Episode summary
AI Dominates Economy and Markets with Torsten Slok | The Real Eisman Playbook Ep 68
The Real Eisman Playbook
· · Hosts: Steve Eisman · Guests: Torsten Slok
Summary
Torsten Slok argues that the U.S. economy is being propped up by three unusually strong, largely interest-rate-insensitive forces: an AI spending boom, an industrial renaissance tied to reshoring, and the tax boost from the 2025 “one big beautiful bill.” He says the AI buildout alone is contributing about 1 percentage point to GDP growth, with reindustrialization adding about 0.3 and the tax bill another 0.9, which helps explain why the economy is still growing above 2% despite weak housing and autos.
On monetary policy, Slok says the Fed has almost no room to cut because growth and inflation are both too firm, and he even thinks markets are now pricing hikes rather than cuts. He also says AI is becoming more capital intensive, with hyperscalers burning through cash flow and raising debt and equity, while the economics of the business remain uncertain if models are easily replaceable and token prices keep falling.
He describes a sharply K-shaped consumer, with high-income households benefiting from rising stocks, home prices, and strong fixed-income yields, while lower-income households face stagnant savings, weaker wage growth, and heavier inflation pressure. That split, he says, is why aggregate spending still looks okay even as stress builds lower down the income distribution.
Key takeaways
- Torsten Slok says AI spending is adding about 1 percentage point to U.S. GDP growth, making it the single biggest driver of the economy right now.
- Torsten Slok argues the Fed is not likely to cut rates this year because growth, inflation, and labor demand are too strong.
- Torsten Slok says the consumer is increasingly K-shaped: upper-income households have roughly $1.5 trillion more savings than in 2019, while the bottom 20% are flat.
- Torsten Slok warns that software is the most vulnerable credit sector because it has high leverage, weak coverage ratios, and a 2028-29 maturity wall.
- Torsten Slok says AI is now a portfolio risk across both equities and credit because the S&P 500 and investment-grade markets are increasingly concentrated in AI exposure.
Notable quotes
“we have an AI spending boom because of the data centers and the energy associated with the data centers. We calculate that that contributes at the moment about 1%ish point to GDP growth”
“there is literally zero chance that he will cut interest rates this year”
“the top 20% of consumers they account for 40% of consumer spending. The bottom 20% only account for 8% of consumer spending”
“the 10 biggest stocks now make up 42% of the index”
How the episode opens
Hey, this is Steve Eisman. This is another episode of The Real Eisman Playbook. There are just so many issues going on these days.
Crossurrence, politics, war. But from an economic perspective, I think the biggest issues are the impact of AI, re-industrialization, short-term, the so-called big beautiful bill, unemployment, the deficit, and the overall investing environment. And these are major issues, and we've actually never had an economist on to sort of plow through all of them.
So today I've invited Torstston Sllock who is the chief economist of Apollo, an excellent economist and we're going to go through a ton of issues and afterwards I'm going to come back and talk about lessons learned. See you soon. Hi, this is Steve Eisman and welcome to another episode of the real Eisman playbook.
So there's so much going on these days. AI, K-shaped economy, oil prices, the deficit. I mean, it it's just hard to keep up.
So, today we have as our guest chief economist at Apollo, Torson Slack, who's going to help us, I hope. — I certainly hope my best to go through what must be like every day, you can't believe how much information is coming. So, Torson, welcome first of all.
Thank you, Steve. Thanks for having me. So let's start with a simple topic. Give us your very broad overview about the health of the US economy. A simple question. — Well, — And then we'll then we'll dig deep. — Well, thanks all again first for having me. But it's really quite simple initially. What is the headwinds and tailwinds to the economy at the moment? Because there are three very important tailwinds that are driving growth. First of all, we have an AI spending boom because of the data centers and the energy associated with the data centers.
From the episode’s captions: roughly the first two minutes, lightly cleaned. Keep watching on YouTube →
Topics
- ai dependence
- k-shaped economy
- fed rate cuts
- private credit
- us economy slowdown
Companies and tickers mentioned
- APO
- Apollo
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Summary, takeaways and quote selection by Octagon. Quotes are short excerpts; the full conversation is in the episode.
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