Market Cracks Under AI Debt Burden | The Weekly Wrap

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Steve Eisman (0:45)

Oil and energy prices continue to influence the market on a daily basis. The inflation data was worse than expected. There was negative news about core weave, and that news caused tech stocks and the market to decline. The news from France is particularly bad these days. France's debt to GDP is at 120%, a dangerous level. The banks kicked off earnings season. Let me just explain the concern some investors have with respect to the impact of agentic AI on banks and other financials. We've had 17 years of amazingly benign credit quality, and investors are wondering if the good times are over. And this brings me to my conclusion about the state of the US economy. Let's get started.

Hi, this is Steve Eisman, and this is another edition of The Weekly Wrap. This is for the week ending Friday, October 16, but recorded Thursday night, October 15

I just want to repeat an announcement about a change we made recently. Monday and Friday episodes are available to premium sub-stack subscribers earlier. The Monday interviews are released 12 PM Eastern Standard Time every Sunday, and the Friday Wrap is released at 12 PM Eastern Standard Time every Friday. The Monday and Friday episodes will still be available on YouTube and all audio channels at their usual times, Monday at noon and Friday at 4:15 PM. For sub-stack premium, this Wednesday, we had returning guests Gretchen Morgensen and Tom Goeber to discuss life insurance susceptibility to being defrauded. And next Wednesday, we have another returning guest, Dwight Collins, head of sales at Autonomous Research, for his thoughts and insights on the impact of AI on financial companies. On this week's Wrap, we will discuss, as usual, number one, the war in the Middle East. Number two, the telepocalypse, not the SaaSpocalypse, the telepocalypse, something of a tech correction. Number four, bad news in France. Five, the impact of agentic AI on financial institutions. Six, and last, earning season, began with, of course, the banks. Let's get started. The war is still in a stalemate. Oil and energy prices continue to influence the market on a daily basis.

On Wednesday, the inflation data was worse than expected. Interestingly, though, interest rates declined on Wednesday. Why?

There was negative news about core weave, which I'll discuss in a bit. And that news caused tech stocks and the market to decline. And some investors purchased Treasuries as a safety play despite the inflation news. Now, you've heard of the SaaSpocalypse. We've spoken about it many times. And now there is a new apocalypse, and I think I have coined this term and I call it the Telepocalypse. This is not an AI story, but an Elon Musk tale. On Friday, last week, October 9, AT&T, Verizon, and T-Mobile were down 9 to 13 percent. Why?

SpaceX's most profitable division is called Starlink. It is a company that uses satellites to provide cellular service all over the globe. Sounds great, but the service is not nearly as good as the service provided by telecom providers. Now, Starlink announced that it was acquiring Grain Management's 14 MHz of 800 MHz spectrum. Now, I don't want to get too technical, but this will definitely improve Starlink's service in the US. However, as best as I can tell, this is still not nearly good enough. Starlink needs to build a terrestrial network, and that can be unbelievably expensive. The most economic way for Starlink to do this is to reach an agreement with one of the Big Three in the US and use their rails to provide service. And none of the Big Three, believe me, have any interest in helping Starlink. So the telepocalypse is probably overblown. But as we know, narratives are powerful, and this one is not going away.

By the way, between the Big Three, T-Mobile is down the most this year, down 25%, whereas Verizon is up 5%, and AT&T is down 9% this year. I think the reason for T-Mobile's poor performance is that it used to have a high multiple. It's been a much better company than Verizon and AT&T, and so used to have a multiple in the 20s, which was double, double the multiple of its two competitors. But now that the entire landscape has changed, T-Mobile's 2026 PE multiple is only 14 times. Moving on, and this is probably the key news of the week. There was a very interesting piece of news about AI that is indicating stress in the AI narrative. CoreWeave is a public company that operates data centers devoted solely to AI.