It’s All One Trade: Steve Eisman’s AI Market Play 7/27/26

Summary

Squawk Pod – “It’s All One Trade: Steve Eisman’s AI Market Play”

Date: July 27, 2026
Hosts: Becky Quick, Joe Kernen, Katie Kramer
Key Guests: Steve Eisman (The Big Short investor), Halima Croft (RBC), Dr. Frank Longo (Stanford Neurology)

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Episode Overview

This episode centers on two interwoven themes: the dominating influence of artificial intelligence (AI) in financial markets, and a breakthrough pill for Alzheimer’s disease. Steve Eisman, renowned for predicting the 2008 housing collapse, argues today’s market is essentially a single, binary AI trade — risky, overextended, and requiring immense faith in the continued success of the AI sector. Guests also weigh in on global energy shocks amid Middle East turmoil and discuss how these geopolitical risks intersect with the AI-dominated investment climate.

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Market Update & Middle East Geopolitics

[02:29–05:44]

• Stock Market Recovery: Amid Middle East tensions and volatile oil prices, the Dow and S&P 500 have rebounded near all-time highs; the Nasdaq lags due to tech’s prior correction.
• Oil Market Volatility: WTI crude plummeted by nearly 8% after a steep rise the previous week, driven by shifting conflict dynamics in the Middle East (particularly US strikes on Iran and disruptions in the Red Sea by Yemen’s Houthis).
  • Becky Quick [03:18]: “We’ve seen [WTI] give it all back over the course of this weekend.”
• Risk Sentiment: Drops in oil prices are associated with market optimism, but the environment remains highly sensitive to headlines from the Middle East.
• Commodities & AI: Both oil and AI mega-cap stocks now heavily influence market direction, further exposing investors to binary risks.

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Halima Croft on Oil Markets and Middle East Risks

[12:29–19:27]

Key Points

• Broken Barometer: Halima argues that oil prices are no longer an accurate gauge of Middle East risk, due to structural changes in demand (esp. China’s reduced imports) and run-down inventories.
  • Halima Croft [13:41, 16:46]: “Do I think oil is a barometer for the pressure building in the Middle East? No, I think it’s a broken barometer.”
• China’s Impact: The decisive factor has been China’s slashing of oil imports by 4-5 million barrels/day. This “swing consumer” status has kept prices subdued despite immense supply disruption.
  • Halima Croft [14:49]: “Asian customers were paying $175 for their barrels... The key factor, though, is as we get into fall, does China come back as a buyer?”
• Outlook: Lasting normalization in the region will be slow due to mines and ongoing instability; signals from political summits (Trump/Netanyahu/Zelensky) could shift the balance.
• Market Humility: Halima stresses the need for humility in calls regarding oil markets, admitting she didn’t anticipate China’s massive import cuts would so deeply mute price action.

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Main Feature: Steve Eisman on the “All AI Trade”

[22:36–32:37]

The Binary AI Market

• No Diversification: Eisman insists that nearly all trades—be it in tech, financials, or even bonds—are now AI trades. Diversification is illusory because AI is the nucleus of both market enthusiasm and capital flows.
  • Steve Eisman [05:20]: “It’s impossible to get diversification… even the banks… they’re doing so much financing for AI trade deals.”
  • Steve Eisman [23:04]: “If you bought Goldman Sachs, you’re diversifying your portfolio away from AI. I disagree… they were great [due to] a lot of AI financing. It’s all one trade.”
  • Steve Eisman [27:28]: “Even people who think they’re diversified… are not really that diversified. What scares me is that it’s all one trade, so it better succeed.”
• Capital Intensity and Moats: The sector is now extremely capital-hungry, with Big Tech and cloud providers dramatically increasing capex. It’s unclear whether any of the leading models (esp. closed-source like OpenAI, Anthropic) can maintain competitive moats, especially with cheaper Chinese open-source models.
  • Becky Quick [24:32]: “What would happen if some of those big hyperscalers actually cut their capex?”
  • Steve Eisman [24:42]: “I think the market would go straight down.”
• Nvidia’s Pivot-Role: Nvidia dominates as supplier and sometimes financier (backing massive projects like OpenAI’s potential $250B–$500B data center in Ohio), which arguably deepens systemic risk due to ever-more “convoluted” and “incestuous” supply chain financing.
  • Steve Eisman [25:46]: “I have questions about the health of Anthropic and OpenAI long term… their models are about five times more than Chinese models.”
  • Joe Kernen [30:31]: “The latest Nvidia deal, like… so incestuous. It’s convoluted.”
• Portfolio Moves: Eisman has exited some big AI names (e.g., Google) but is not outright short—he’s cautious, holding cash, waiting for more clarity.
  • Steve Eisman [26:33]: “I would not [short]. I’ve lightened up. I sold my Google a couple of months ago.”
  • Steve Eisman [28:19]: “I’m just sitting and I have 5% cash until I can try and figure out what to do.”
• Bubble Warnings: If AI fails to deliver, Eisman sees a significant correction—the “all one trade” means trouble for almost every asset class.
  • Steve Eisman [27:23]: “If AI doesn’t succeed? I think we have a big correction.”
• Fed Policy = Market Noise: Eisman downplays the impact of Fed decisions on the current market compared to gigantic shifts in tech and AI.
  • Steve Eisman [32:06]: “Completely irrelevant… It’s good to talk about on television, but it doesn’t really interest me.”

Memorable Moments & Quotes

• Steve Eisman [23:04]: “It’s all one trade. Either it’ll succeed or it won’t.”
• Steve Eisman [27:28]: “What scares me is that it’s all one trade, so it better succeed.”
• Joe Kernen [30:31]: “It’s so incestuous. It’s convoluted… you don’t know if there’s any real profitability.”
• Eisman on Defensive Stocks [27:03]: “Buying something defensive or stapley is kind of a waste of time… people either want to buy AI or they don’t, but they don’t want to shift out of it to buy Clorox.”

Timestamps

• 23:04 Eisman: “It’s all one trade”
• 27:28 Eisman: “What scares me is that it’s all one trade, so it better succeed.”
• 28:19 Eisman: “I’m just sitting and I have 5% cash until I can figure out what to do.”
• 32:06 Eisman: “Completely irrelevant [re: Fed meeting].”

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Science Feature: Breakthrough Alzheimer’s Pill (Dr. Frank Longo)

[34:40–44:23]

Compound 31: A New Approach to Alzheimer’s

• The Drug: LM11A31 (“Compound 31”) acts on synaptic resilience, not just amyloid plaques like existing drugs. It's an oral pill, not an injection.
  • Frank Longo [35:27–35:57]: “There are drugs that go after the amyloid, but not the other two [toxins & inflammation]. Our drug deals with all three.”
• Trial Results: In phase 2A trials (240 patients), the drug showed meaningful slowing (and some reversal) of brain degeneration metrics, confirmed by independent analysis at Indiana University.
  • Frank Longo [36:18]: “All three of those measures indicate that we significantly slowed down the degeneration of the brain.”
• Resilience Concept: Some individuals, even with massive amyloid deposits, never develop dementia. The drug’s aim is to “create resilience”—the synaptic strength seen in these rare people.
  • Longo [38:39]: “The key word there is resilience. We think our drug is creating this resilience…”
• Next Steps: Phase 3 trials are ready, drug production scaled up, awaiting funding. The drug has promising indications not just for Alzheimer’s but other neurodegenerative diseases (Huntington’s, Lewy body, traumatic brain injury).
  • Frank Longo [40:13]: “We think once we have the funding, we can enroll the first patients within about six months.”
• Personal Motivation: Dr. Longo was inspired by his sister’s cerebral palsy—his childhood question “why can’t you fix the brain?” spurred his decades-long pursuit.
  • Longo [43:30]: “My mother… said ‘you can’t fix the brain, there are no treatments.’ That just stuck with me.”

Notable Quotes

• Frank Longo [35:27]: “So our drug deals with all three [causes]. That’s how it’s different.”
• Frank Longo [38:39]: “The key word there is resilience… We think our drug is creating this resilience.”
• Frank Longo [43:30]: “My mother... said, ‘You can’t fix the brain.’ ”

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Additional Noteworthy Timestamps

• Oil market update & Middle East risk: 08:03–11:58 (Dan Murphy)
• AI legal/ethics, lawyer jokes, Walter Isaacson conversation: 05:44–07:49
• Nvidia–OpenAI financing news: 21:41–22:36

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Tone and Language Notes

• The hosts balance technical insight with humor and plain language. At times, the dialogue is self-deprecating or wry (e.g., lawyer jokes over AI regulation or Joe Kernen’s grilling prowess “improved by AI”).
• Eisman’s tone is straightforward, slightly cynical, and deeply cautious—even as he acknowledges that AI’s potential could be “amazing,” he is sharply aware of its risks and bubble dynamics.
• The Alzheimer’s segment is hopeful and accessible, with scientific explanations clearly broken down for a general audience.

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Conclusion

This episode captures the sense of both awe and anxiety that surrounds the current moment in financial and scientific innovation. Markets are concentrated in a potentially fragile “all AI” bet, while medical breakthroughs like Dr. Longo’s Alzheimer’s pill offer glimpses of real-world resilience—if they can clear the hurdles of funding and regulatory approval. Meanwhile, geopolitical shocks continue to ripple through oil and markets, underscoring the precariousness of any forecast in 2026.

Key Quote [27:28, Steve Eisman]:
“What scares me is that it’s all one trade, so it better succeed.”

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For more, see video and graphics from Dr. Longo’s research at cnbc.com/cures. Sign up for the CNBC Cures newsletter for updates on Alzheimer’s and rare disease innovation.

Transcript

[Schwab/Ameritrade Announcer]

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[Katie Kramer]

Bring in show music please.

[CDW Announcer]

Hi, I'm CNBC producer Katie Kramer. Today on Squawk Pod, a pause in strikes on Iran sends markets on a bounce back journey. Our Dan Murphy in Abu Dhabi on the latest in the Middle east conflict.

[Dan Murphy]

The real signal is exactly what we see coming out of the meeting between Trump and Netanyahu this week. If the Israelis pushed the US to try and perhaps return to the conflict

[CDW Announcer]

here and oil prices falling. Palima Croft on global energy Do I

[Halima Croft]

think oil is a barometer for the pressure building in the Middle East? No, I think it's a broken barometer.

[CDW Announcer]

The market's rise boosted by enthusiasm in one key technology. We turn to veteran Wall street watcher Steve Eisman.

[Steve Eisman]

Oh, I think it's all one trade.

[CDW Announcer]

AI who is reducing his exposure to artificial intelligence including trimming his stake in long held stock. Alphabet.

[Steve Eisman]

What scares me is that it's all one trade, so it better succeed.

[CDW Announcer]

Plus a pill to treat Alzheimer's.

[Katie Kramer]

We think our drug is creating this resilience.

[CDW Announcer]

Stanford neurologist Frank Longo on the breakthrough in clinical trials that he wants to get into patients.

[Katie Kramer]

This is a drug right here. It's a pill. It can be taken orally.

[CDW Announcer]

It is Monday, July 27th. Squawk Pod begins right now.

[Katie Kramer]

Stand Becky by in 3, 2, 1. Q.

[Becky Quick]

Good morning everybody. Welcome to Squawk Box right here on cnbc. We are live from the NASDAQ market site in Times Square. I'm Becky Quick along with Joe Kernan. Andrew is off today. A third week in a row of declines for the Dow last week. But if you're looking at the Dow and the S&P 500. They're less than 3% from all time highs. It's the NASDAQ that people are watching a little more closely. The technology names there. The NASDAQ is more than 8% from its all time high. But the gains that we're seeing this morning soundly because of what we've seen with energy prices dropping rapidly over the course of the weekend, you'll see that at this point if you check out WTI it is down by close to 8%. 8235 is the last trade for WTI. And Joe, it's interesting. Last week WTI was up by about eight and a quarter percent. So we've seen it give it all back over the course of this weekend.

[Joe Kernen]

Basically I just had the, I don't know the overall feeling that it seems heavy to me and we'll have Halima Croft on it, we'll talk to her about it. I don't know what, I don't know what the spot price looks like but the futures seem like even a glimmer of anything. And they immediately we talked about it was the frog boiling because grudgingly going up. I mean it was a kinetic war. They were forays back and forth every night and it was going up like a dollar, a dollar 10 states launching attacks almost like resisting to go up. I think that the market might be well supplied or something. I don't know. We'll talk to Halim about it. But my feeling was it's ready to go back to 80 in just the drop of a hat which it did and it's all good for everything. I mean I'm glad it's not 130 or something like that but with the Red Sea involved now and the strait closed.

[Becky Quick]

Houthis in Yemen. Yeah. Launching attacks on Saudi Arabia getting out. I think they'd been getting out maybe 7%.

[Joe Kernen]

Well that's part of the problem.

[Becky Quick]

The daily oil usage through the Red Sea.

[Joe Kernen]

Halima is going to make the case that, you know, don't be complacent, don't think that it's over and don't think that the straight if it does reopen suddenly everything goes back to normal. I don't know, it just seems maybe not heavy but it just seems like never gone where it could have gone.

[Becky Quick]

No, it seems like a risk off position where anytime talks open up people think that this can change pretty rapidly for the better without those attacks taking place.

[Joe Kernen]

And the future is kind of similar too. They seem to want to go har. But so many people think that it's the most expensive market that we've ever seen. And AI has inflated the bubble so much, and it's so much like 1999. I think the hardest thing to do right now would be to buy. To buy at these levels. And if it's the hardest thing, that's usually the right thing. But let's talk about.

[Becky Quick]

Steve Eisman's going to join us today. He's going to talk a little bit about AI trade. His point is that it's impossible to get diversification at this point because everything's an AI trade. Even the banks, he says, are trade at this point because they're doing so much financing for AI trade deals that are out there. So either it's going to be a huge win or everything's going to collapse. It's a bilateral way of looking at all of these markets Today, too.

[Joe Kernen]

I read something, and I shouldn't. And I shouldn't. I probably shouldn't voice my. But I read David Fox, who built like one of the largest law firms in the country, now says AI is the profession's future. And I was just thinking, what if there were no lawyers?

[Becky Quick]

Okay, can I just tell you, I had a conversation.

[Joe Kernen]

What if it was all what a wonderful world it would be, except I

[Becky Quick]

had a conversation in the hallway with Walter Isaacson on Thursday after the show, because we'd been talking about this idea or. I'm sorry, was it Friday? Yeah, Thursday. I think it must have been. When he was on. We had been talking on air about what you do with a situation like an OpenAI, where its bot gets loose, it goes and hacks into places. How do you stop. Without regulatory oversight, which is going to be pretty hard to get anybody on agreement on regulatory oversight. How do you stop that kind of outrageous behavior and force the AI companies, the big.

[Joe Kernen]

You need lawyers to do that.

[Halima Croft]

Yeah.

[Becky Quick]

Basically, he said that's what you might be able to use.

[Joe Kernen]

Why can't you use lawyers for.

[Becky Quick]

Because they're all over the place.

[Joe Kernen]

AI lawyers to do it, Use bots to do it. Had another road trip, you know, six hour Tripp, every billboard are these shyster personal injury types.

[Halima Croft]

Yeah.

[Joe Kernen]

And they all have different. They all have these parasites. They all have different.

[Becky Quick]

Walter's point was maybe those parasites could do something useful for society.

[Joe Kernen]

Well, that would be a switch. Yes, that would be. And I said to Penelope, she goes, you know, a lot of people need those people and you need to advertise to get your name out and I go, they have magnetic business cards. As the ambulances are driving by, call me, you know, hoping for another whatever that horrible.

[Becky Quick]

Walter's point was that they've been a little too aggressive down in New Orleans with some of the cases they've taken down there. But maybe they could do some good for society by trying to put clamps on aid.

[Joe Kernen]

See, I really wish I hadn't gone down this path at all. I'm going to hear from some of these people. In fact, they might sue me for saying these things because they are looking for a reason

[Becky Quick]

and a pause in fighting between the United States and Iran. What we've been talking about this morning, it's reflected in the price of oil. Our Dan Murphy joins us right now with more from Abu Dhabi. And Dan, what's the feeling on the ground there?

[Dan Murphy]

Becky? Joe, good morning. Well, the pause is in and the war premium coming out as you've just flagged, a huge reversal for Brent right now and oil prices pulling lower. There have been no US Strikes on Iran since Thursday night. Crude on a heavy rollback as a result. And Brent's actually snapping what was a three week rally after trading above 100 US last week. Analysts at ING putting it pretty plainly this morning, saying the price action in oil this morning clearly reflects the market's desperation for positive news. ING also calling this the first tangible signal of de escalation. Now, we don't know what prompted this halt or how long it might last. The US Ambassador to the UN Mike Wald, speaking to Fox News at the weekend, saying President Trump has paused attacks on Iran to give diplomacy more time. At the same time, Axios reports today that centcom's own commander, Admiral Brad Cooper, told the White House that 13 rounds of strikes had reached the limit of what US air power could achieve. His message to Trump was either return to full war or stop. And President Trump has chosen to stop. At the same time, Yemen's Houthis claim they struck Saudi oil facilities on the Red Sea coast. Aramco and the Saudi Energy Ministry have not commented yet. And traffic through Bab El Mandeb fell again on Sunday, according to Kepler data. And there's a third supply risk that's emerging as well. Ukraine saying it hit several Russian oil sites and an Iranian merchant vessel in the Caspian. Iran says one sailor was killed and is now demanding a UN Response. I should say so the next signal that we're watching is actually going to come from Washington. Benjamin Netanyahu and Vladimir Zelensky due to meet President Trump tomorrow. So for oil, the question is whether this pause becomes a real de escalation moment or whether any one of these flashpoints puts that war premium straight back in the price. With that, it's back over to you.

[Becky Quick]

All right, Dan, just the feeling of what's been happening with the Red Sea, too. How has that changed the feeling on the ground just the with the renewed tax on some of the US Allies at this point?

[Dan Murphy]

Well, we're trying to get clarity on exactly what's happening inside the Bab El Mandeb right now. For weeks, for months, in fact, we've been talking about the bloc inside the street rate of Hormuz. Obviously, that's been material for oil prices. But at the same time, the Houthis have been threatening vessels inside that critical Red Sea waterway. It means oil out of Saudi Arabia either has to move south and attempt to pass through the Bab El Mandeb or alternatively move north through the Suez Canal. Shipments, according to Kepler data that I've been monitoring, have been pretty slow at this point. So it seems as if there is a hesitation on the ground to actually get those ships moving. And of course, moving through the Suez instead of going through Bab El Mandeb of course adds to the time and adds to the cost. So there's an extra impetus there to not make that journey. All of that should be a catalyst for a higher oil price, but that's not necessarily happening right now. The mood on the ground here, I can say, is one of cautious optimism. Right now, obviously, the markets certainly taking this pause in their stride. Right now we're watching and waiting to see exactly what happens next and whether or not we will see a resumption of hostilities. I think the real signal is exactly what we see coming out of the meeting between Trump and Netanyahu this week. If the Israelis push the US to try and perhaps return to the conflict here to ensure that Iran can never have a nuclear weapon and to maybe end this once and for all, or if the president decides to do what he has done now and continue to put the brakes on and push for a diplomatic track. Either way, markets watching very closely to see which way this goes next.

[Becky Quick]

All right, Dan, thank you very much. It's good to see you this morning.

[Joe Kernen]

Meanwhile, UN Ambassador Mike Waltz gave a round of interviews at a Sunday news shows and addressed reports the US Is running low on air defenses in the Middle East. The US Military and I've verified this every which way has everything that it

[Katie Kramer]

needs to conduct this campaign as effectively

[Joe Kernen]

as it needs to be and I have to tell you, the people that

[Katie Kramer]

are leaking this nonsense deserve to be in jail.

[Joe Kernen]

NBC News reporting late last week that the military is letting some attacks through in order to preserve weapons that are used to intercept incoming projectiles. Joining us now is Halima Croft, global head of commodity strategy at RBC Capital Markets and a CNBC contributor. Halima, I was talking about just trying to summarize your overall feelings that, you know, don't get too complacent here about a pause because it's still going to be a while before anything normalizes. But then I was making the point that it just seems like we're fairly well supplied because the minute you get any indication of a pause, it seems like the bottom drops out. It took a long time, 13 trading days to get back from 68 or 69 back up to, to where we were, up near 90. Why does the market seem like it doesn't want to go to 120? Because in the old days, if you even said there's a possibility the straits can be closed, you go to 140 or something like that. Why isn't it like that?

[Halima Croft]

Is that basically a lot of people in the market are still pricing endgame. And so anytime you have a PA then we move to how quickly can we get ships moving through the Strait of Hormuz? So I do think we're getting ahead of ourselves in terms of normalization. But when you bring up the issue of being well supplied, I think the China factor is still so paramount. The fact that the Chinese made the decision to slash imports by 4 to 5 million barrels a day like that was really consequential in terms of market balances. Now, we also really did run down our reserves. Our inventories have really been run down. But the China factor I think has been really critical in terms of why we're not at 200, despite the fact that we have very little traffic through Strait of Hormuz. Now we have issues in the Red Sea. And Ukraine is still hitting Russian energy

[Joe Kernen]

targets because the futures, they should be reflecting your fears and your angst, I think, because it's not going to be easy. Right. What spot right now, approximately what are people paying? What's the highest people are paying anywhere right now?

[Halima Croft]

Well, I think the key thing is, like if you're China, we did see them like really starting to try to source Russian barrels again, because if you're trying to actually buy the barrel, that's different than the price that you see on the screen. And one thing I'll tell you early on in this conflict, like, we heard from Middle Eastern national oil companies that in March, you know, Asian customers were paying $175 for their barrels now, so there was always this discrepancy. The key factor, though, is going to be, Joe, as we get into fall, do we see any type of normalization in terms of flows? And does China come back as a buyer into the market if there's another

[Joe Kernen]

formal cease fire that they say, and who knows how long it lasts or what Iran does. It's 70, we headed back there near term.

[Halima Croft]

Again, are we going to have this kind of stalemate where you have these periodic two weeks of bombing ships attacked? Then we have a pause. Does the pause turn into something that's durable? I mean, we also have to get the mines just cleared out of the strait. I mean, we talk about the attacks on actual vessels. The middle corridor of the strait is pretty heavily mined. And so again, to get this key transit point open is going to take a while. And we certainly need to see a stable security environment.

[Joe Kernen]

I mean, there have been times through this whole conflict where people that market watchers are actually saying that oil's getting it wrong. It's like, it's funny when people do that. I don't know how well they understand markets, but there are times where they say, well, it's obvious that I think they attribute it to individual traders or something, not the collective wisdom of the marketplace. Has oil been. Been right about things?

[Katie Kramer]

Or.

[Joe Kernen]

I think in your view, you think oil is, is underestimating the true risk of the conflict staying.

[Halima Croft]

Do I think oil, do I think oil is a barometer for the pressure building in the Middle East? No, I think it's a broken barometer. But again, if China is going to scale back their imports by 4 to 5 million barrels a day, that plays a big role in terms of balancing the market as well as running down our inventory buffers. So again, what are we looking for oil to tell us? Are we looking for oil to tell us how stable the security situation is? Yeah, I don't think oil, we have oil. I don't think oil is a leading indicator of how stable the security environment is in the Middle east when you have essentially China becoming China's now the swing consumer. So when China decides they're going to pare back their imports and we can run down our reserves like that allows us to get through a crisis for that $200 oil.

[Joe Kernen]

It doesn't mean, though people that know what they're doing should have been, should have been factoring in what China I mean, it's a global marketplace. If that's what was going to happen, we should have known that. Were you predicting much higher prices or something? Is that why you keep saying, well, if it wasn't for China, then I would have been right? Is that where this is coming from?

[Halima Croft]

No, I think you have to be humble a little bit in saying, what did you not anticipate? And certainly we thought the scale of the disruption was so much bigger than we saw in Russia, Ukraine and we should have been at those price points. But again, like if China, if China is going to, if China is going to change their purchasing policy, if we are going to run down our reserves, I mean, I do think you end up in a different place. Again, if you ask me what I did not anticipate at the start of the conflict, I did not anticipate China playing such a big swing factor in terms of scaling back imports. So again, it's a little bit of humility in terms of where the market is right now.

[Joe Kernen]

Where did we get in at the beginning of the Ukraine war? What was the peak?

[Halima Croft]

I mean we took out like $128. And so we never got close to that in terms of Brent pricing. And again, we never had a significant supply disruption in Russia, Ukraine that was driven by a fear of a 3 million barrel a day disruption. You know, at one point during this war we had over 10 million barrels being disrupted out of Hormuz. So the scale of the disruption was much larger. This time around it's still much larger, but the price response has been more muted. So again, I think we have to look at other factors in the market.

[Joe Kernen]

That's what's where you expect the futures to go absolutely crazy. And your point is that it didn't happen because of China. So we're going to take that to the bank because I don't know, 80 just seems like the market must be wrong or something. Anyway, Halima, thanks. Thank you.

[Halima Croft]

Thank you.

[Katie Kramer]

Cheese will be next.

[CDW Announcer]

Coming up on Squawk pod investor Steve Eisman, made famous by the bets he made in 2008, immortalized in the Big Short. He's not shorting the market now, but he's being cautious about Big Tech's reliance on artificial intelligence.

[Becky Quick]

So if this is a binary situation where AI signal succeeds and the market continues to push higher and higher, what happens if AI doesn't succeed?

[Steve Eisman]

I think we have a big correction.

[Becky Quick]

How big?

[Steve Eisman]

Now that's a hard question.

[CDW Announcer]

Eisman's take on this AI everything market. Right after this break,

[Schwab/Ameritrade Announcer]

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[Joe Kernen]

Pod Standby Joe His Mic Q Watching Squawkbox on cnbc. I'm Joe Kern along with Becky Quick. Nvidia is in talks to provide a $250 billion backstop for OpenAI as part of a large data center project. There's a Wall Street Journal report that says that it guarantees from Nvidia would help OpenAI lease a 10 gigawatt project in southern Ohio that's being developed by a SoftBank subsidiary and then videos. Nvidia's backing will help the data center developer raise debt at more favorable terms that it could without a financial backer. And since it's not rated, since OpenAI doesn't have an investment grade credit rating as an unprofitable private company, terms have not been finalized and the deal could still fall apart. Anthropic Microsoft and Alphabet have also expressed interest in the site.

[Becky Quick]

And joining us right now to talk about what's really moving the markets is Steve Eisman. He is the host of the Real Eisman Playbook podcast and Former senior portfolio manager at Neuberger Berman. Obviously somebody who understands when markets get inflated at times and has done very well by poking holes in some of those things in the past. Steve, we've got a Fed meeting that's happening this week. We've got the busiest week of earnings. But you're really looking at this as an all AI market at this point.

[Steve Eisman]

Oh, I think it's all one trade. It's, it's a. I. Either it'll succeed or it won't. But I mean, I just take for example, you know, the investment banks all reported the numbers were really great. But you know, why were they great? They were great because they're doing a lot of AI financing. So it's not like, you know, if you bought Goldman Sachs, you're diversifying your portfolio away from AI. I think the biggest news is that a year, if we were sitting here literally a year ago, so the entire debate on I would be, it's all, it's all great, rah, rah, you know, let's spend money. You know, every time one of the companies would increase their capital expenditures, the stock would go up. It's much more complicated now. That doesn't mean it's all negative, but it's much more complicated. So you've got, it's, it's become very capital intensive. It's questionable whether any of the LLM models have any moats around their businesses. And the Chinese AI models are a lot cheaper. So is there going to be a price war? I don't know the answer to a lot of those questions, but I don't think anybody else does either. And that's why, you know, for example, last week when Google reported the stock

[Becky Quick]

went down, not because they didn't beat expectations, they beat expectations.

[Steve Eisman]

The revenue numbers are coming through, but they increased the capex from 190 billion to 205. People freaking out.

[Becky Quick]

You know, we were asking the question earlier today, what would happen if some of those big hyperscalers actually cut their capex? How would the market react to that?

[Steve Eisman]

I think the market would go straight down.

[Becky Quick]

I think so too. To me, it's your damned if you do, damned if you don't situation.

[Dan Murphy]

Almost.

[Steve Eisman]

I mean, in the end of the day it all boils down in a sense to in video Nvidia, I think when they reported last quarter had 85% revenue growth. So if the hyperscalers cut, it would be 85% and you know, maybe that would be healthy for the long term, but I think the market would go straight down on that news, there's the

[Becky Quick]

front page story today in the Wall street journal that says Nvidia's in talks to back open AI on a $250 billion financing, basically for, for a data hub.

[Steve Eisman]

Right.

[Becky Quick]

That could wind up costing half a trillion dollars in the long run on some of these things in video has been involved with backing a lot of these deals. And if you ask Jensen Huang why, he would say because they are looking for the bottlenecks that are preventing AI from moving forward and they want to make sure they clear those bottlenecks. It's a sound strategy, but what do you think as somebody who watches the markets, in terms of what this means?

[Steve Eisman]

Look, I have questions about the health of anthropic and OpenAI long term. I mean, this is great for Nvidia long term, but you know, Anthropic and OpenAI, the cost of their models is about five times more than Chinese models. So I think one of the, one of the bottlenecks is what's the future health of anthropic and open AI in the face of models that are much cheaper? I don't know the answer to that question, but I don't think anybody else does either.

[Becky Quick]

Why are Chinese models so much cheaper?

[Steve Eisman]

Because they're open source and anthropic and OpenAI are closed source. And for whatever reason, the closed source models are just much more expensive.

[Becky Quick]

So what do you do overall? It's more complicated. But you wouldn't necessarily short this market at this point.

[Steve Eisman]

I would not. I've lightened up. I've taken. I'll give you an example. I sold my Google a couple of months ago. I've owned Google. I can't even tell you how long I've owned Google. But I felt I wanted to reduce my exposure to AI. I haven't bought anything to replace it because buying something defensive or stapley is kind of a waste of time.

[Becky Quick]

Why?

[Steve Eisman]

That doesn't go up. They don't go up. They, you know, people either want to buy AI or they don't want to buy AI, but they don't want to shift out of it to buy Clorox.

[Becky Quick]

So if this is a binary situation where AI succeeds and the market continues to push higher and higher.

[Steve Eisman]

Correct.

[Becky Quick]

What happens if AI doesn't succeed?

[Steve Eisman]

I think we have a big correction.

[Becky Quick]

How big?

[Steve Eisman]

Now, that's a hard question. I don't know. But I mean, it's all one trade. It's literally one. I mean, even people who think they're diversified because they own 60% stocks and 40% bonds are missing the fact that they're actually not diversified because of their 60%, more than 50% of it is tech and AI related. And of the 40% of bonds, most of the new issuance of bonds is AI related. So even people who think they're diversified because they own bonds are not really that diversified. What scares me is that it's all one trade, so it better succeed.

[Becky Quick]

What are you doing? If you've sold Google, I mean, if you sold Alphabet, what else have you done?

[Steve Eisman]

I'm just sitting and I have 5 cash until I can try and figure out what to do.

[Becky Quick]

What would it take to get you to deploy that cash?

[Steve Eisman]

I don't know yet. I really don't. I mean, I don't think this debate's going to get settled within the next two weeks.

[Becky Quick]

We talk all the time about the Middle east because you can say AI is driving everything, but you could also say oil prices are driving everything right now too. Oil prices are down 8%. You see the market's up, right? Significantly. How much does that factor into it? To tariffs factor into it?

[Steve Eisman]

I think it factors it to a degree. I don't think this war is going to be over anytime soon. I don't think. I mean, I think President Trump wants the Iranians to give up their, their nuclear fuel and the Iranians are not going to give up their nuclear fuel. So I don't think there's much to talk about. So, you know, we get these lulls, but then it doesn't do anything.

[Becky Quick]

But you're not worried about oil prices at this point?

[Steve Eisman]

I think actually there's an oversupply. That's why Halima, who was a guest on my show too, pointed out that China has basically stopped buying oil, which is why oil prices haven't gone up that much. You would have thought oil prices would be 150 at this point, but they're not because there's actually an overproduction. And I also think some of these, these pipelines that are going to be able to avoid the Strait are pretty close to being finished.

[Becky Quick]

Yeah. Next year. I think maybe 20, 27.

[Steve Eisman]

Yep.

[Becky Quick]

Is when you hear.

[Steve Eisman]

That's why I'm not really all that worried about oil prices.

[Joe Kernen]

I mean, AI is going to be something. I don't, I'm like you. I'm not sure what. But does the, for lack of a better term, the bubble popping, does, does it come from people slowing down on the build out or does it come with the promise of what it's supposed to do? Disappointing people.

[Steve Eisman]

I don't necessarily think the latter.

[Joe Kernen]

It's going to be, I think it's going to be amazing.

[Steve Eisman]

It's going to be, it's going to be something, something really good. That doesn't mean that everybody succeeds. That doesn't mean that these circular deals,

[Joe Kernen]

the latest Nvidia deal, like you gotta read it and it's like they're gonna, you know, back this, but then they're gonna provide money for opening high to buy their chips. And it's so incestuous.

[Steve Eisman]

It's convoluted.

[Joe Kernen]

It's totally convoluted. You don't know if there's any, you know, you don't know if there's any real profitability in any of, of the machinations that you find.

[Becky Quick]

Eventually there probably is for Nvidia, like he was saying. Probably.

[Katie Kramer]

Well, there is.

[Steve Eisman]

Yes, for Nvidia. They're not doing it for free. Yeah, but look again, I think one of the bottlenecks is that anthropic and AI and OpenAI are responsible for a lot of the spending that people are doing.

[Katie Kramer]

Right.

[Steve Eisman]

And Anthropic and I have models that are now much more expensive than the competition and I think that is a potential bottleneck.

[Joe Kernen]

I'm a much better cook because of AI and you are? Yes. And griller.

[Steve Eisman]

Okay.

[Joe Kernen]

When I grill things on much, I mean, far better. Everything is juicier, tastes better. I do it a totally different way. I'm using the grill that has different zones.

[Becky Quick]

And you don't pay anybody for any of that?

[Joe Kernen]

No, I use just

[Steve Eisman]

free.

[Joe Kernen]

Right. But he's very, very nice to me.

[Becky Quick]

He's beating him into submission.

[Joe Kernen]

Maybe so. No, Claude is like, so how was your, you know, how was your boneless breasted chicken? It was unbelievable. Claude, thanks. Anytime. I kind of like that stuff.

[Steve Eisman]

Very friendly.

[Becky Quick]

Steve, we've got a Fed meeting this week too. You basically think that's just noise.

[Steve Eisman]

Completely irrelevant. I mean, look, if inflation gets worse, they'll raise rates and inflation gets better, they'll cut rates. And so I don't know why people get so exercised about it.

[Becky Quick]

Doesn't make much difference to you one way or the other.

[Steve Eisman]

Not really. I mean, look, if the Fed starts to raise rates very aggressively, that would be important, but I don't see that. So, you know, it's good to talk about on television, but it doesn't really interest me that much.

[Becky Quick]

Steve, thank you for joining us today. It's good to see you.

[Joe Kernen]

Thank you.

[CDW Announcer]

Still to come, a potential game changer for the millions of Americans impacted by Alzheimer's disease. Stanford neurologist Frank Longo has spent decades developing a pill to counteract the worst of the brain degeneration.

[Katie Kramer]

The problem with Alzheimer's is we're losing the synaptic connections between the neurons.

[CDW Announcer]

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[Halima Croft]

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[CDW Announcer]

Make amazing happen. Learn [e-mail] modernwork. Welcome back. You're listening to squawk pod from CNBC.

[Joe Kernen]

Papa and Becky, thank you.

[Becky Quick]

More than 7 million Americans are living with Alzheimer's disease and while there are treatments on the market, there is currently no cure. One new drug currently in clinical trials is offering hope for many though. It is called LM11A31 or Compound 31 and it approaches treatment very differently from existing Alzheimer's therapies. Joining us right now to talk about it is Dr. Frank Longo. He's a Stanford University professor who actually headed up the neurology department there for 18 years. He's also the co founder of Pharmatropics. That's the company that has created this new drug. Dr. Longo, thank you for being with us this morning. It's been to you. Thank you.

[Katie Kramer]

It's great to be here.

[Becky Quick]

Let's talk a little bit about how this drug is different from what exists on the market today. Those drugs that try and target amyloid plaques.

[Katie Kramer]

Right. So the drug's different in a number of ways. So the problem with Alzheimer's is we're losing the same synaptic connections between the neurons, and there are multiple forces causing those connections to degenerate. There's the amyloid that accumulates in the brain. There are toxic forms of the tau protein or damages, the synapses and inflammation. And on the market today, there are drugs that go after the amyloid, but not the other two. And so our drug deals with all three. So that's how it's different.

[Becky Quick]

You don't think the amyloid drugs are all that effective at this point?

[Katie Kramer]

Well, they're an important start. I mean, they help a little bit, but they slow the loss of cognition by just a small amount. So it's a good start, but we need something much more powerful.

[Becky Quick]

You've completed phase 2 and phase 2A trials. What did compound 31 show in those trials?

[Katie Kramer]

Sure. In the phase 2A trials in mild to moderate Alzheimer patients, we did brain scans, we did spinal taps, we did blood tests. So we looked at those patients very thoroughly, and all three of those measures indicate that we significantly slowed down the degeneration of the brain. We slowed down the loss of those synaptic connections. So we're very excited about that.

[Becky Quick]

How many patients were involved in that study?

[Katie Kramer]

About 240. So we had about 80 on placebo, 80 on a low dose, and about 80 on a higher dose.

[Becky Quick]

You also sent the results of that study out to Indiana University to confirm what you had found. I think we're looking at some graphics of what you found on that. Why don't you talk us through what we're looking at?

[Katie Kramer]

Sure. We took one of the forms of brain scans from that trial, and we coded the data so the Indiana University group would be blinded. And they have a new technique where they can measure network function in the brains of the patients in our trial. And what they found was that there was not much effect on the placebo group, but in the patients on the drug, they were able to reverse the degeneration of the network. So what that image is showing in red is where we're gaining function of the network and the connections that are lost in Alzheimer's. The red is actually showing the drug effect reversing that loss versus the placebo.

[Becky Quick]

And Indiana University was able to say, hey, we know who was on the placebo, who was on the low dose, who was on the high dose, based on what they saw in that?

[Katie Kramer]

Yes. And we're excited about that because it's an independent group that was blinded to the data.

[Joe Kernen]

The age old question is whether amyloid plaques actually cause Alzheimer's or result from what's happening with Alzheimer's. And we still don't know. And if you found a family that has amyloid plaques everywhere but doesn't get dementia, that strongly argues that it's not necessarily just stopping amyloid plaques that would cure Alzheimer's.

[Katie Kramer]

That remains a controversial question in the field. How much is amyloid contributing? I think most people think it's at least one important contributor. I think it's one important contributor. But the amazing observation is there are people whose brains are filled with amyloid, even the toxic tau, and they don't get demented. They live into their 70s and 80s

[Joe Kernen]

and their synapses are what? They're still intact. That's what seems to be the key.

[Katie Kramer]

Exactly. The key word there is resilience. We call that resilience. And we think our drug is creating this resilience. It's tapped into this resilience mechanism and

[Joe Kernen]

it's based somewhat on some gene that is either mutated in this family or this line of family. We're in Colombia or something.

[Katie Kramer]

Right. There's a family in Colombia that has a very strong gene that if you have that mutated gene, you for sure will get Alzheimer's. And there was a patient, those families generally have dementia starting at about age 40. And there was a patient there who made it into his 70s. He's perfectly well, his brain was filled with amyloid and he's demonstrating resilience now. He's lucky that he had resilience. And the goal with our drug is so that everyone can be resilient.

[Becky Quick]

How did you come up with this drug to begin with? I know this was 20 years in the making.

[Katie Kramer]

Yeah, well, this drug has been a 20 year journey. And this started off in my academic labs, supported by funding from the nih, the Alzheimer's association, the Alzheimer Drug Development foundation, the Estee Lauder family that started that here in New York. And then once we finished testing in mice, we wanted to move it to people. So my wife Ann Longo and I started our company, Pharmatrophic. She's the co founder and the initial CEO. And we started the company to do the clinical trials and manage the commercial development. And so that's how we've done the human trials.

[Becky Quick]

The phase three trials can cost millions and millions, maybe hundreds of millions of dollars. Where do you stand right now? With a phase three trial at this point.

[Katie Kramer]

Right. Well, where we stand with the phase three trial, we're ready to go. We scaled up production of the drug, so we have enough drugs to do a phase three trial. This is the drug right here. It's a pill. It can be taken orally. The existing treatments are intravenous or injection, and they do have some important side effects. Brain swelling or brain hemorrhage. This drug doesn't cause either one of those side effects, and it can be taken orally. So we think this will be accessible to a lot more people. This is the medication. We scaled up production, so we think once we have the funding, we can enroll the first patients within about six months.

[Becky Quick]

Wow. The interesting part about this is you have done these studies with Alzheimer's, but you think that drug can work in a lot of other applications, including traumatic brain injury, Huntington's disease. I want to say Lewy Body Disease. Yes, Lewy Body, Parkinson's too.

[Katie Kramer]

Yeah. This drug, because it makes the synapses resilient, and that's the key word here, resilience. It's a fundamental mechanism that can be applied to a number of brain disorders. So, for example, there's a rare form of dementia called progressive supranuclear palsy, or psp. That's where too much tau accumulates in the brain. Patients will start enrolling in a trial taking this drug this summer. The NIH is funding that trial, and this drug was selected for that trial. They'll be enrolling this summer.

[Joe Kernen]

So 86 billion neurons in the brain, supposedly hundreds of trillions of synapses. So, AI. When do we get sentient AI? Is it ever possible? When you think about that, with that

[Katie Kramer]

many synapses, I think you can. You got a ways to go compete well with AI. That's a huge human AI right there.

[Joe Kernen]

I mean, we see green and smell. Smell perfume and have memories and feelings, and I mean, it's all. And it's all mediated by synapses.

[Katie Kramer]

It is. I'm a neurologist. I'm biased for the human brain.

[Joe Kernen]

How about a genome that can have the blueprint to set up? I mean, how mind boggling. Is that? Almost godlike.

[Katie Kramer]

Yes, yes. I mean, we're still in the early days of understanding how the genome translates into setting up the brain and how

[Joe Kernen]

all this wire, plus, I mean, a lot of it is obviously as things are happening, it's developing.

[Katie Kramer]

Right?

[Joe Kernen]

Right. It's feedback that does it. But there must be an unbelievable blueprint to start with.

[Katie Kramer]

You would think I think there is an unbelievable blueprint. And I think that's why the basic science remains important. That's what's helping us figure out how we get from genes to this beautiful organ in our body. The basic science is telling that. So we need a combination of the basic science and then translating and then good human trials.

[Joe Kernen]

It's also binary. Everything that happens somehow is just that. Either the neuron either fires or it doesn't fire, right?

[Katie Kramer]

Yeah. Yeah, that's right.

[Joe Kernen]

One or the other.

[Katie Kramer]

Well, we can modulate those connections so when you learn something, you're making the synaptic connection stronger than it was before you learned that. So that's why it's important to keep learning things.

[Becky Quick]

Dr. Longo, very quickly, I know that you got into this because of a very personal reason. Do you want to explain why you're a neurologist?

[Katie Kramer]

Sure. I've been interested in the brain since I was a child. I have a sister, my sister Patty, who's one year younger than me. She was born prematurely and suffered brain damage at birth. It's called cerebral palsy. And so she's cognitively impaired and she was in a wheelchair. So as a child, I went to the doctor visits that my mother was taking her to, and I asked why the doctors couldn't make my sister Patty walk. And my mother, who was a nurse and therefore a medical authority, said, you can't fix the brain. There are no treatments for the brain. And that just stuck with me. So when I got to medical school, I looked for mentors that would help me train in how to make treatments for the brain. And that's what I'm still doing.

[Becky Quick]

It's very exciting work. We really appreciate your stopping by to talk to us about it, and we'd love to hear more about your progress with this drug, too.

[Katie Kramer]

Oh, well, thank you. It's my pleasure. And we're looking forward to getting this phase three trial going. We want to get this drug to patients.

[Becky Quick]

Dr. Longo, thank you.

[Katie Kramer]

Thank you.

[Becky Quick]

And by the way, folks, for a deeper dive on everything happening in the rare disease space, you can visit cnbc.com cures and there you can join thousands of people by signing up for the CNBC Cures newsletter to sign up for the latest in the rare disease community. Alzheimer's is not rare, but this drug could work on some rare diseases potentially as well.

[Katie Kramer]

Definitely could, yeah.

[CDW Announcer]

We should mention here that you can see video of our segments on CNBC's website. Head to cnbc.com cures to see Dr. Longo's Alzheimer's pill right there, as well as images of brain scans from pharmatrophic's clinical trials. And that is Squawk Pod for today. We've come to the end. Squawk Box is hosted by Joe Kernan, Becky Quick and Andrew Ross Sorkin tuned in weekday mornings on CNBC at 6 Eastern to get the smartest takes and analysis from our TV show right into your ears. Follow Squawkpod wherever you get your podcasts. We'll meet you right back here tomorrow.

[Katie Kramer]

We are clear. Thanks guys.

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