Episode summary
The AI Debate Gets More Complicated: Microsoft Has a Win, Meta Stumbles | The Weekly Wrap
The Real Eisman Playbook
· · 25 min · Hosts: Steve Eisman
Summary
Steve Eisman argues that the market’s latest rotation is being driven by a cooler, more complicated AI debate, not a clean verdict that AI is good or bad. He says hyperscalers such as Microsoft, Amazon, Google, and Oracle still have real businesses and a structural advantage because the AI buildout is so capital intensive, but he is much more skeptical of large LLM providers like OpenAI and Anthropic, which he thinks have weak moats and could face price pressure from cheaper open-source Chinese models.
He also says investors are showing nervousness by selling tech and AI-related names, with the Nasdaq down 7% from its high and the semiconductor index down 23% from its June peak. That weakness shows up in financing too: CoreWeave’s debt is being priced at more than 9%, which he reads as a sign that credit investors are separating the biggest players from riskier newer ones.
On earnings, Eisman highlights a sharp split. Microsoft and Amazon looked strong, while Meta’s results were “quite bad” because expenses and AI-related capex overwhelmed growth. Visa, Mastercard, Bloom Energy, Quanta, Starbucks, and Robinhood all showed pockets of strength, while PayPal, FICO, and Apple disappointed. He ends by saying the K-shaped economy is real, but that humanity is still far wealthier than in previous centuries.
Key takeaways
- Eisman says Microsoft had a very good quarter, with EPS up 30% and Azure revenue growth accelerating to 43%, while Meta’s quarter was “quite bad.”
- He argues the AI winners are the hyperscalers, because only a few firms can afford the infrastructure, but he is skeptical that OpenAI and Anthropic have durable moats.
- He says the market’s risk-off move is visible in the Nasdaq being down 7% from its high and the semiconductor index down 23% from its June peak.
- Eisman says Charter’s broadband losses worsened again to 172,000 and he will sell the stock next week because the thesis no longer works.
- He views FICO’s miss on revenue and soft guidance as weakness for a monopoly business facing a VantageScore challenge.
- He says Meta’s AI spending is crushing margins, while Microsoft and Amazon are better positioned because their cloud businesses support the AI buildout.
Notable quotes
“Microsoft had a good quarter. I would not characterize Meta's quarter as a good one. It was quite bad”
“There is a major difference between hyperscalers and LLM providers. The hyperscalers are the huge tech companies that are building the data centers”
“The large LLM providers, Anthropic and Open AI and partially Google and Microsoft are much more problematic”
“Meta's quarter as a good one. It was quite bad. Meta reported earnings per share of 618 versus 714 last year. So down down 13% and a miss versus expectations”
How the episode opens
Investors have displayed their nervousnesses by selling tech stocks and all AI related plays. That is why NASDAQ is down 7% from its all-time high. So many companies reported this week.
PayPal company reported numbers that once again show the problems plaguing the payment sector. Microsoft had a good quarter. I would not characterize Meta's quarter as a good one.
It was quite bad. Starbucks has been a turnaround story that finally looks like it's working. Apple was disappointing.
Amazon was strong. Migrating from thinking that AI is all positive to AI is all negative is a pretty short emotional road to take. The story is moving too quickly.
But here is where I think we are now. Hi, this is Steve Eisman and this is another episode of the weekly rap. This is for the week ending Friday, July 31st, but recorded Thursday night, July 30th.
By the way, I have a cold. The best way to support the Real Eisman playbook is to subscribe to Substack and to YouTube. Subscriptions are free and we appreciate your support.
The link to join for free is in the description. I just want to flag something that's coming up on premium. On Wednesday, August 5th, we will release an interview with filmmaker and producer Peter Hoffman.
Peter has been involved in the making of iconic films like Terminator 2 and Basic Instinct. We discuss the arc of his career and how the business has changed from old school film production to the current world of streaming. The link for premium is in the description.
On this week's rap, we will cover number one charter, number two, the war in Iran, number three, the Fed meeting, number four, the AI debate in more detail, number five, a huge week of earnings, and six one mail pack.
From the episode’s captions: roughly the first two minutes, lightly cleaned. Keep watching on YouTube →
Topics
- ai debate
- earnings week
- microsoft vs meta
- k-shaped economy
- retail and consumer stocks
Companies and tickers mentioned
- MSFT
- META
- V
- PWR
- BE
- SBUX
- AAPL
- FICO
- HOOD
- CHTR
- PYPL
- Microsoft
- Meta
- Visa
- Quanta
- Bloom Energy
- Starbucks
- Apple
- FICO
- Robinhood
- Charter
- PayPal
Watch the episode
Summary, takeaways and quote selection by Octagon. Quotes are short excerpts; the full conversation is in the episode.
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The Real Eisman Playbook, this episode and its artwork belong to Steve Eisman. Octagon is not affiliated with the show; this page is an independent summary.
