# 2026 Predictions with Dan Ives and Chris Verrone | The Real Eisman Playbook Episode 40

Markdown copy of https://realalpha.app/v/KByibe1S6l8/ on Real Alpha, the best minutes from long interviews with the people building AI. Cite and link the page, not this copy.

Dan Ives says the AI buildout is still in its early stages, while Chris Verrone sees 2026 leadership shifting toward real-economy stocks.

- Show: The Real Eisman Playbook
- Hosts: [Steve Eisman](https://realalpha.app/people/steve-eisman/)
- Guest: [Dan Ives](https://realalpha.app/people/dan-ives/) · Partner & senior managing director, tech analyst, Yorkville Ives
- Guest: [Chris Verrone](https://realalpha.app/people/chris-verrone/) · Strategas
- Published: Jan 5, 2026
- Length: 1 h 5 m

## The best minutes

- [8:51](https://realalpha.app/v/KByibe1S6l8/?t=531) [AI adoption is early, but power and scaling remain constraints](https://realalpha.app/s/ai-adoption-is-early-but-power-and-scaling-remain/) (5 min)
- [28:13](https://realalpha.app/v/KByibe1S6l8/?t=1693) [Housing affordability depends on local supply barriers](https://realalpha.app/s/housing-affordability-depends-on-local-supply-barriers/) (3 min)
- [40:22](https://realalpha.app/v/KByibe1S6l8/?t=2422) [Software incumbents may retain value through installed bases](https://realalpha.app/s/software-incumbents-may-retain-value-through-installed-bases/) (3 min)

## Also worth watching

- [21:04](https://realalpha.app/v/KByibe1S6l8/?t=1264) [Oracle’s credit signals may overstate its financing risk](https://realalpha.app/s/oracles-credit-signals-may-overstate-its-financing-risk/) (7 min)
- [43:05](https://realalpha.app/v/KByibe1S6l8/?t=2585) [Pharma and biotech may lead a historically underweighted sector](https://realalpha.app/s/pharma-and-biotech-may-lead-a-historically-underweighted/) (3 min)
- [58:59](https://realalpha.app/v/KByibe1S6l8/?t=3539) [Verrone expects a 2026 shift toward real-economy stocks](https://realalpha.app/s/verrone-expects-a-2026-shift-toward-real-economy-stocks/) (3 min)

Skip the opening year recap, Tesla’s autonomy debate, sponsor reads, and the later Fed-cut and AI-model discussion.

## Full analysis: Dan Ives says tech stocks will rise more than 20% in 2026

- Ives expects technology stocks to rise 20% plus in 2026.
- His 3% U.S. adoption figure suggests runway, not proven returns.
- Power constraints, diminishing returns from scaling LLMs and a possible real-economy rotation test that call.

Its 6 sections, what it means for you and what to watch are on [the page](https://realalpha.app/v/KByibe1S6l8/#analysis), free with an account:

- [1:01:27](https://realalpha.app/v/KByibe1S6l8/?t=3687) Ives expects technology stocks to rise more than 20%
- [11:04](https://realalpha.app/v/KByibe1S6l8/?t=664) Three percent adoption supports runway, not proof of returns
- [12:07](https://realalpha.app/v/KByibe1S6l8/?t=727) Power constraints can delay demand without defeating it
- [24:01](https://realalpha.app/v/KByibe1S6l8/?t=1441) Oracle's credit signals do not settle its financing risk
- [59:12](https://realalpha.app/v/KByibe1S6l8/?t=3552) Verrone sees a real economy handoff, but price action leads
- [1:03:03](https://realalpha.app/v/KByibe1S6l8/?t=3783) Teams should budget against milestones, not the 20% call

## Summary

The episode identifies Ives with Wedbush and Verrone as a market strategist at Strategas. Ives discusses technology and AI, while Verrone focuses on market trends and sector performance.

Ives argues that the AI buildout remains early, with enterprise use cases and monetization still developing, while Eisman and Verrone flag energy constraints and the risk of weaker returns from scaling language models. Verrone sees a possible 2026 shift toward real-economy sectors, including regional banks, transports, housing and commodities; he also views Bitcoin’s weakness as a possible sign of that change. The guests discuss Oracle, Tesla, financials, software and healthcare, with differing views on risks and potential leaders. Ives expects technology stocks to rise more than 20% in 2026 and highlights Apple, Microsoft and Oracle.

### Minute by minute

- [6:50](https://realalpha.app/v/KByibe1S6l8/?t=410) **AI monetization remains the key test.** Ives says investors worry about whether AI revenue will arrive quickly enough to justify the spending. Eisman raises concerns about power shortages and diminishing returns from scaling language models; Ives counters that enterprise adoption is still early, citing his estimate that 3% of U.S. companies have pursued AI.
- [15:33](https://realalpha.app/v/KByibe1S6l8/?t=933) **AI creates second-order investment plays.** Ives looks beyond major AI providers to software, cybersecurity, data centers and power, naming Palantir, Snowflake, CrowdStrike, Nebius and GE Vernova. Verrone says benefits may also reach users of AI and memory makers such as Micron, Samsung and SK Hynix; he sees commodities as possible inputs to the buildout.
- [21:04](https://realalpha.app/v/KByibe1S6l8/?t=1264) **Oracle faces a test of confidence.** Ives says investors overstate the risks from Oracle’s debt and its commitments to OpenAI, and calls Oracle a large-cap favorite for the coming year. Eisman says Oracle credit-default swaps trade in an illiquid market, so wider spreads alone may not reflect broad bond-market views; Verrone says investors should hold market narratives lightly.
- [28:24](https://realalpha.app/v/KByibe1S6l8/?t=1704) **Housing remains weak.** Eisman and Verrone say rates have not revived housing. Verrone says homebuilder stocks need to turn up from support for housing to have a chance in 2026, while Eisman argues affordability depends on local fees, regulations and approval delays as well as interest rates.
- [30:41](https://realalpha.app/v/KByibe1S6l8/?t=1841) **Tesla depends on robotaxi execution.** Eisman questions Musk’s credibility on robotaxi delivery, contrasting a promise of 500 autonomous vehicles in Austin with 80 in service, and says Tesla’s EV business is struggling as subsidies have ended. Ives sees autonomous driving as a pivotal chapter and expects Tesla to reach 30 cities within a year; Verrone says the stock’s chart supports a higher direction.
- [40:22](https://realalpha.app/v/KByibe1S6l8/?t=2422) **Software may be ready to turn.** Ives says software companies’ installed bases and their own AI products could help them withstand disruption, and expects more software mergers, especially among mid-cap firms. Verrone says the software-versus-semiconductor ratio may be bottoming and points to early improvement in Salesforce and Snowflake.
- [43:05](https://realalpha.app/v/KByibe1S6l8/?t=2585) **Pharma and biotech could lead healthcare.** Verrone says healthcare may be turning after its weight in the S&P 500 reached a 25-year low. He points to Lilly, Intuitive Surgical and Natera, sees pharma and biotech as potential 2026 leaders, and says he would not bottom-fish health insurers because their long-term trends remain broken.
- [46:23](https://realalpha.app/v/KByibe1S6l8/?t=2783) **Defensives and private credit draw attention.** Verrone says consumer staples have been left behind, though he sees better price action in Coke, Hershey and Estée Lauder; he is not yet calling them next year’s leaders. Eisman says concerns about private credit lack supporting data and notes that Tricolor and First Brands, cited as warning signs, did not originate in private credit.
- [53:22](https://realalpha.app/v/KByibe1S6l8/?t=3202) **AI value may come from use cases.** Ives says the AI market may have a few leading models, but that value will come from data and applications rather than the models alone. He names Google, Microsoft and Palantir as favorites, and says Palantir could reach a $1 trillion market capitalization in two or three years.
- [58:59](https://realalpha.app/v/KByibe1S6l8/?t=3539) **Real-economy stocks may gain leadership.** Verrone expects a first-half 2026 handoff from speculative areas to transports, regional banks, housing, chemicals and commodities, some of which he sees as AI-related beneficiaries. He says Bitcoin’s weakness may signal a move away from liquidity-driven, high-beta assets and toward assets with carry.
- [1:01:18](https://realalpha.app/v/KByibe1S6l8/?t=3678) **Ives expects technology stocks to rise.** Ives forecasts gains of more than 20% for technology stocks and highlights Microsoft, Oracle and Apple, which he says could benefit from its Gemini partnership. Eisman flags energy and language-model scaling as risks, while Verrone says a stronger economy could push the 10-year yield back to 4.5% and unsettle speculative stocks.

## Transcript

The Real Eisman Playbook, hosted by Steve Eisman, with Dan Ives and Chris Verrone.

Transcribed by machine (Whisper) from the episode’s audio, so a word may be off here and there. Where the podcast’s audio and the video part ways, some times are a minute or so off.

[0:29](https://realalpha.app/v/KByibe1S6l8/?t=29) Hi, this is Steve Eisman, and welcome to The Real Eisman Playbook. And here we have two great guests today, Dan Ives of Wedbush, Chris Verrone of Strategas, who is the market strategist. And we're going to do a year-end review we're going to talk about next year, because there's just not that much to talk about. so let me give you each an opportunity let's let's we'll do predictions later let's just chris you're the market strategist strategist give us your view of this absolutely insane exhausting year before we get to just how insane and the ups and downs and the twist in terms of the year were let's also first start by just saying how consistent a few things were throughout the course of the year and really have been so consistent for two or three years the premise of our call for two years has been, so long as banks are involved and so long as credit is calm, the trend of the market's probably still up. And if you look at what's continued this year, all the bank stocks that- continue to work. Credit conditions have remained remarkably calm. I think until those change, we would be reluctant to kind of move away from the bull call here. Now, put this in context of what was a very nuanced year from point to point. Now, you entered 2025. Expectations were high.

[2:45](https://realalpha.app/v/KByibe1S6l8/?t=165) Trump had just won. Animal spirits were running wild. The bar of expectations was set high. And that kind of moved us into the April tariff disaster. I'll never forget, we held a conference call that Sunday night after the big down move that Thursday and Friday. Right after Liberation Day. Right after Liberation Day, April 7th. Think about what could go right from this condition. Right. I mean, we were down 20 plus percent relatively quickly on all the major averages. 19 percent point to point. I mean, sentiment went from euphoric in January to absolutely rock bottom. In our own sentiment composite, you were in the second percentile historically. You think about what can go right from that condition. And I remember being on your show, Steve, in June or July, talking about a market that was up 25% over three months, yet bullishness was still hard to find.

[3:32](https://realalpha.app/v/KByibe1S6l8/?t=212) So here we are now, three, four, five months on from then. And just think of how the narratives have shifted so many times. And Dan, this is certainly in your world, but from January of deep seek to April of tariffs to, you know, chat GPT, you're going to eat Google's lunch to Google's eating everybody's lunch. Think of how the narrative has changed. And then in my world, what hasn't changed? Banks have been involved. Credit's been calm. Ten-year yields have been really stable. Remarkably stable. Remarkably stable. Okay. Dan, take it away. Give us the year from your perspective. Because it's been so boring for you.

[4:06](https://realalpha.app/v/KByibe1S6l8/?t=246) Oh, my God. It's like, you know, it's funny. Like, you know, doing this since, like, late 90s, you know, there have been certain years where they're just you know that you feel like they're just much more crazy than others i think this is like a top two or three crazy year that i've had my career part of it goes back to like on one hand the ai revolution were it's year three of a 10-year build-out cap backs you start off in the beginning of the year everyone's that go to the deep seek moment which ultimately ended up really being essentially fit you know you got to add two commas to what they spend and those are essentially stolen NVIDIA chips.

[4:43](https://realalpha.app/v/KByibe1S6l8/?t=283) But the reality is that... Say that again. I don't think everybody's aware of that. If you go back to DeepSea, because a lot of times people be like, how come no one talks DeepSea? Because instead of spending $6 million, they were spending $600 million in reality. and the chips they were using were essentially stolen NVIDIA chips through Singapore. I mean, that's the reality, right? So when everyone's like, how could DeepSeek do it with two matches, a dollar, and like a bag of McDonald's? And a tent. And why would these companies be spending $300 billion? I'm like, dude, that's because that's a Cinderella story.

[5:23](https://realalpha.app/v/KByibe1S6l8/?t=323) I mean, if you want to believe that. So I think the thing is that took time to manifest. Big tech then had a double down, CapEx, Nadella, Davos, we're good for our $80 billion, the whole thing. Then obviously, like, the spending, I mean, the spending was, you know, I'd say probably 20%, 30% more than we expected. You go to Liberation Day, I'd say the same thing. That was probably, like, maybe a handful of times in my career, that was, like, a moment of, like, potentially economic Armageddon, just because knowing that that was going to cut the tech trade at its knees. And for the first time in 30 years, the U.S. is ahead of China when it comes to tech.

[6:00](https://realalpha.app/v/KByibe1S6l8/?t=360) And that was almost like an emotional time because for me, so many times you're in Taiwan, China, see 18 hours in a fab, all the innovation technology. Land in Newark Airport, there's a fistfight, the Dunkin' Donuts, and then you're like, dude, there's a reason how far behind we are. The reality is first time we're ahead in terms of U.S. tech, circular financing, going from good to bad. Google New York City cab drivers bearish on the stock going into this year. Oracle good, Oracle bad. It's the only MAG 7 stock actually outperforming the S&P this year. I believe it's Google. But go back. If we sit here a year.

[6:34](https://realalpha.app/v/KByibe1S6l8/?t=394) By a lot. By a big number. It's up over 60%. Yep. Remember a year ago, they're going to get broken up by DOJ. Better chance of me playing for the Knicks. Then the reality is like AI. I wouldn't go that far. You never. Impossible. Who knows? Then all of a sudden AI eating their lunch. search is going to be done. They're behind. Now you look at Gemini. So it's get the popcorn out. It's going to be, you know, obviously a lot of ups and downs. So right now, what would you say are when you're talking to investors on the tech trade, what are the big concerns that you're hearing from people? The big concerns and, you know, and you hit on some of them, but the big concern is just, you know, the spending's there, the capex is there. The question is like, when's monetization of AI going to happen? Is it going to be quick enough that investors are not going to be like, white flag, you got to stop spending and become self-filling profits?

[7:25](https://realalpha.app/v/KByibe1S6l8/?t=445) The data center build out, the OpenAI, too big to fail trade, is that almost like a centerpiece? Are they good for their bills or whatever? And that's why I think the reality is like it's easy to get fearful if you're in the 30th floor of a New York City office building or Metro North. But for someone like myself, three and a half million air miles in the last 25 years, seeing it front and center, you have a much different view in demand and supply for NVIDIA chips are 12 to 1 in Taiwan. on. And Dan, I think two things can be true at the same time, right? Some of these stocks that had remarkable runs over the last couple of years can have 20, 30, 40% drawdowns, and everything you're saying could still be true. And I think we need to separate that a little bit. Oh, I totally agree.

[8:09](https://realalpha.app/v/KByibe1S6l8/?t=489) You know, there are some names that I would say are on the periphery of the AI story, which were once viewed as AI darlings, which actually, as you know, Steve, have not made any progress now all year. I'm thinking of a name like Eaton, right? That was viewed as very much in this infrastructure build out um it was up sharply off the april lows but it's actually point to point unchanged i think april of 24 right that's a long time for something that you would consider one of these darlings to be uninvolved well the problem with eating just a little pushback is they have other businesses of course and so it's it's not as pure an ai trade they've got legacy businesses that aren't doing as well but when they were viewed as part of that ai trade all right and to your point part of the problem too is that just because you say ai 30 times in a conference call. It doesn't make you an AI player. So investors, too, is trying to decipher who are the winners, who are the frauds, the fake ones, and I think that's the other thing.

[8:58](https://realalpha.app/v/KByibe1S6l8/?t=538) So let me push back a little bit on the AI trade because I'm pushing back more academically than reality because I own all these stocks. But it seems to me I completely accept what you're saying about the demand. There's no question the demand is there. There's no question the CapEx is there. It seems to me there are two potential pitfalls to the whole AI trade, and I like your feedback from it. So the first one is just, you're building all these data centers, are you going to have power? Now, there are two data centers in Santa Clara, California, which were on the drawing board in 2019, that are fully functional, and they only have one problem. They can't plug in because it's just the utility out in California can't supply the power.

[9:48](https://realalpha.app/v/KByibe1S6l8/?t=588) So it takes, as you all know, it takes time to build all this stuff. So I think there's a legitimate argument to... be said that some of this stuff may take longer than people think, and that would cause a delay. That doesn't mean that the AI trade is wrong. It's just that maybe it gets pushed out, we have a correction, et cetera. I think the more interesting critique is the argument that you find on Twitter, which was very much like a minority opinion, and now is gaining some credence, which is that continuously scaling LLM models is becoming now diminishing returns. Now, there was a guy, Gary Marcus, who was like the only person on Twitter that I could even find that had this argument.

[10:31](https://realalpha.app/v/KByibe1S6l8/?t=631) So I just read him not knowing anything. Okay, this guy's just saying something nobody else is saying. I gotta read this guy. A couple of weeks ago, one of the co-founders of OpenAI took exactly the same position. So I'd be curious what you're hearing because if it turns out that you're getting diminishing returns now and scaling LLM models, then maybe you're going to see maybe six to nine months from now orders start to pull back because the thing that eats the chips are these LLM models. I'd be curious

[11:04](https://realalpha.app/v/KByibe1S6l8/?t=664) **Dan Ives:** what you're hearing. Look, 3% of US companies have gone down the AI path today. In Europe, zero. They're basically trying to build blockbuster videos. Asia, ex-China, it's less than 1%.

[11:16](https://realalpha.app/v/KByibe1S6l8/?t=676) Middle East are starting. Sovereigns are starting. So just to take a step back, like where we are, how early days we are in the AI build-out. I would say, like, from the Palantirs to the Mongos to the Snowflakes to everything we see on hyperscalers, look, use cases are accelerating on the enterprise. So even though, like, that whole argument on LM, my view is, like, that is just tip of the sphere relative to where this is going as an enterprise consumer trade. Next few years, it's all about enterprise. But my also view is, like, humanoid robotics is going to be real in the next three or four years.

[11:52](https://realalpha.app/v/KByibe1S6l8/?t=712) Autonomous is going to be... We're not talking just in our lifetime. We're talking about the next three, four, five years. So my view on the data center perspective is there's more data centers under construction today than active data centers in the United States. I do agree with you. The biggest constraint is energy. So I'm a huge believer in nuclear energy and where we need to take that. By the way, even if you're a believer, which I am a believer too, you don't just wave a magic wand to build a nuclear power plant. I mean, it takes time. But given China, given where they are from an energy...

[12:25](https://realalpha.app/v/KByibe1S6l8/?t=745) perspective, it is an arms race what we need to do. Well, the language we've been using, Steve, is, you know, so much of this maybe 2.0 or 3.0 AI trade might be the war beneath our feet, right? All the resources and the commodities and the metals and the rare earths and the energy that's necessary to do what Dan believes is coming to fruition here. So, you know, I look at maybe what was maybe the more important or one of the more important developments of the last four or five months is this turn in commodities, right? This may not be a cyclical signal. This may very well be a reflection of Ai2.0 of the raw material necessary to make this happen.

[13:01](https://realalpha.app/v/KByibe1S6l8/?t=781) I mean, look around the world, whether it's GE Vernova in U.S., whether it's Siemens Energy in Europe, whether it's Mitsubishi Heavy in Japan, right? You could kind of go geography by geography and say this power theme really transcends national borders here. This is a really, really prevalent theme. Yeah. No, those are great thoughts. And I think also you – I think you do particularly an awesome job where sometimes like from a macro and summarizing it in a way that also – it also dovetails into a lot of the themes too. Well, like what are the super themes, right? So we could look at this move in commodities and you could come up with three very different answers.

[13:40](https://realalpha.app/v/KByibe1S6l8/?t=820) By the way, I was watching CNBC today and they were talking commodities and the commentator was – all he was talking about was that this is a contrafear currency trade. Like the basement of the dollar by commodities and with absolutely nothing about AI involved. So let's think about why here for a moment. So you could say commodities are turning up here because there's some cyclical signal. The real economy is getting better. I'm OK with that answer. You could say commodities are turning up here because we're in this geopolitical resource nationalism. OK, that sounds reasonable as well. You could say commodities are turning up here because of this debasement trade.

[14:20](https://realalpha.app/v/KByibe1S6l8/?t=860) Maybe, maybe not. You could say they're turning up here because they're the raw material necessary for a lot of the stuff that you focus on, Dan. And I don't particularly care which is the correct answer. I think the stocks are blunt instruments. Any one of those could be right. I don't think Rio or BHP or Freeport is going to distinguish what is the correct reason why. Do you view like Rio as like an AI, like a third, fourth – You're talking Rio Tinto. Yeah, do you view like some of those as like third, fourth derivative AI trades? Yeah, I do. And I think you could actually start to view some of the energies in that – that capacity as well. I had a fascinating conversation last week with a gentleman who's one of the biggest players in the physical delivery crude world. Of crude? Of crude.

[15:04](https://realalpha.app/v/KByibe1S6l8/?t=904) And I was pressing him a little bit on, you know, help me understand why the oil chart looks so bad, but actually the E&P names are all getting better. And he's like, well, it's simple. AI is making the geological survey so good that the breakeven of crude is falling. So that's good for the stocks not bet for the stocks so you know there's this really yeah so you know that's crazy and i think dan like you know maybe 2.0 or 3.0 here if we're talking about a general purpose technology the the winners of ai are who all the benefits accrue to of course and that's probably what's on the come here then there's a whole trade about like you see my whole view is like like our whole thing is like in our lives etf which is like the second third fourth derivatives of AI, because it's not just about, in 2020, 2024, it's like, own a godfather of AI, Jensen, own a video, Microsoft, Palantir. Now it's about how do you play the derivatives, infrastructure, Nebius, some other names like that. So give us some derivative trades that you're focusing on now. I mean, to me, like derivatives, first off, like in software and Palantir being our number one. But I think I look at names like Snowflake and MongoDB that are really the use case software

[16:23](https://realalpha.app/v/KByibe1S6l8/?t=983) names. As these use cases get deployed on the enterprise, I think there's going to be huge plays. The protection of it, I think the area that's getting overlooked is cybersecurity. I look at CrowdStrike, Palo Alto as huge derivative trades on the cybersecurity side of the AI piece. And then from an infrastructure perspective, like Nebius is a name that we're super bullish on, you know iron iron i-r-e-n in terms of a name that's a power play it's also on crypto but that's a name i think's going to be a data center power play g vernova is one of our favorites i mean we're we're now at a point now where it's like all we're doing we're trying to spend our time figuring out whether it's the microns wearing semis wearing software to to play the the ai revolution chris what are you thinking you know it's funny when i look at what we've in our own etf um it's kind of evolved from the traditional pure play ai stocks again to more of the derivatives could banks be a derivative here of right like when you think about this one out of here. When you think about the organizational efficiency that some of this stuff in an industry that's been organizationally inefficient for much of the last 20 or 30 years. So you just start going

[17:38](https://realalpha.app/v/KByibe1S6l8/?t=1058) industry by industry and you begin to wonder who are the benefits really accruing to right now. And look at the strength you're beginning to see. Now it's nascent, but I think it's beginning to happen in some of these consumer stocks, right? Again, the users, not the producers. I have found it notable all year kind of some of the analog summits that frankly outperformed a lot of the traditional ai ones i mean look at the micron numbers today we sit here on oh my god right i mean this is a stock that's already doubled from from where it was a couple months ago we've seen what samsung has has done this year we've seen what hynix has done this year and it's amazing when you meet with like like when you're in korea like sk high and like especially like in asia so many of them it's a memory play i mean i think this is a memory super cycle now i i think the tricky part here is trying to get an understanding of when the bar is being raised too high on the speculative side of the economy. At the same time, when you look at some of the parts of the real economy, whether it's consumer sentiment, that are very, very depressed. It's this very odd environment. I've been saying it's a K-shaped economy. Your area is rock and roll

[18:45](https://realalpha.app/v/KByibe1S6l8/?t=1125) exciting. And then you talk to people who cover consumer staples, housing, your traditional consumer stuff, and it's depressing. Oh, it's depressing. And you see, I think the UMICH Consumer Sentiment Survey is in the second percentile of the 40-year range or something like that. Now, ironically, that's actually where you should be buying consumer stocks, as silly as that sounds. The excess returns from that conditions are generally pretty good. But it's this very, very bizarre sentiment framework where the speculative fever has been there for much of the year. At the same time, all the real economy stocks, which I think are getting better here, is where sentiment is probably most depressed. We'll come to that. Hi, Steve Eisman here. The most successful businesses in the world share one secret. They know exactly where every dollar goes, what to cut and where to double down. With Ramp, you can see exactly what's happening across the business in real time. RAM combines corporate cards, expense management, bill pay, and travel in one platform. You set spending rules up front, and RAM, corporate cards, block any out-of-policy spend before it even happens. That's why some of the most valuable businesses.

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[20:44](https://realalpha.app/v/KByibe1S6l8/?t=1244) Points can be redeemed for flights, hotels, lift rides, a future housing payment, and much more. turn one of the most unavoidable payments in your life into the most rewarding. Find the card that's right for you and apply at joinbuilt.com slash eisman. That's j-o-i-n-b-i-l-t dot com slash eisman. Use our link so they know we sent you. Terms apply. Subject to approval and eligibility, Build cards are issued by Column N.A., member FDIC pursuant to license from MasterCard international incorporated let's go to oracle because oracle seems to me is almost like the poster child for the debate so give us your thinking on oracle i what are you hearing from people on both sides as you talk to investors so first off like look oracle is not a hyperscaler so the reality is like microsoft amazon google like they are hyper they build data centers oracle doesn't build data centers so the reality is like when you think about open ai coming to them the 300 billion and they basically have about 500 billion that of revenue combined 300 that being open ai then now they have to fulfill over the next two three years by building by building so when you look at where oracle plays my view is like okay are they taking on debt is

[21:54](https://realalpha.app/v/KByibe1S6l8/?t=1314) their quote unquote like is that out of the realm free cash flow going down is that typical oracle Well, of course it's not. But the reality is that Ellison, the whole team at Oracle understands they have the opportunity. It's there. They see the numbers that if they take on some debt, build these data centers, I'm not going to say you're not going to have like headlines and, you know, and, you know, we could talk about thinly traded CDS and everything like that. But my view is, is that this has gotten way overdone. I mean, I'll compare it to like Google earlier this year. I could compare it to like other times at Meta going back to 2022, times where everyone's like questioned the business model.

[22:38](https://realalpha.app/v/KByibe1S6l8/?t=1358) The reality is that Oracle is going to play a huge role in this data center. And I actually think on large cap, if there's a table pounder name where we sit here today going to next year, it's Oracle. I mean, that's sort of – Before you jump in. So when you're talking to investors who are negative on Oracle, what are they saying to you? They're like, you're telling me OpenAI is good for their bills? That's revenue that they're going to be able to fulfill? OpenAI is doing whatever, X amount of revenue, and they have a trillion dollars of opportunity that they're trying to go after. And my whole point is it's year three of an eight, ten-year build-out.

[23:19](https://realalpha.app/v/KByibe1S6l8/?t=1399) And the reality is OpenAI is building out essentially a new economy from a consumer and enterprise perspective. And I just view it as the fact that that's viewed as bad today in terms of being associated with OpenAI, I couldn't disagree more. And I think that continues to be the trade, right? Like anyone that's associated those stocks ever since the Altman sort of podcast interview with Brad and others has gone down. You know, it's – I say it kind of somewhat jokingly, but it's true. I've gotten more questions on Oracle CDS in the last two or three weeks than I did on Citigroup CDS in 08. So not all our viewers – so let me give a little explanation.

[24:01](https://realalpha.app/v/KByibe1S6l8/?t=1441) Yes, please. So CDS is credit default swaps, and it's a measure of risk. So if you wanted to basically short Oracle debt, what you could do instead is buy credit default swaps. And so what would happen is spreads would blow out, and right now Oracle debt is trading like junk. And so people look at that and they say, well, it's not just the equity markets that think something's wrong with Oracle. It's the debt markets, and we all know the debt markets are much more intelligent than the equity market. That's a typical argument. And what people don't understand is that the credit default swap market is not what it was.

[24:41](https://realalpha.app/v/KByibe1S6l8/?t=1481) great financial crisis. It's much more illiquid. So if somebody wants to go out and short Oracle debt or buy credit default swap, that stuff moves on very, very, very little. So the fact that that Oracle's credit default swaps have blown out, it ain't great. Trust me, you know, for Oracle, if they want to raise some debt. But it's not necessarily really indicative of what the fixed income markets really seriously think about. It's also a reminder, I think the Oracle example here in particular is hold your narratives very, very lightly. I mean, think about, what was it, January, February, kind of into the April lows. NVIDIA at one point was an $86 stock, right, in that correction. Was it really? Yeah, it got down to about $86, $88. I think that was right about the low because our view going into the year was, hey, semis go down 50% every three years and all NVIDIA's friends had already gone down 50 last summer, summer of 24. I thought NVIDIA would be next i didn't think it would happen in six days as it did in april of 25 but you know you kind of got to the mid 80s on NVIDIA i think the low is 88 and the high previous high was 160 that's that's kind of close enough so we're kind of in that ballpark of oracle here

[25:52](https://realalpha.app/v/KByibe1S6l8/?t=1552) what's it down 40 ish from the highs a little more so you're kind of in the zone where again you might want to think about okay but by the way it's actually shocking when you think about how in such a shorter period of time from the moment that they announced their backlog when they reported third quarter to today it's only two or three months a lifetime ago you would think it's a different world but also one of the narratives that's also important for viewers is like 75 to 80% of spending that's going to happen in tech over the next 12 to 18 months is being driven by That's funded by free cash flow from – they're not taking on debt for AI spent.

[26:36](https://realalpha.app/v/KByibe1S6l8/?t=1596) So I think there's a perception like companies taking on debt and debt to fund this. That's actually wrong just mathematically in terms of what's being funded just from true cash flow from big tech. Can I propose a theory? I'm curious your view on this. I've been thinking about this. I think one of the things people got wrong in late 22 going into 23 was when bond yields started to go up. kind of the view was, oh, tech's in trouble in that environment. But I think they missed the idea that these were self-funders, right? So higher rates penalized other parts of the market much more. Now, well, here we are now.

[27:11](https://realalpha.app/v/KByibe1S6l8/?t=1631) three years later, and they're not self-funders anymore, or they're not to the same extent they were self-funders. So is the risk here actually higher long-term interest rates over the next year or so because of the debt load that these companies are now taking on? I think, but it's still outside of Oracle, the debt load's been- Diminimous. Diminimous, yes. I think Google took on, has taken on, maybe 15 billion more in long-term debt. Yeah, and when you look at that, a percentage of market cap is meaningless. Yeah, and even on the – now, you can make an argument, like, as Fed cuts, depending on whoever gets in Fed chair, that, like, mid-cap names, do they start to do more converts, converts, like – so you can make an argument that that could happen.

[27:53](https://realalpha.app/v/KByibe1S6l8/?t=1673) But in terms of large-cap, it goes – it's still so small. Well, like, let's not forget on the rate side, you go back to 99-2000. I think what people forget is that final six months where I think NASDAQ doubled in the fourth quarter of 99, 10-year yields went from four to almost seven, right? That's a big move. Into the Nikkei peak in 1989, JGB yields went four to eight in 1989. So, I mean, 10-year yields have just gone 390 to 415. So let's take it easy a little bit on the rate concerns. But by the way, just to switch gears for a second, hasn't helped. Whatever rates have done hasn't helped housing at all.

[28:36](https://realalpha.app/v/KByibe1S6l8/?t=1716) No. Housing is just dead. Yeah, I mean, I think it's a very important, frankly, next couple of weeks for these housing stocks, right? So you've had what were very good rallies in D.R. Horton, et cetera, over the course of the summer. And they gave it back. Gave back about half of it, right? D.R. kind of hanging out right at very, very critical support here. If housing has a shot in 26, I think the stocks have to be anticipatory of that right now and have to turn up from this condition. So let me say something about that because I'll tell you when I'll know if the Trump administration is serious.

[29:11](https://realalpha.app/v/KByibe1S6l8/?t=1751) If you go back to the campaign, you had the Democrats talking about giving – helping first-time homebuyers by giving them money. And that wasn't going to help anything because that would just cause positive prices to go up. And then you have this administration talk about 50-year mortgage. Same thing. It's just going to cause housing prices to go up.

[29:32](https://realalpha.app/v/KByibe1S6l8/?t=1772) **Steve Eisman:** The problem with affordability in the United States is local. It's all local.

[29:39](https://realalpha.app/v/KByibe1S6l8/?t=1779) It's impact fees that communities put on it at 10 to 15. percent of the costs. It's regulations that prevent home builders from building smaller homes. So I'll know when the politicians of this country are serious about tackling real affordability, if they start to withhold money from states, literally withhold money from states unless they start to hurry up the process of approving things. Until then, it's pure interest rates i have no i have no i have no long-term prediction about rate i think rates would have you know the 10 year would have to go to like three and a half for there to be really a real good bump in housing i think the problem with 10 year yields going three and a half is then you begin to wonder why like what are we missing on the economy side exactly what's weakened here like i mean the reality is 10 year yields have been in a range for three years they have you know 375 on the low side maybe 460 on the high side um i can't think of good uh good reasons why we escape that range on either side that's so interesting it's like but you do see so many investors going into 26 you're either on especially in tech you're either on this side or this side i'm saying like bull or bear it's a very divisive bull bear debate interesting in

[30:54](https://realalpha.app/v/KByibe1S6l8/?t=1854) terms of what's happening so let's talk about something divisive tesla okay so so here i have I have no skin in this game, okay? And I never have. I was short to stock years ago, got my head handed to me. But my problem is I just don't trust Elon. I don't trust what he says. I mean, example. He said a couple of conference calls ago that he was going to have 500 autonomous vehicles in Austin. He's got 80. So, you know, the basic business, the electronic vehicle business, that's not doing well. because the credit, all the government subsidies have gone away. That's bad. Robotics is on the come. EV, electronic vehicle, autonomous driving is on the come.

[31:44](https://realalpha.app/v/KByibe1S6l8/?t=1904) To me, it's all hype. And until I actually see that his robotaxes really work autonomously, I'm on the sidelines. You tell me what you think. so look and obviously like for me you know knowing musk you know from the early days and being such a believer in tech there were so many times where like things like they were a year and a half late 2018 you could argue like you know they were on the verge of like a bankruptcy or pseudo bankruptcy my view is like musk right now is is a wartime ceo like what does that mean what that basically means is that he's so laser focused almost like in a wartime but wartime being the battle versus other attack and you know the competition that he understands that this autonomous chapter robo taxis it's going to be the most important chapter ever in tesla's history and to your but i understand the skepticism but i believe we city are a year from now you're in 30 cities the geofence area significantly expands you're basically at level okay so let me push back imagine that that does not happen that that a year from now or within every time frame that It's important.

[33:03](https://realalpha.app/v/KByibe1S6l8/?t=1983) We're basically where we are today. What do you think then? Then that would be, I mean, that's like a bear thesis. Like that would be one way. That's the bear thesis. The stock's like a whatever, sub $300 stock, if that happens. I think it's $600 to $800 because they. Because you think it happens. It's binary. That's my target too. And Steve, I think the problem here is you lay out this very elegant reasoning, which may very well be true of why none of this stuff plays out, yet one problem, the chart looks great. And it's probably the best chart of the Mac 7 at this point. So if I'm going to kind of lean on narrative or lean on price action, I'm always going to choose price action.

[33:40](https://realalpha.app/v/KByibe1S6l8/?t=2020) So the price action is encouraging me to be more imaginative about what could happen over the next year or two years. And whether it's 600 or 800, I'll take either. But I think the direction is higher. Just because of the way the chart looks. Yeah. It is emerging as the leader in Mac 7. And I would just add to your point, like, when it comes to physical AI plays in the world, there's NVIDIA and Tesla. Those are the two best physical AI. What do you mean physical AI? What I'm saying, like, instead of, like, when you talk about just traditional AI, like, software, use cases, LLM, physical AI being, like, robotics, car.

[34:16](https://realalpha.app/v/KByibe1S6l8/?t=2056) I'm talking about physical, actual AI, and you look at what everything, like, NVIDIA is going after, like, the robotics. Look at Fanuc in Japan. I don't even know what that is. Japanese robotics. I mean, you want to see a pretty chart? Go look at a 20-year chart of Fanuc. This is the real deal. Okay. Human robotics in Japan and in China is ahead of where we are in the U.S. Let's switch. gears for a sec. Let's go to financials for a bit. Tell me what you're thinking. I mean, the charts look great. What are you thinking here? Here's what I'm thinking. And by the way, what's very interesting about just the whole financials group, the banks are great. Insurance looks like- It's getting better. I mean, it ain't great. Payments looks awful. Payments have been terrible for a while. And so it's real. I mean, when people are focusing on financials right now, it's Goldman, it's Morgan Stanley, and maybe some of the, and maybe the regionals, because maybe in this M&A, but tell me what you're hearing.

[35:01](https://realalpha.app/v/KByibe1S6l8/?t=2101) Goldman Sachs is behaving as the old Goldman Sachs, is certainly what the chart implies. I mean, this has been the leader in financial services now for two years. I want to focus on Bank of America. Okay. Spent 20 years in the confessional booth, right? BAC last... And confessing. And the whole time. Many sins to repent. Many sins. The last high in Bank of America was November of 2006 until this week. This week. November 2006. Until this week. By the way, Citigroup will never get there. Because of the dilution. Because of the dilution. By the way, do you know this? Yeah. The high in Citigroup is like 550.

[35:31](https://realalpha.app/v/KByibe1S6l8/?t=2131) It's unachievable. In our lifetimes. Never say never, but it's like- And that's because of the dilution. So I want to think about this. For 20 years, these money center banks have had their hands tied behind their back as they repented of the sins of the financial crisis. Yes. I think that's over. We are in a deregulatory regime here. To a degree. I mean, we're not going anywhere close to where – back to where we were in 2006 in terms of the leverage. And maybe nor should we. We should not. But it's – but some of the handcuffs are being taken off. And these companies – by the way, these companies are much, much, much better run than they were.

[36:00](https://realalpha.app/v/KByibe1S6l8/?t=2160) It's not even a comparison. Let's remember something though. It can't just be a deregulatory story. story because it's happened in Europe. It's happened in Japan. It's happened in LATAM. Find me a bank stock in the world that hasn't made a new 52-week high in the last couple of days. Good luck. You're not going to find any. So there's something global here. It's been the case for two years. It's largely gone unnoticed, unobserved, unembraced. The financials are still very much leadership. Now, talk about some of the laggards within the sector. I actually think insurance might be inflecting back up here. You had Chubb breakout this week. You have AIG acting better, but focus on some of these alternative private capital stocks. You have very deep corrections. Huge.

[36:26](https://realalpha.app/v/KByibe1S6l8/?t=2186) Huge corrections. In Apollo, in Blackstone. By the way, it's so unusual in a bull market for these companies like Blackstone and Apollo to be down on year. They're down 10%, 15% on the year. After an incredible run. And have to be down even more. Now, I think from peak to trough, they might be down 30% or 40%. Those are pretty deep corrections for stocks and long-term uptrends. So if you wanted to kind of poke around and say what could be a surprise next year relative to consensus, I mean, people got very bearish on these names in that October, November growth scare. Remember all the credit concerns?

[36:50](https://realalpha.app/v/KByibe1S6l8/?t=2210) Tricolor, first brand. Jeffries. Yes. People got very, very – But by the way, Jeff, people got so hysterical. I got calls over one of those weekends that Jeffries was filing for bankruptcy. It was crazy. The irony here is Steve is probably partly to blame that everyone in this business thinks anything idiosyncratic has the potential of being systemic. Oh, people want to predict the end of the world. Most things remain – By the way, I have a joke about that. The problem is that there's so many people in this world who want to be me. Yeah. And you know what? The position is taken. Yeah, the position.

[37:13](https://realalpha.app/v/KByibe1S6l8/?t=2233) There's only one. There's only one. And you know what? I'm not interested in predicting the end of the world anymore because believe me, it was no fun the first time around. Yeah. Oh, my God. But you look at these global financials and you know what's remarkable? Wells Fargo, which is often considered like the weakest of them, actually made new highs before most of them a year ago, right? Goldman and Morgan Stanley two years ago made new highs. Bank of America finally in on the act. This is a $55 stock today. I don't think it's a $55 stock next year. What is? BAC, I think. BAC, are you thinking?

[37:36](https://realalpha.app/v/KByibe1S6l8/?t=2256) I think 75 is a conservative target. Interesting. We could get more aggressive if we wanted to. You know, people got really down on Brian Moynihan and they forgot. I mean, he was handed from Ken Lewis, like, disaster. I mean, he needs to be admired to a degree that he actually fixed the company. What he's done is amazing. And guys, don't sleep on these regionals as well. I mean, curves – So let's talk about the regionals. I've had this thesis for a while. People thought I was crazy at the beginning of the year, which is we have not had a bank M&A wave in this country since the 90s. I know. And it's been completely discouraged by the regulators.

[38:05](https://realalpha.app/v/KByibe1S6l8/?t=2285) And it's actually, I've actually, I completely changed my mind about this about a year and a half ago, two years ago, that we actually need a bank M&A wave because it can't be that only J.P. Oregon and Wells Fargo are going to be able to afford all the tech. You got to merge these banks and make them larger so they can afford to compete. And this administration, I think, is on board with that. And the fact that Comerica finally put its shareholders out of its misery is an indication, I think, what could potentially happen. So I think if you want a surprise for next year, I mean, for two years, it's been the money centers over the regionals. I would entertain the idea that 26 is more about regionals over money-centered banks in terms of where the leadership is found in an otherwise very healthy banking system. You mentioned Comerica. I mean, this is just finally getting back to highs that haven't been seen in 25 or 30 years.

[38:42](https://realalpha.app/v/KByibe1S6l8/?t=2322) If that. If that. I mean, I think about PNC just broke out. Regions just broke out. I mean, there's a lot of these. Steeper curve probably helps. You quietly have seen the 230 curve go right back to the highs here. To me, that's a pretty constructive backdrop for these regional banks. Hi, Steve Eisman here. The best pieces in your closet are the ones you can count on, whether you're heading to work, going out, or keeping things casual. And this time of year, Quince makes finding something great for everyone else just as easy. This holiday season, it's where I'm shopping for myself and everyone on my list.

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[40:12](https://realalpha.app/v/KByibe1S6l8/?t=2412) That's why some of the most valuable businesses in the world like SpaceX, Shopify, Visa, and Stripe cut their expenses by 5% with RAMP. A business owner I really respect uses RAMP, and they say they love it. Invest in your growth. Get on Ramp. New customers get $250 off at ramp.com slash eisman. Go to ramp.com slash eisman. Ramp.com slash eisman. So let's talk about within everything you do, let's talk about what stuff that you do that's been kind of hasn't done so well, what you think might do well. And let's talk about sectors that have been done poorly, like the defensive. Is there any hope?

[40:45](https://realalpha.app/v/KByibe1S6l8/?t=2445) Let's talk tech first. For me, it's really software. I mean, right now, software is like a do not enter police lines, like yellow tape. Salesforce is turning. I know. So if I said it would be like Salesforce, Adobe, ServiceNow, like the traditional software. So what would be – everybody knows the bear case. The bear case is AI is reducing the cost of creating software. The moats are not as big as they used to be. Get out of the way. What's the contra argument? So my contra-argument is like you cannot discount the install base of what Benioff and Salesforce have built. These install – like, look, these software models, okay, are pieces of them getting eaten by AI?

[41:26](https://realalpha.app/v/KByibe1S6l8/?t=2486) Yes.

[41:26](https://realalpha.app/v/KByibe1S6l8/?t=2486) **Dan Ives:** But they have massive install bases. They're building out their own AI suites.

[41:31](https://realalpha.app/v/KByibe1S6l8/?t=2491) The software phase of AI is now coming because companies have built the infrastructure that they could actually start to deploy these use cases. they couldn't do it till basically you know the last few months so my view to your point like i'm a believer that you're going to see a turnaround some of these software names i also think you're going to see massive m&a in software in software i think if there's going to be one area you talk about overdue are you talking like regionals or you know in terms on the on the banking side software is so overdue for m&a why why why because there's so many companies where like maybe they had like a certain silo and the reality is is that that's being compressed growth's gone from 40 percent to 50 15%, and especially in it's mid-cap software.

[42:20](https://realalpha.app/v/KByibe1S6l8/?t=2540) You know, Dan, I'm sure you look at it. I would encourage everyone to take a look at this. We look at the software versus semi ratio. We look at it equally weighted. So it's not just, you know, what is NVIDIA doing versus Microsoft? What is the average software stock doing versus the average semi? That might be starting to bottom here. The last couple of weeks, there's been some positive price action there, which we haven't seen effectively all year. You're starting to see Salesforce inflect here a little bit. I'm not there yet on Adobe. Service. I mean, ServiceNow, I mean, they have washed out Snowflake here as well, to your point earlier, where, like, those start to get interesting, especially when you think about it through the lens of beta, right?

[42:57](https://realalpha.app/v/KByibe1S6l8/?t=2577) Semis have been the hood ornament of beta for the last four, five, six, seven, eight months, basically since the low in April. Beta tends to burn very, very bright for six, seven, eight months off a low. Then it becomes more of a normal performing factor. So I wonder if the beta impulse is probably behind us at this point. Interesting. Yeah. What about you? What's the area that you think – like if there's one that you think is going to like – that's been a laggard? Yeah, I think this turn in healthcare is a real deal. And listen, and we could say there's some defensive element to that. It may be.

[43:33](https://realalpha.app/v/KByibe1S6l8/?t=2613) It may not be. When you say healthcare, which parts of healthcare? I'm talking about – That's a broad statement, healthcare. The most important healthcare stocks after 18 months of indifference are back in gear. Look at Lilly. Look at Intuitive Surgical. Look at Natera. Look at the turns. even like bristol and and bmy health and health insurance is that turned no that has not i mean that was the only game for 15 years where the insurers and the hmos i think that's over i think pharma and biotech is the leadership or the leadership that's on the come uh into 26 so you would not bottom fish united health care i would not like that i would not i think these are long long-term broken trends uh in the hmo space on health care is there also like to your point is Is there like an AI trade component where you could start to actually get multiple expansion because of like AI where there's like pharma or biotech?

[44:24](https://realalpha.app/v/KByibe1S6l8/?t=2664) So you hear that a lot, right, that the AI application will allow drug discovery to become – right? Or diagnostic discovery. Or if AI is very good at finding order, right, it should very quickly be able to help in the pharmaceutical and biotech space. Whether or not that's actually happening, I think you got to – I mean, it should be obvious, right? What CEO? would not want to talk about how accretive this is to their business. So it should be obvious, and it should be obvious soon. That's not the foundation of my health care call.

[44:57](https://realalpha.app/v/KByibe1S6l8/?t=2697) **Chris Verrone:** The foundation of my health care call is the sector got to a 25-year waiting low in the S&P 500.

[45:03](https://realalpha.app/v/KByibe1S6l8/?t=2703) Say that again. You have to go back to Hillarycare, to the last time health care's weight earlier this year. What's the weight now of health care in the S&P? It's less than 10%. It got like borderline single digits earlier in the year. 25-year waiting low. So what do we look for? By the way, let me just go for one second. this tells you everything you need to know about the U.S. economy. The weighting of, and just Infotech in the S&P is 35%. The next- But wasn't really. Oh, it's more than that, but I'm just taking, strictly the strict category is 35%. What's the next category? The next category is financials at 14%.

[45:39](https://realalpha.app/v/KByibe1S6l8/?t=2739) So the second largest, now obviously it's much bigger than 35%. You had Google and all that stuff. The second largest sector is 60% lower than just pure infotech. It'd be 80% lower if you add in all the other stuff that's in consumer discretionary. I mean, what's Staples 3? What's Energy 2? What's Materials 1? REITs 1? I mean, these are big segments of the US economy. The S&P needs to rejigger because there are categories now that are basically irrelevant. Yeah. I mean, you see it. Energy's 3%. Who cares? what do you you know i gave it i gave him see like my like in my first and yeah when you have like morning meetings or whatever it would be like tech and then some of the other like you know it's like because just from a from a you know interest perspective you have investors that are like real estate investors REITs and now they're like well maybe i could kind of focus on some of these like quasi sort of like tech related REITs so what's been left for dead this year It's just a review.

[46:45](https://realalpha.app/v/KByibe1S6l8/?t=2805) Like what's – we focus on what's done well. Anything defensive. Let's focus on what's done poorly. Anything defensive. Don't give me a list. Left for dead. So if we're talking about consumer staples as an example here, I would encourage people to start paying attention to Coke here, quietly acting better. Hershey's is quietly acting better. I mean Estée Lauder's probably turned here in a very meaningful way. Maybe they're trying to read on that name. But staples roundly have been left for dead. Am I ready to say that they're going to be your leadership next year? I'm skeptical of that, but listen, I know I don't know.

[47:15](https://realalpha.app/v/KByibe1S6l8/?t=2835) I want to be open to where the prices and the markets take me. Price action. I certainly don't think that would be impossible, particularly into a midterm election year where you have tended to see a defensive leadership fabric anyway. So I'm alert to that for next year. I'd say the other place kind of left for dead and we hinted at it is some of these private capital, private credit stocks, the Apollos, the Owls, the Blackstones, which, I mean, they were incredible for so many years prior. They had a bad 2025. I wonder if that's past it at this point. Well, my view on that is, first of all, the two sort of what people are calling canaries in the coal mine, which are tricolor and first brands, actually did not originate in private credit.

[48:01](https://realalpha.app/v/KByibe1S6l8/?t=2881) Those are public credits. But they're viewed as like, you know, what could happen? I actually think that, I mean, for those who are negative on private credit, the simple argument was that in 2020, private credit was $2 trillion, and today it's $3 trillion. So that's a lot of trillion. It's a trillion. And if you want to make an argument that there's bad stuff in there, you can make that argument. The problem is that you have actually no data to back it up, because it's not like pre-great financial crisis, you could look at the monthly securitization data, you could see what was happening. Here, there's no information. So it's pure conjecture.

[48:44](https://realalpha.app/v/KByibe1S6l8/?t=2924) My view is that whatever has happened in private credit is not going to cause a recession, but that when there is a recession, whoever made mistakes is going to get shown. But I don't see at this point a recession on the horizon. So I don't see what the issue is. I mean, I think if anything, the market seems okay with the idea that we're through a soft patch. right so there was a confident hit in the spring around the tariffs it showed up in weak data in 3q and 4q i think the market's anticipatory of an economic turn here i think the discretionary stocks are suggestive of that i think the commodities are i think the transports all these real economy signals might say hey the the risk in 26 is right tail risk not not left and i think what we were talking about for two is like what's amazing is like i can never remember a market where narrative changes could be so dramatic week to week like that's the one thing that's like crazy about this market you could the narrative changes so quick I was traveling basically like you, basically since Labor Day until last week, right?

[49:53](https://realalpha.app/v/KByibe1S6l8/?t=2993) And in October and November, going from Jefferies to First Brands to you had that day where Trump set the tweet about the Chinese and the market was down 3% from that. And then Sunday, B.C. I didn't mean it. Remember, Friday, after some golf Sunday, I'm good to go. To the NVIDIA reversal day on the earnings in November, watching in real time, being on the road, watching sentiment erode. And what gets revealed is how fragile sentiment still is. And it doesn't take a lot to shake the tree. We were down 5% on November 20th from the highs. And the narrative was suddenly, oh, my God, the Fed's going to skip the December meeting.

[50:33](https://realalpha.app/v/KByibe1S6l8/?t=3033) The economy is much weaker than we think. Think how quickly the narrative shift. It's wild. Basically, on that point, I agree the economy is probably better than people think. And I don't think the Fed's going to be so quick to cut. But then again, we don't know who the next Fed chairman is going to be. We don't. Listen, the two-year yield, I've joked and I've – sometimes this joke gets laughed, sometimes it doesn't. But who needs Fed speakers when you have the two-year yield, right? And what's the two-year yield? 346. Right. Where it's been for five months, somewhere between 340 and 360. That's probably where the market believes the neutral rate should be.

[51:09](https://realalpha.app/v/KByibe1S6l8/?t=3069) Whether that's two cuts next year or one cut next year, I don't think it's terribly different. Getting to that point. So that means that at most over the next year or two, there's two Fed cuts. That's not the narrative of the market. It can't be because if – Do you remember how many cuts were priced when we started this year? No. Six. Six. How many did we get? Three, right? If you told anyone in January, hey, you're not getting six cuts, Dan. You're only getting three. Oh, my God. S&P is going to be down 20%. So that comes to my point. I actually think that because the Fed is not in an aggressive cutting mode, people's sort of hyper-focus on it is kind of a waste of time.

[51:54](https://realalpha.app/v/KByibe1S6l8/?t=3114) That what's happening in your world is what's important. If the AI keeps going, it'll be fine. Think how quickly, like, if you even go back, like, you have the Oracle, whatever, Blue Owl pulling out, Data Center, Michigan, whatever it is. Then all of a sudden, Mike Brown reports, like, it's like, okay. One day later. It's almost like Ted Stryker flying the airplane, like, everything's fine. You know, and I think that's the thing. It's just. It's like you see the nervousness of some of the trades. But it just continues to be like you have $3 trillion to $4 trillion being spent the next two or three years.

[52:33](https://realalpha.app/v/KByibe1S6l8/?t=3153) You're in a fourth industrial revolution that we happen to be living in. To have a view that this is an AI bubble, we're just in the early days of the demand cycle. What do you make of the view? I've thought about this. I'm curious your take that if you go back to the 99-2000 experience, the gains in productivity didn't really show up in the data until after the NASDAQ had peaked. Do you think about that today? I mean, I view it as like the use cases are all starting to get deployed in enterprise, in consumer. And I actually think this is one where like we're still in the software use case phase.

[53:12](https://realalpha.app/v/KByibe1S6l8/?t=3192) So my view is like we don't – it's a tech bull market for, in my view, at least another two years. So I don't think we even hit – so rubber hits the road for another few years because you're not really even going to see – the monetization is going to be much bigger than I think the stocks are factoring in next year. Let's focus on that for a second. So you've got chat GPT, you've got Anthropic, you've got Gemini, you've got perplexity. It reminds me a little bit of the railroads. You don't need so many railroads. I mean, what do you think there could be maybe a shakeout in the sense that you don't need four, five, six massive LLM models.

[53:59](https://realalpha.app/v/KByibe1S6l8/?t=3239) You maybe need only two or three. And then that means that let's say I'll just throw out OpenAI. Maybe OpenAI falls by the wayside in their ramifications. What do you think about that? I think it's a winner. It's a winner takes most market. Right. But not all. So in other words, you'll have much more – you're going to have the top three or four models that continue to be – but you even see like meta, llama, like that's starting to sort of dissipate. But look, to me, the AI story is not about the models. It's about the data and it's about – I want – models are going to get cheaper and cheaper. the AI trade is about the data and the use case build-out of what that looks like.

[54:41](https://realalpha.app/v/KByibe1S6l8/?t=3281) So what would be your top three on that theme alone? I mean, on that theme, I mean, to me, it's like you have to own Google, not just because of where I see Gemma, but also because... what's happened on GCP. What's GCP? Google Cloud in terms of like my view, like in the enterprise and the hyperscaller side, how they're benefiting. Right. You know, two, in terms of just what we see on the enterprise, you got to own Microsoft because that's right their backyard in terms of from a hyperscaller perspective. And look, Palantir, I believe, is a trillion dollar market cap in the next two or three years.

[55:13](https://realalpha.app/v/KByibe1S6l8/?t=3313) I mean, no one has a better mousetrap relative to use cases than Palantir. So let's press out for a second. When you go out and talk to people within the tech community what do they say about palantir and how come and how they compare to let's say mongo db or anybody else out there it's in my whole career i've never seen a company outside used like NVIDIA on chips but just from like an actual like a software perspective that is so on another level of every other company in the whole so what do you like what do you hear from people because the reality is like look palantir even though they did for three letter agencies dod and every so western government for for a decade their technology what is behind sort of you know closed doors cloak and dagger that technology is now going to major corporations and when cios understand what they can do it's it's almost kind of like you know it's game set match type thing and that's why and remember they're doing this without direct sales force they don't ever cut prices and that's palantir basically had a commercial business that went from 20 million to a billion in basically a year and a half i mean that's just the react so that's why when investing it's so expensive most expensive stock ever look it is very expensive

[56:35](https://realalpha.app/v/KByibe1S6l8/?t=3395) 100 but my view is like if you just focus on valuation over the next one two years you miss every transformation or growth stock the last 20 years that's fair i feel like you have to will be able to look at, okay, four to five years, what does the commercial business look like? It's double the margins of the government business. Could earnings go up three, four X from where they are today? Could free cash go from $3 billion to whatever it's going to be, $8 to $10 billion? See, I think those are some of the numbers that you have to go through rather than sometimes just living in a more... So saying what you said about if you focus on valuation, you missed some of...

[57:08](https://realalpha.app/v/KByibe1S6l8/?t=3428) I think it's a very important statement. Transformational growth names. I mean, you've talked about this. it's like if you just when you look at like apple in 08 after financial crisis oh it's a one-year cycle with at&t why would you Why would you ever leave it black? Why would you ever go away from a BlackBerry? You had to have an understanding what Apple is going to build as a services, as an ecosystem way to monetize it. If you look at NVIDIA 2022, you had to understand the ability, what they could do if they actually came out with an AI chip instead of viewing them as a gaming company. But you wouldn't see that in the numbers over the next year or two.

[57:43](https://realalpha.app/v/KByibe1S6l8/?t=3463) I just think with the transformational growth stories from Pound to Tesla to many others, if you just look at it over the next 12, 18 months, you miss the longer-term story. Now, look, do you have to be a believer? Do you have to be more valuation agnostic? Yeah. But I'm just saying, like, how many investors that I've known that have had to redo their resume two or three times different hedge funds because they had to stay valuation-centric and couldn't own certain MAG-7 names, they had a short Palantir, whatever it may be? That's why it's good to be a trend follower. It's a blessing. No, but don't – like, we've talked about it.

[58:23](https://realalpha.app/v/KByibe1S6l8/?t=3503) It's like, don't you think, like, there's certain – like, you can't – You can't get intimidated by stocks in my world that are up two, three, four hundred percent. You can't be intimidated by that. And you also have to identify – Well, you could be intimidated, but you could hold your nose. Well, but at the same time, you have to be very alert to what has had a 50 percent haircut still in the throes of a long-term uptrend, right? That's where you really have to make your money and lean into those. And I think there may be an opportunity in first half or second half of next year kind of in your world to see if we get a good correction here.

[58:56](https://realalpha.app/v/KByibe1S6l8/?t=3536) What shakes out? Who's in the long-term uptrend? What can we really lean into? I mean, think back to late 2022. I mean, all the MAG7 stocks bottomed exactly where they should, right at the long-term uptrends. There's going to be another moment like that in the next year or two, and you've got to be ready to act. So let's do predictions. What's your prediction for next year? I think we're in this handoff in the first half of 26 from some of the real speculative parts of the economy to the real economy. And I think it's- And when you say real economy, you mean what? I think this is transports, regional banks, housing, chemicals, commodities having their say here.

[59:31](https://realalpha.app/v/KByibe1S6l8/?t=3571) And they've largely been off the playing field for two, three, four years. I ironically don't think it's out of step with the AI theme because these may be AI derivatives in some respect. And I think certainly the commodity space may be the raw material for a lot of the things Dan's talking about. So I like real economy stuff. I think Bitcoin has been telling us for four or five months now that there's this handoff happening to the real economy stocks. Well, let's talk about what's happening in crypto because we haven't talked about crypto. First of all, how do the charts look on crypto? They don't look great.

[1:00:03](https://realalpha.app/v/KByibe1S6l8/?t=3603) They do not look good. You don't need to be a trained chartist. Listen. What do you think is going – you know what my problem with having even like a discussion about crypto in this is like, okay, so it's down. The charts look bad. That's like the extent of my discussion. Like I don't know what else to say. There's no PE. There's no price to book. You know, what's the thesis is to own it. You know, I'm sort of bewildered by what – I'm bewildered when it goes up. I'm bewildered when it goes down. I mean you basically have had three and a half to four-year cycles on crypto and we're kind of at the end of a three and a half to four-year cycle where I think you get 12 months of violent range.

[1:00:45](https://realalpha.app/v/KByibe1S6l8/?t=3645) i'm not convinced this rally that tried to begin a few weeks ago is over yet i could see this rallying back to 105 10 10 i think there's a lot of sellers up there on bitcoin uh who were late to the game uh who bought it late but what's the message steve and i've wondered for a few months now is bitcoin's weakness kind of the first hint of the first tell that 26 is not about owning purely liquidity-driven, high-beta speculative assets.

[1:01:13](https://realalpha.app/v/KByibe1S6l8/?t=3673) **Chris Verrone:** It's about owning real stuff with carry versus Bitcoin with no carry.

[1:01:19](https://realalpha.app/v/KByibe1S6l8/?t=3679) So I'm very open to that being the message as we think about why or what Bitcoin's trying to tell us. Interesting. Dan, what'd you do? Yeah, I mean, look, I think tech stocks are going to be up 20% plus. But I think a lot of those could actually be driven by the second, third, fourth derivative as the AI theme plays out. I think in large cap, I think you're going to see like what I think names like Microsoft and Oracle could actually be significant outperformers over next year. And I think the big theme is going to be like Apple is going to get into the AI game with the Gemini partnership. You're seeing new leadership there.

[1:01:56](https://realalpha.app/v/KByibe1S6l8/?t=3716) I think Apple as a large cap name could be the one that has like just a massive move because there's no AI. There's no AI component at this point. Because they haven't done. I love the chart. I own it. And now what you're starting to see play out is like new leadership, DOJ win with Google, sets it up for that big Gemini partnership. So that's the one with that installed base. I love it. Would you see? I still say it's the most underweight kind of among the names. I mean by investors. By investors, yeah. Apple. Yeah, because look, Apple, every event I've been at for Apple, I felt like Michael J. Fox Back to the Future, right?

[1:02:34](https://realalpha.app/v/KByibe1S6l8/?t=3754) Like it was always kind of like, you know, I mean, where is that? You're at every—Cook's finally been like, clock struck midnight, time to shift their leaders, bring people from the outside. They're not going to do acquisitions, but Apple's ready to play ball. And I think, look, I think the theme is like you said. We're going to have these white knuckle moments. But the reality is like we are early in this tech trade that has – So I completely agree with you other than the two risks that I outlined earlier before. Sure. Energy. If that – the energy is – that's a real risk. No, it is. Because it always takes longer to do stuff than you think.

[1:03:10](https://realalpha.app/v/KByibe1S6l8/?t=3790) And the whole LLM thing I think is more serious than you think. I think we should leave it to the states to figure that out. You know, every time I go into a motor vehicle, I feel really comfortable that the states could have control of that. No, I'm joking. But I'm saying the reality is it needs to be a federal roadmap. I agree with that. I mean, would you add one more risk to that? It's just rates. They haven't really moved here, but they've moved in Germany. We know they moved in Japan. I think it would be silly not to be alert to the idea that you get a pretty bad move in rates. I think that's – look, if the economy is stronger than people think in the early part of the year, you could get the 10-year back to four and a half.

[1:03:48](https://realalpha.app/v/KByibe1S6l8/?t=3828) Then people start to get nervous and they start to have a whole narrative about, you know, you got to get rid of your speculative stocks. I've seen that. I could read the headlines already. I could see that. Okay, guys. That was really great. Thank you. No, this is so fun. That was fun. Happy New Year to both of you. You too. Happy New Year. Health and health and prosperous. That four. Great. That was great. Have a great one. Thank you. Have a good New Year. We'll talk at the end next year. Thank you. Thank you. this podcast is for informational purposes only and does not constitute investment advice the hosts and guests may hold positions in stocks discussed opinions expressed on their own and not recommendations please do your own due diligence and consult a licensed financial advisor before making any investment decisions