Nvidia reported powerful numbers. How could it not? And yet, the skeptical narrative about AI retains its power. And the Blue Owl news from last week, in my view, was particularly bad. The private credit market has exploded into a $1.8 trillion market. Huge. Part of the problem is that private credit is overexposed to software. In a recent report, private credit could see default rates surge to 15% because of AI disruption. Such a level would be disastrous.
Hi, this is Steve Eisman and this is the weekly rap for the week ending Friday, February 27, 2026, but recorded on Thursday night, February 26. Before I start the rap, I'm going to do something I don't normally do and flag the episode we will release this coming Monday, March 2nd. I do a deep dive with Tom Gober, an expert in what is going on with private equity increasingly dominating the life insurance sector and the incredible risks involved. This is truly worth checking out. On this week's rap, I discuss one, tariff turmoil. Two, I go into more depth on Blue Owl, private credit and private credit's exposure to the software sector, and I also touch on Blue Owl's control of a life insurance company. Three, AI creates more fear in software and other sectors as well. Four, earnings results of Nvidia, Salesforce, First Solar, and others. And five, I answer two viewer questions: the first as to why the market did not react more negatively to Friday's tariff news and the second as to what tools institutional investors have that retail investors do not. So let's get started.
On Friday of last week, the Supreme Court struck down President Trump's tariffs which he imposed under the International Emergency Economic Powers Act, the IEEPA. Over the weekend, President Trump responded with a new temporary 15% tariff under section 122 of the 1974 Trade Act and a plan to start several new section 301 trade investigations covering most major trading partners that would allow him to reimpose the tariffs under other laws. The 15% global tariff is a temporary measure while reciprocal and fentanyl tariffs are converted into more permanent section 301 tariffs on specific countries. Section 301 tariffs involve a multi-month investigative process. According to Secretary of the Treasury Scott Bessent, the new tariffs should result in virtually unchanged tariff revenue in 2026 from what was currently being raised. If correct, the net effect of the US's pivot to a new tariff plan, while undoubtedly messy, may be neutral overall for the US fiscal picture.
But there is market uncertainty because of the tariffs. And I want to flag one headline from Monday morning on CNBC. There was a headline of quote, 'Bitcoin falls as Trump tariff moves raise uncertainty.' That was the headline. This headline should not exist. The entire investment thesis behind Bitcoin and cryptocurrency, as I have said many times, is that it is a hedge or supposed to be a hedge against the debasement of fiat currency, government currency. If that's the case, Bitcoin should be up on days of uncertainty, but it always goes down on such days. It is mostly correlated with tech stocks until now. It is just a way, in my view, for people to speculate about speculating. In this week's interview with George Noble, George postulated that Bitcoin is just no longer cool, that the people who once traded in it have moved on and are now all on predictive market sites.
I want to return to the topic of private equity, private credit that I discussed last week with respect to the Blue Owl news. It deserves more commentary. So, let's first review again what happened. Blue Owl is a 17 billion market cap private equity company that specializes in making private credit loans. The private credit market has exploded into a $1.8 trillion market. It's huge. And if it ever blew up, it would hurt the US economy badly. Investors have been showing fear about this market for about a year. And the Blue Owl news from last week, in my view, was particularly bad. Over the last 5 years, private credit firms have been expanding their distribution from institutional investors to retail investors. They created private lending funds specifically designed to attract retail investors. The yield on private credit is higher than public credit, so retail investors are enticed. The big problem is that this model works great in good times. It has never been stress tested for a scenario where the asset valuations are being questioned, there is liquidity pressure, and there is a major sector-specific disruption — software — and all of this is happening simultaneously now.
So what happened? Blue Owl froze redemptions from its private credit funds. At the same time, it sold 1.4 billion in loans at roughly par to four buyers. Three buyers were CalPERS, Canada's OMERS, and British Columbia Investment Management. So far so good. However, the fourth buyer was Kuvare Insurance. And here's where it gets funky. In April 2024, Blue Owl bought Kuvare Asset Management, the investment management arm of Kuvare Insurance. Blue Owl did this transaction as a way to emulate what Apollo has accomplished with Athene. Often Apollo sells the loans that it originates to its captive insurance company, Athene. Here too, Blue Owl sold some of the 1.4 billion in loans to an entity that it controls. This is hardly an arms-length transaction. Let me make this clear. An entity, Kuvare Insurance, whose assets Blue Owl manages, used insurance policyholder money to purchase loans from Blue Owl's distressed funds. Now, Blue Owl's funds can only be levered 2:1. Kuvare Insurance can lever loans far more. It might wrap those loans into a CLO that can be levered 10:1. So, the same risks are now going into far more levered vehicles, but backed by insurance policyholders. By the way, Kuvare Insurance is a life insurance company that sells annuities, whole life, and universal life policies. And we have to question whether it can cover those obligations now that it's being loaded with riskier investments or apparently riskier investments.
One more thing, part of the problem is that private credit is overexposed to software. These loans are a result of buyouts of software companies at high valuations which were funded by private equity and private credit funds. There are some estimates that over 20% of the entire private credit market is composed of loans to software buyout transactions. In a recent report, a strategist at UBS said that private credit could see default rates surge to 15% because of AI disruption. Now, I have no idea if a 15% default rate is realistic at all, but such a level would be disastrous. The obvious question is how did all of these pools of smart money miss what now seems so obvious that adoption of LLMs would impact the profitability of software companies. Back then LLMs were not a secret although they were not widely used. ChatGPT was launched in November of 2022 and Perplexity was launched in December of 2022. But they were in the works. People inside can rarely see the paradigm shifts. When they do, they are called whistleblowers or outsiders until after the fact. Then they are called seers. Private equity firms investing in and funding buyouts of software companies were victims of their own enthusiasm and inability to see the paradigm shift occurring now as AI was under development back then.
Lastly, on Monday, Boaz Weinstein, Saba Capital, and Cox Capital announced a tender offer to retail investors in Blue Owl's funds, but at a 20 to 35% discount. The significance of this is that Blue Owl investment funds are being priced by the smart money at a 20 to 30% discount. That's some haircut. I flag Blue Owl this week again for two reasons. The 1.8 trillion private credit market is now huge and has a large impact on the US economy. The private credit market is opaque, but it has not suffered any serious credit issues, at least not yet. What is even more opaque is the impact from the relationship between the private credit loans that private equity makes, which it then often sells into the insurance companies that these same private equity companies own or control, as in the case of Kuvare. I will be exploring this private equity life insurance relationship in depth this Monday with my guest Tom Gober who is a former life insurance examiner. In the end, if private equity only sold private credit to institutional investors, nobody would care. But it has expanded into selling loans to retail investors, 401k plans, and insurance companies backed by individual policyholders. Now everybody cares.
Monday saw a resumption of fears of the demise of multiple industries due to AI. Cybersecurity stocks got hit hard with stocks like CrowdStrike down 10%. Fear also struck the payment sector with Visa down 4.5% and Mastercard down 6%. This was all earlier in the week. And IBM at one point was down 13% as Anthropic announced a product that would eat into IBM's Cobol language franchise. Every day is an adventure. Now I will admit I am no expert in software. So I really don't know, but nor does anyone, how big an impact AI will have on software. But when it comes to payments, Visa and Mastercard have network effects. They connect hundreds of millions of merchants with billions of consumers globally. And here I don't think AI can impact that.
And now for earnings. The two big tech earnings for the week were Nvidia and Salesforce. Nvidia reported powerful numbers. How could it not? Last year, total AI-related capex in the US was a total of 450 billion. Four hyperscalers — Meta, Google, Microsoft, and Amazon — have already projected 650 billion in AI capex in 2026. So, Nvidia's numbers had to be great. And they were. Revenue beat, EPS beat, guidance beat by a lot. I'll just flag one statistic. Q4 revenue was 68.1 billion, up 73% year-over-year and 20% quarter-over-quarter. Earnings per share was up 82%. It's incredible to say that the company with the largest market cap in the world grew revenue 73% in a year. We can doubt the future of AI all we want, but these numbers are powerful. And yet, the skeptical narrative about AI retains its power. Nvidia's stock was up only 1% after hours and opened down Thursday morning and closed down. And despite the 67% EPS growth projection for this fiscal year, Nvidia's PE is only 25 times. That relatively low multiple, especially compared to the company's growth rate, expresses all the doubts now surrounding AI.
Salesforce, this stock has been rocked because of AI software fears. The stock is down 25% this year alone, and Wednesday night's earnings report did not help. The stock was up on Thursday, but that report did not help. The software company reported healthy results, but unfortunately its fiscal 2027 revenue view trailed Wall Street projections. Salesforce beat on earnings per share and revenue. Its revenue grew 12% year-over-year in its fiscal fourth quarter, and it's the company's fastest growth rate in 2 years. But if you exclude the impact of the recent acquisition of Informatica, organic revenue growth was only 8%. And for the 2027 fiscal year, Salesforce provided revenue guidance that was a bit light. And given the AI overhang, this is not the time for light revenue guidance. One more thought on software stocks. I can't help but notice that despite the annihilation of the sector, no major insiders are stepping up to buy stock in their software companies. What does that tell you? Tells me that maybe the insiders have their own doubts.
Moving on. In housing, Home Depot and Lowe's reported nothing great here. With respect to Home Depot, earnings per share and revenue beat slightly. However, same-store sales growth was a meager 0.4%. Home Depot kept its EPS guidance at flat to up 4%. Lowe's has been doing better than Home Depot of late. Its same-store sales growth was a better 1.3%. It too beat on earnings and revenue, but gave EPS guidance that was lower than expectations. These are great companies struggling through a period where the housing market is locked by the fact that existing homeowners have sub-4% mortgages. The best news for all housing stocks just occurred and that is that mortgage rates just ticked below 6%.
Next up, First Solar, the solar company. First Solar's numbers were, to put it very plainly, a complete and utter disaster. The solar group has generally been awful for the last few years, but the group is divided between those that sell to consumers and those that build massive solar panels for utilities. The residential side has been terrible for years for two reasons. First, most consumers borrow to put up a solar system on their roof. With rates higher, volumes have collapsed and subsidies, both state and now federal, have lessened or been eliminated. So, a company like Enphase has seen its stock decline from $340 during COVID to a current $46. However, until now, the commercial solar side has held up and there was a hope that the demand for electricity and therefore renewables because of data centers would overcome the elimination of federal incentives. Nevertheless, it now looks like President Trump's dislike of all renewables has finally impacted commercial solar. On Tuesday, after the close, First Solar stock was down 15%. The company reported weak fourth-quarter earnings results and full-year guidance. Let me get a little specific so you'll get a flavor. First Solar earned $4.84 while analysts expected $5.15. So a miss. For the full year, First Solar guided revenue to come out between 4.9 billion and 5.2 billion, which was way lower than the 6.12 billion that analysts were expecting. In response to these bad results, a bunch of analysts downgraded the stock.
Moving on to a company we've discussed before, Circle, the stablecoin company, they reported. This stock has been on a roller coaster and has suffered with the decline in cryptocurrency prices. Circle went public in June of last year at $31. It quickly jumped to $260 and it has been on a steady decline since then. And with the recent demise of crypto prices, the stock got as low as $50. Now, Circle is actually a profitable company, and the results that they reported this week were good. Revenue rose a very nice 77% to 770 million, and Circle's stablecoin called USDC posted circulation levels of 75.3 billion, up 72%. Shares were up 35% on Wednesday. I just point out that currently Circle's sole source of revenue is from the interest rate it earns on the stablecoin reserves that it maintains and that interest rate is at the short end of the curve. So if the Fed continues to cut interest rates that will hurt Circle's future revenue. The issue for Circle is that most of its current business is derived from customers in the crypto digital asset world. It needs to diversify into the broader payments world, which is what it is trying to do.
Finally, Warner Brothers reported the numbers were not good. The company reported a loss of 10 cents. Revenue of 9.5 billion was down 6% year-over-year. I said this last week, but I'll say it again. I don't think that Warner Brothers is worth its current 70 billion market cap. And Warner Brothers has a very difficult culture to manage. If I was a shareholder of Netflix, I'd be hoping that Paramount wins. Netflix's current PE multiple of 26 times, I think, is starting to look interesting.
And now for the mailbag. First up is from Yes, We Can. 'Steve, I think Friday was shocking in many ways. GDP growth came in at 1.4%, half of consensus. PCE and core PCE came in at 2.9%, well above the Fed's target. Also, many bears were saying that if SCOTUS struck down the Trump tariffs, that would create market chaos because there would be uncertainty around whether companies can expect a refund or whether Trump will impose new tariffs using new legislation. Despite all of this negative news, the market went up on Friday and closed up for the week. Your analysis of the situation would be greatly appreciated.' Before I answer this question, I would just point out that the market did have a bigger correction on Monday where the S&P 500 declined by over 100 basis points. This decline does express investor uncertainty regarding the tariffs, but it is hardly calamitous. So why has the market not reacted more? People love to catastrophize and business news loves a good catastrophe headline. Frankly, since the great financial crisis, there has been a competition amongst pundits to see who can predict the next calamity. They keep predicting it, but it has not yet happened. And while a recession is always possible, the US economy has proven to be incredibly resilient. One bad day about tariffs is not going to tip the economy into a recession. For me, the big risks to watch are one, the amount being spent on AI and will it generate adequate returns. Two, the problems emerging in private credit and private credit's overexposure to software loans. And three, the incredibly complex relationship between private equity, private credit, and the life insurance companies that private equity owns and/or controls. These are the risks that I will be watching most closely.
And our second question is from Gil who says, 'Hi, Steve. As a retail investor, I am curious to know what resources professional investors have at their disposal that give them an edge over retail investors such as myself. I read the annual reports and other financial filings for companies that I follow, as well as any investor presentations and conference recordings that the companies choose to make available on their investor relations sites. However, professional investors such as guests you bring on to your show seem to know much more about companies than what I can glean from publicly available resources. I would appreciate it if you can walk us through the professional equity research process highlighting the additional non-public resources that professionals have at their disposal such as expert networks and what retail investors can do to bridge the gap. Additionally, under what circumstances do you believe the additional information possessed by professional investors is crucial to making good investment decisions and under what circumstances does it matter less?' This is a great question. One of the purposes of my podcast is to bring institutional knowledge to retail. Let me elaborate on what tools institutional investors wield that retail investors don't have access to. First, institutional investors have access to Bloomberg terminals and their equivalents, and that provides them with a wealth of data that they can easily access from credit spread information to sector analysis to the ability to stress test portfolios. Second, institutional investors have access to sell-side research. And sell-side analysts, while they are not always the best stock pickers, they are incredibly knowledgeable about their companies. Sell-side analysts visit institutional firms all the time. And in those meetings, investors grill them about what is going on in their sectors and companies. Also, institutional investors have access to industry consultants and experts who are not sell-side analysts. Institutional investors also have access to company managements. This can occur at conferences or at meetings at firms. And it all sounds very impressive and it is. It's a wealth of information. But I just point out that despite this information advantage, the indices almost always outperform active managers.
Anyway, this last Monday, we dropped an interview with George Noble, a famous investor who used to run one of the largest equity mutual funds at Fidelity. This is a stock jockey episode. George is very bullish on gold and negative on crypto and the tech sector and negative about AI infrastructure spending. He voiced opinions that you don't normally hear on business news. Feel free to send me questions about this interview. It involved many different topics with some at times complex lingo. So check it out.
And this coming Monday, we made a change because of a scheduling conflict. We had originally scheduled dropping an episode about life insurance a week from Monday, but we will now drop it this Monday. As I said at the beginning, that interview is with Tom Gober, a former insurance examiner. Tom discusses how private equity has made massive inroads into the life insurance sector and in the process he believes has increased the risk that the life insurance sector takes with its investments. He also discusses how these same life insurance companies increase their leverage by moving insurance liabilities overseas via sophisticated reinsurance deals. This is an incredibly important story and it has complexities that I hope we explain well. Hope you tune in. Be sure to check out our website realismanplaybook.com. There you can easily access all our episodes as well as the financial literacy master classes. If you're enjoying these weekly raps and our podcast, we kindly ask that you support the channel by subscribing. Subscribing is the best way to help us expand this community to more like-minded individuals such as yourself, and we greatly appreciate your support. And that's the wrap. See you real soon.
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 are their own and not recommendations. Please do your own due diligence and consult a licensed financial adviser before making any investment decisions.
