

Netflix has a market cap of over 300

billion. The next biggest entertainment

company market cap is Disney at 178

billion. Paramount is at a lowly 10

billion. Warner Brothers is at 69

billion. Yet not all is great at Netflix

anymore. The company is very profitable,

but growth is slowing and growth

investors don't like investing in

companies where growth is deteriorating.

The upstart has grown old and that's why

the stock is down 21% year-to-date.

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Netflix is just one example of an

upstart conquering an industry. We've

seen this time and time again over the

past 25 years. Amazon conquered retail.

Bezos started with a business model of

disrupting Barnes & Noble and other book

superstores by mailing books from a

garage. He funded growth with massive

CapEx and never cared about earnings.

Investing with Amazon meant changing

investment models and taking a risk that

Bezos's vision would pan out, and that

risk paid off. There are many other

examples. That's why when an upstart in

a different industry goes public,

investors jump on the bandwagon as they

have seen this movie many, many times

before. But, not all upstarts are

created equal. Take Circle, the

stablecoin company. The company went

public last summer on June 4, 2025 at

$30, and it quickly climbed to 240 on

June 20th, same month. Today, it's 71.

Why the massive up and why the massive

down? Circle provides stablecoins as a

store of value and for payments. Today,

almost all of its business is in the

form of a store of value in the crypto

digital world. For Circle to truly

succeed, it has to break into the

payment space. The price of the stock

soaring to 240 reflects that investors

assumed it would be easy for Circle to

conquer the payment space. And in my

view, those investors could not be more

wrong. The payment space is notoriously

difficult to disrupt because Visa and

MasterCard dominate. Visa and MasterCard

link billions billions of consumers with

hundreds of millions of merchants. Go

recreate that. Since Visa and MasterCard

went public in the early 2000s, every

few years upstarts show up claiming they

are cheaper and will disintermediate

Visa and MasterCard, and they fail every

time. Visa and MasterCard are just

well-run companies. They are not going

to get complacent like the incumbent

entertainment companies. Any inroads

that Circle makes in payments will occur

by teaming up with Visa and MasterCard,

not by fighting them. Fighting them is a

hopeless cause. Circle has a very tough

road to follow. It's competing with

giants who are very competent, and it

only has a market cap of 18 billion.

Now, I don't think it has the financial

strength to play this game for too long.

If I was a CEO, I would try to sell the

company. Since we've just discussed

stablecoins, let's now turn to Bitcoin

and other digital currencies, another

potential disruptor. My problem with

Bitcoin is that no one has articulated,

at least to my satisfaction, an

investment thesis as to why anyone

should own the asset class. The most

frequently cited thesis is that fiat

currency, which is government currency,

has been debased, true, and everyone

should invest in Bitcoin as a hedge

against that debasement. Maybe. Nice

theory. The problem with it is that

Bitcoin acts inversely to that thesis.

If the thesis was correct, then on days

where inflation is soaring and Nasdaq is

collapsing, Bitcoin should be up and

vice versa. Instead, Bitcoin's

correlation to Nasdaq has been very

high. High until recently, when it has

just been underperforming. I fail to see

the point of owning Bitcoin. The fact

that it generally tracks the Nasdaq is

the clearest indicator that there really

is no thesis. It's not a disruptor yet.

Maybe one day. Year-to-date, Bitcoin is

down 27% over the past 12 months. It has

declined 46%. Also, I think something

else is going on here. Bitcoin used to

be cool. Young people traded it as their

primary asset class. Over the last year

or so, however, prediction markets have

taken off. I can't prove it, but I think

young investors have moved to prediction

markets. Bitcoin is no longer the cool

toy. Couch is. Just ask DraftKings,

which is facing the same fate as

Blockbuster. Being early is no guarantee

of survival. Adapting is. As another

example, eToro Group reported this week.

eToro is a global social investment and

multi-asset brokerage platform that lets

users trade and invest in stocks, ETFs,

and cryptocurrencies. But, its biggest

asset class is the trading of crypto.

EPS was okay, but revenue was down 30%

because of the decline in the trading of

crypto assets. And the stock was down

14% on the day that they reported, which

was on Tuesday, and is down 19% for the

year, and 47% over the past 12 months.

Like I said, not so cool. I discussed

Bitcoin on our recent podcast on August

10th with Glenn Schorr and Ken

Worthington. This topic came up, and Ken

pointed out that Bitcoin, at best, is a

store of value. Other digital

currencies, he argued, have many more

potential use cases. It's an interesting

point, but count me a skeptic. For any

digital currency, in my view, to have

any real impact, it has to break into

the payment system. And now, we are back

to the problems facing Circle and

stablecoins. Regardless of the form of

the digital currency, Visa and

Mastercard are not going to roll over

for digital currencies. They may look

old, established, and easy to take on,

but they will fight to the death to

defend their turf. Finally, [snorts] let

me flag issues involving boards of

directors. On Wednesday, August 26th, on

our premium Substack subscription, we

will post an interview with Becca

Platsky, host of the podcast called

Corporate Gossip. Great name. We

discussed several corporate scandals.

It's a lot of fun, and we touched on the

role or lack of a role of boards of

directors. Conceptually, a board of

directors should act as a check on the

authority of the CEO. The CEO is

supposed to report to the board, so that

if the CEO screws up, the board fires

the CEO. And it sometimes works like

that. You do see boards fire a CEO, but

most of the time it does not. In the

real world, CEOs handpick the members of

their board. They are not going to pick

someone who will challenge them. It's

mostly window dressing. Sometimes, you

see a CEO ask difficult question, and

their answer is, quote, "That's a

question for the board."

What a joke. The CEO usually controls

the board. Building your own moat can be

a perk of being CEO. I remember that

during the GFC, I decided for the first

time to examine who sat on the boards of

the major financial institutions. I was

horrified. Horrified. Running a large

financial institution is really

complicated. There are lots of moving

parts, and the accounting is very

complex. And yet, most members of the

boards of the major financial

institutions had no background in

financial services at all. They were

professors. They were once highly ranked

government officials. Very nice, but

they knew nothing about financial

services. Cushy catered board meetings,

nice annual compensation, and the status

motivated them. Understanding the

complexities was outside their

wheelhouse. That's why they were

handpicked as board members. How are

they ever going to challenge a CEO? They

weren't. This last Monday, August 10th,

we released an interview with Glenn

Schorr of Evercore and Ken Worthington

of J.P. Morgan. Combined, they cover

much of the financial services

landscape, and we explored the

controversies surrounding private equity

and private credit, as well as the

fundamentals of the overall financial

services sector including the digital

currency landscape. So, check it out.

This coming Monday, August 17th, we will

release an interview with Chris Ferrone

and Jason Trennert of Strategas. Chris

is the firm's market strategist and

Jason is the firm's founder. We had a

wide-ranging conversation about equity

markets, AI, private equity and private

credit and general risks about the

market. So, please tune in. When we are

back on September 7th, we will release

an interview with Ryan Tunnis of Cantor

and do a deep dive into property and

casualty insurance. And finally, on our

premium service on Substack on

Wednesday, August 19th, we will release

an interview with Wolfgang Münchau,

author of Kaputt, The End of the German

Economic Miracle, a great book. We

discussed at length why European growth

is so sclerotic and whether Europe is or

is not doing anything to deal with these

complex issues. So, please tune in. On

Wednesday, August 26th, on our premium

Substack subscription, we will post an

interview with Becca Platksy, host of

the podcast called Corporate Gossip.

Lakshmi Ganapathi will it will be

returning and will join us on Substack

Premium Wednesday, September 2nd for

some short picks. Please tune in. The

best way to support The Real Vision

Playbook is to subscribe to Substack and

to YouTube or your favorite audio

channel. Subscriptions are free and we

deeply, greatly appreciate your support.

And that's the rack.

>> [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]