AI Terminator Fears Grow & Rates Breach 4.9% | The Weekly Wrap

Summary

Steve Eisman argues that the 10-year Treasury yield breaking 4.8% and then 4.9% is a meaningful stress point for equities and the broader economy, and he thinks Treasury buybacks of $4 billion to $6 billion are far too small to matter against $40 trillion of debt. He contrasts that with QE, which he says inflated asset prices while leaving the real economy weak, and he expects the Fed to ignore political pressure while markets still price a meaningful chance of a September hike. On AI, he dismisses near-term extinction narratives, saying there is no evidence AGI is imminent and that what matters now is reliable systems that do not hallucinate. He flags OpenAI price cuts, Qualcomm’s Amazon partnership, and Oracle’s dependence on OpenAI as signs that the AI stack is still fragile and economically concentrated. He also touches on FICO pricing pressure, Macy’s and GameStop results, and says he prefers 5% Treasuries over gold as a hedge.

Notes

• The 10-year Treasury yield moved above 4.8% and then 4.9%, a level Eisman says is the highest since November 2023.
• He argues higher long-term rates are hard for equities to absorb and negative for the real economy.
• He frames 4.5% as a previous “Rubicon” for rates, but says he was wrong and the threshold is lower now.
• Scott Bessent’s Treasury buyback plan started at $4 billion and was later increased to $6 billion.
• Eisman says the buyback size is far too small to matter relative to $40 trillion of federal debt.
• He contrasts Treasury intervention with QE, saying QE bought Treasuries to lower rates and jumpstart the economy.
• Eisman says QE inflated stock prices but did not help the economy much.
• He says the Fed’s balance sheet stands at $6.7 trillion, which he calls a “crazy sum.”
• He says the new Fed chair wants to exit QE and gradually shrink the balance sheet.
• Eisman expects threats from the Trump administration to keep the Fed from hiking to be ignored.
• He cites a market-implied 60% chance of a September rate hike.
• He dismisses warnings that AI could trigger human extinction by decade-end as speculative.
• Eisman says there is still no evidence AI will achieve AGI.
• He says the real need is trustworthy intelligence that does not hallucinate.
• He notes the recurring “AGI tomorrow” narrative has already cooled after repeated misses.
• A subscriber argues Nvidia’s unusually high margins let it extract rent from hyperscalers and then finance emerging AI challengers.
• Eisman says Nvidia’s gross margin was about 74% this quarter, still far above historical semiconductor norms.
• He suggests Nvidia’s financing and ecosystem support could accelerate commoditization of AI economics.
• He says the current AI ecosystem is heavily dependent on Anthropic and OpenAI.
• Eisman warns that if OpenAI failed within a year, the stock market could face a massive correction.
• OpenAI’s CFO said the company cut the price of its GPT 5.6 Luna model.
• He says the company reported a tenfold increase in usage shortly after launch.
• Eisman frames the OpenAI price cut as a possible signal of an AI price war.
• Qualcomm announced a collaboration with Amazon to build custom AI chips and optical networking equipment.
• He says the Qualcomm-Amazon deal is intended to compete with Nvidia.
• Amazon received a warrant to buy 25 million Qualcomm shares at $161.26.
• Because Qualcomm trades above $175, Eisman says those warrants are worth more than $4 billion.
• Oracle reported 30% revenue growth.
• Oracle’s non-GAAP EPS also rose 30%.
• Eisman criticizes non-GAAP reporting because it excludes stock-based compensation.
• Oracle’s remaining performance obligations reached $664 billion, only modestly above $600 billion in the prior quarter.
• He says about 50% of Oracle’s RPO comes from OpenAI.
• Eisman highlights Bill Pulte’s renewed criticism of FICO and the credit bureaus.
• Pulte said FICO raised prices by something like 1,600% over five years.
• VantageScore is now available to all lenders, expanding competition against FICO.
• Eisman says FICO’s monopoly is likely to break badly and that he still likes the short.
• Macy’s had a good quarter and he thinks the company is becoming a turnaround story.
• Macy’s total same-store sales rose 2.7%.
• Bloomingdale’s same-store sales rose 11.3%.
• He links Bloomingdale’s strength to Saks’ decline.
• GameStop reported adjusted EPS of $0.27 versus $0.25 a year earlier.
• GameStop revenue fell to $790 million from $972 million last year.
• GameStop now generates more revenue from collectibles than from video games.
• On gold, Eisman says investors view it as protection against inflation and fiat debasement.
• He says he does not own gold and prefers 5% Treasuries.