Just from a pure flow of funds issue. And this is scary whether you're a bull on AI, I think, or negative on AI. I don't think the market has ever been so concentrated since the great financial crisis. Incentives trump ethics every time. Like in the great financial crisis, they can get carried away and they can't stop themselves because it's like a competitive race to the end. Anthropic has made over 800 billion in commitments. I think that's getting carried away. You know, you're not even close to getting to the revenue to support that. You're betting the ranch.
Steve Eisman, great to have you on Commodity Culture. I want to kick things off by discussing the broad market here because you've described it as effectively a single trade at this point in time, which of course is AI. And while many agree that AI could be a transformative technology over the course of time, there's no denying these massively overstretched valuations on many of these stocks that are holding up the big indices. In your view, how dangerous is this overconcentration? And why don't most investors out there seem to understand the risk?
You know, there's a great movie, Finding Forrester, with Sean Connery where he's teaching a young man how to write and they're in his apartment eating soup. And the kid asks a very complicated question to which Sean Connery responds that it's not exactly a soup question. So what you just asked is not exactly a soup question.
You know, as you know, I'm a full-time podcaster. My podcast is called The Real Eisman Playbook and this is front and center of everything. I'm going to be interviewing some analysts later this week who cover tech and I had interviewed them six months ago. And at the end of the interview, I said jokingly, you know, we'll have you back in six months because between now and then probably the world will have turned over 15 times. I think that was an understatement.
So, let me sort of lay it out in terms of, you know, there's so many different levels here and please interrupt at any time with questions or if I'm going too long. From a purely technical investment perspective, let's leave aside, you know, is AI good? Is AI bad? Is AI going to conquer the world? We'll get to that. Just from a pure flow of funds issue, and this is scary whether you're a bull on AI, I think, or negative on AI, and that is, infoch, there are 11 sectors of the S&P. Infoch is the largest sector, it's 40%. There has never been in the history of the S&P a sector that large ever, nothing even close.
But it's actually bigger than that because if you then add, years ago, about 10 years ago, S&P started a process of rejiggering the S&P. And so certain stocks that were in infoch like Google are no longer in infoch. They're in communication services or some of them were in consumer discretionary. They sprinkled it all around. But if you took all those companies and added them to infoch, you get to 50%.
Now add the entire utility sector because that's obviously supplying the power to AI, that's 3%, that's 53. Then add all the investment banks and alternative asset managers that are providing the financing. And then add all the industrial companies that are providing the construction of AI data centers, providing the power for AI data centers like a Quanta as an example or a GE Vernova, and you're at 65% of the S&P.
So what I like to say is yes, you know, you could own the S&P and think you're diversified but you're not diversified because it's really just one trade right now. Then, you know, a lot of people, you know, when they go to a wealth manager are given advice to put 60% in stocks and 40% in bonds, but the 40% in bonds aren't nearly as diversified as they used to be either. 15% of all corporate bonds today are AI related and in 2026, 50% of all issuance is AI related.
So, it's all one trade for better or worse, but I don't think the market has ever been so concentrated in terms of it's all one trade since the great financial crisis.
On the other side of this, what sort of a correction do you see potentially coming? Because I've had so many guests on this show alluding to the fact that the market's going to roll over at some point in the near future. People have been saying that for around three or four years, as long as I've been doing this show, and yet valuations keep on creeping higher. So, I wonder what your thoughts are here on when that moment could come. Would you ever consider shorting the broad market here? And if so, what are the signs you'd look for that would make you confident enough to take that type of position?
Well, let me just first say I don't get hung up on valuation because not that valuation isn't important, it's just that what I've learned over the years is that narrative is more important than valuation. So you could have a group like tech that is expensive but it has a very, very powerful narrative and as long as that narrative is intact it doesn't matter whether the multiple is 25 times or 35 times or 45 times. What breaks the stock or group is not the valuation, it's that the narrative comes under attack, which is what we've seen recently in terms of the AI correction. It wasn't the valuation. It was that the narrative changed and that people started to get worried about the narrative.
I mean, look, I worry about it a lot. I am not prepared to make a call that it's the end of the world. I made that call once in my life. I am in absolutely no rush whatsoever to go through that painful process again. We're closer, but I don't think we're quite there yet.
The next question I have comes from a member of the Commodity Academy. This is an online classroom I run on investing in the commodity space. Guys, you can sign up in the link below to get your chance to ask guests on the show questions. This is from James. He asked, "What is the biggest lesson from the GFC that you think is most applicable to the current AI and private credit situation?"
I mean, if you go back, one of the lessons of the great financial crisis, and I'm very, very proud to say that I created this sentence, is that incentives trump ethics every time. You know, the loans that were made, the subprime mortgage loans, they were terrible loans. I mean, they were awful loans for consumers, but people were incentivized to make those loans because they were paid on volume and they basically kept doing them until planet Earth burned.
I don't think, I mean on the other hand, what's happening with AI is not unethical. I don't think that at all. But what I do think is that people can, like in the great financial crisis, they can get carried away and they can't stop themselves because it's like a competitive race to the end. So, you know, if you go into, just as an example, the Anthropic S-1 which came out last week, Anthropic has made over 800 billion in commitments for leases, loans, etc., etc., etc. I think that's getting carried away. You know, you're not even close to the revenue to support that. You're betting the ranch. There are a lot of other examples like that out there. You know, Meta, which recently, starting last week, began a process of raising $90 billion in equity, also has 800 billion in commitments. So that's the similarity.
How much of the US government and how much they seem to be staking on AI data center buildouts, the AI arms race against China. And of course the emphasis they're also putting on the stock market being a barometer of economic prosperity. Do you think we could see them, you know, take stakes in more of these big AI names and how could that impact the overall market?
Do I think it's possible? Sure, it's possible. I don't think it's going to happen. I don't think this administration has interest in investing in these companies. That's just my view.
Even though they've already taken a stake in Intel.
Yeah, I understand. I just don't think it's going to happen.
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Okay, interesting. I want to get your take on the current debt and deficit situation in the US with $40 trillion now being surpassed on the national debt, Treasury yields ticking up. Now, we're seeing all sorts of takes on this, some believing we're on the precipice of a major crisis in sovereign debt. I wonder how you see this situation playing out and how serious you think it is.
I'm playing a violin. I'll answer your question, but before I answer your question, the argument that the deficit is a disaster, you know, the dollar is going to lose its reserve status, nobody's going to own treasuries, volcanoes will erupt, cats and dogs will lie down together, and it'll be the end of the world. That argument has been around for 40 years.
I mean, it's not like somebody, you know, no one's been talking about this and then all of a sudden everybody woke up and said, "Wow, look at that. This is a disaster." Pete Peterson was making this very same argument in the '90s. So before we get to the substance of it, I think, you know, when you make an argument for 40, in my business, if you're too early, you're wrong.
There have been times I've been wrong because I've been too early. I was a year too early. I was two years too early. But I've never been 40 years too early. When you're 40 years too early, I think you should take a step back and ask yourself, why have I been wrong for 40 years? That's actually a more interesting question than analyzing the deficit. And I think the answer to that question is it's not just that the dollar is the reserve currency of the world. It's that treasuries are the lifeblood of the financial system of planet earth.
So just as an example, the bank repo market, which is where banks lend to one another overnight, it's like a $4 trillion market. That entire market only uses T-bills. When major institutions like the sovereign wealth fund of Norway need to park money for five years, they buy US treasuries because that's the most liquid, safest market in the world. If there was an alternative to treasuries, I would take the deficit arguments much more seriously.
Now in support of the deficit arguments, you know, 10, 15 years ago, the percentage of buyers of treasuries who were what you would call central banks, entities that were price insensitive, was 70% of the treasury market. Today it's down to 40, but it's still 40. You know, this is the difference between us and France. You know, we have a $40 trillion market. France has a $4 trillion sovereign debt market. And nobody on planet Earth needs to own French sovereign bonds. That's the French problem. People do need to own US treasuries. So do I worry about it? Yeah, I worry about it. Do I lose sleep over it? Not even one evening.
Do you not see gold as that potential alternative? You know, we saw the ECB report earlier this year that gold had officially surpassed US treasuries as the largest reserve asset on central banks' balance sheets. Obviously, we've seen quite an accelerated purchasing of gold by central banks over the past several years. Some point to the fact that the US froze Russia's FX reserves as kind of the catalyst for this. I'm wondering what your thoughts are on gold as a potential alternative and where you see the gold market headed.
I'm not a gold bug. I've never been an investor in gold. I don't believe in it. I mean, respect to people who have and have made a lot of money over the last several years. It's just not my thing. It doesn't pay you anything. It's not that liquid. I think for central banks it has limited use.
Okay. Interesting. Obviously, we have a lot of gold bugs on this show and...
I'm sure no offense to all of you. God bless. I'm sure you've made a lot of money over the last several years, but it's not my thing.
Well, switching to another commodity, and that is the energy markets. I'm wondering what your thoughts are there because now we're seeing WTI and Brent over $100. We're seeing continued supply chain constraints obviously due to continued conflict in the Middle East, the Russia-Ukraine situation, a lot of refineries and energy infrastructure getting hit. Do you think that there is an opportunity in energy markets right now or do you think caution is warranted there given how much geopolitical events seem to be driving prices?
You know, I have met over the years like every energy expert who tells you they can predict oil prices and not one of them I think is successful. I think it's impossible to predict oil prices. Completely impossible. And you know, tell me what happens in the war in Iran and I'll tell you what happens to oil prices, but you know, I'm not in the room. I have no idea what President Trump's going to do after the midterm election. Is he going to bomb Iran? Maybe. Is he going to instead negotiate? Maybe. I can't handicap it. I just can't handicap it at all.
So, when you're looking across the investment landscape, as we sit here today, are there any areas of the market that you're seeing opportunity in? Would you mostly be defensive here sitting in cash, short-term treasury bills? How are you viewing things when it comes to investing in today's environment?
