Steve Eisman made his name betting against the housing market before the Global Financial Crisis—a trade immortalized in The Big Short. So when he sees risk building in the market, investors pay attention. But this time, Eisman isn’t predicting another crash. In fact, he’s net long.
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Steve Eisman, The Real Eisman Playbook
The man who made his name on The Big Short isn’t calling for a crisis. Steve Eisman is “cautiously long,” but he wants investors to understand what they actually own. “If you own the S&P, you’re not diversified. You’re versified.”
- It’s all one trade. Only consumer staples and health care, about 14% of the S&P 500, have nothing to do with AI. Count tech, the tech-like giants, utilities spending $250 billion on AI capex and the industrials building it out, and you’re north of 60%.
- The weak link is at the bottom of the chain. Five customers make up 70% of Nvidia’s receivables. About 70% of AI cloud revenue at Microsoft, Amazon and Google comes from OpenAI and Anthropic. If either of those runs into trouble, “the whole chain unwinds.” The risks he’s watching: a price war in AI models, companies cutting back on AI spending once “they got the bill,” and no moats.
- But don’t short the story. Momentum and narrative are too powerful. He owns Nvidia: “I watch and I worry.”
- The bond market isn’t panicking. Until credit spreads blow out, higher yields reflect growth, not fear. And he dismisses the US debt doomsayers who have “been wrong for 40 years”: Treasuries are the plumbing of the global financial system.
- On Canadian banks: “I was wrong.” He no longer invests outside the US at all.
Steve Eisman’s Pro Picks
1. Nvidia (NASDAQ: NVDA)
- Latest quarter: revenue up about 110%, “unheard of” for the largest company on the planet
- The catch: 70% of accounts receivable come from just five customers
- Thesis: he likes it “as long as the AI story remains.” Eisman owns it and won’t bet against the narrative, but he’s watching the chain beneath it closely.
2. Eli Lilly (NYSE: LLY)
- Thesis: “They’ve won the diet drug wars and there’s no evidence that that’s going to change anytime soon.” It’s also one of the few big names outside the AI trade, sitting in health care.
3. The trade he just closed: short Fair Isaac (NYSE: FICO)
- The setup: FICO dominated credit scores and raised prices about 1,600% in five years. The trigger was a critical tweet from FHFA director Bill Pulte about FICO’s monopoly and pricing.
- The result: the stock fell about 60% this year, and Eisman took profits.
- The lesson: “When a stock is down 60%, the slightest good news can create an incredible reversal… Don’t be a piggy. It’s enough. Walk away, be a gentleman.”
Bonus: Meritage Homes (NYSE: MTH)
A small position he calls “an option” on falling rates. The homebuilder trades at about 80% of tangible book value. “If rates were to go down, I think that stock would just be like a coiled spring. But rates have to go down.”
He has a new short he isn’t revealing yet. Follow The Real Eisman Playbook at steveeisman.com to catch it.
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