Episode summary
The Midterms Have Changed the AI Narrative: S&P Down 4.4%, Nasdaq Down 5.5% | The Weekly Wrap
The Real Eisman Playbook
· · Hosts: Steve Eisman
Summary
Steve Eisman argues that the midterms materially changed the AI narrative because a Democratic sweep could slow AI data center construction. That sparked a sharp Thursday selloff, with the S&P down 4.4% and the Nasdaq down 5.5%, and he says the market is now reassessing which companies actually benefit from AI capex. He sees the biggest negatives in power suppliers, semis, equipment vendors, neoclouds, and even Elon Musk-related names, while suggesting the hyperscalers could eventually benefit if slower construction lets them fund AI buildout from cash flow instead of capital markets.
Key takeaways
- Steve Eisman says the midterm result could slow AI data center construction and hit the broad ecosystem, from GE Vernova and Quanta to Nvidia, AMD, Dell, and Super Micro.
- He argues the neoclouds are structurally weaker than Microsoft, Amazon, and Google because they depend on fixed-income markets to finance AI buildouts.
- He says Google search revenue growth slowing to 12% suggests AI search is beginning to replace the old search model.
- Eisman reads Anthropic’s amended S-1 as evidence that post-token-maxing growth has slowed, with Q3 sequential revenue growth falling to 47% from 147% in Q2.
- He says the tech correction is likely to hurt Anthropic’s IPO valuation and that a price war among Anthropic, OpenAI, and Google is underway.
Notable quotes
“The implications of the midterms are potentially quite consequential on the AI narrative and the economy”
“AI capex accounts for at least 50% of GDP growth this year”
“The capital intensity is the spending on AI data centers and the spending to create LLM and agentic AI models”
“I have owned Eaton for quite a while”
How the episode opens
The implications of the midterms are potentially quite consequential on the AI narrative and the economy. The initial reaction of investors on Thursday was to sell in a panic and the market suffered a massive correction. The yield on core's debt jumped to 15% which is a prohibitive rate.
Investors began to think that maybe not everyone will benefit from the AI story. Fiserve and FIS have been horrible stocks. Best to stay away.
AMD also reported Tuesday night, AMD did deliver. This tech correction is going to hurt Anthropic's valuation for its IPO. Growth has slowed.
AI capex accounts for at least 50% of GDP growth this year. A slowdown in AI capex means a slowdown in the economy. Let's get started.
Hi, this is Steve Eisman and this is the weekly rap. This is for the week ending Friday, November 6, but recorded Thursday night, November 5th. For Substack Premium this past Wednesday, November 4th, we posted an interview with Substack newsletter writer Herb Greenberg.
We had a wide ranging conversation about the market and faulty narratives. This coming Wednesday, November 11th, we will post an interview with Melody Wright of Unicus Research, who is an expert in housing. We will discuss the horrific state of US housing and why Melody thinks housing prices are going to decline in most parts of the country.
We hope you tune in. If you like the work we are doing, please visit us at steveisman.com and subscribe to Substack and our YouTube channel. And on to the rap.
On this week's rap, we will discuss number one, and this is a big one, implications of the midterms on the AI narrative and the economy. Number two, the change in the AI narrative because of coreweave. Number three, Anthropic amended its S1 with data that is quite revealing.
From the episode’s captions: roughly the first two minutes, lightly cleaned. Keep watching on YouTube →
Topics
- ai narrative
- midterm elections
- equity market selloff
- coreweave
- anthropic filing
Companies and tickers mentioned
- GOOGL
- GOOG
- CoreWeave
- Anthropic
Watch the episode
Summary, takeaways and quote selection by Octagon. Quotes are short excerpts; the full conversation is in the episode.
More from The Real Eisman Playbook
-
Anthropic’s Growth is Slowing: Is AI Capex Next? | The Weekly Wrap -
Inflation, The Deficit & Why the Dollar Stays King with Benn Steil | The Real Eisman Playbook Ep 81 -
AI Narrative Switched, Debt Yields Spike | The Weekly Wrap -
Big Short Reunion w/ Danny Moses: Rising Rates, AI & Private Equity | The Real Eisman Playbook Ep 80 -
Market Cracks Under AI Debt Burden | The Weekly Wrap -
AI Doomsday Fears, Hacking & the Fight for Control with Gary Marcus | The Real Eisman Playbook Ep 79
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.
