Steve Eisman’s Three Big Macro Themes

There are three great stories of our time right now. AI and everything having to do with it. Infrastructure. And Crypto. I believe in the first two and I don’t believe in the third.

Steve Eisman on the Three Big Macro Stories of Our Time | Odd Lots

Steve Eisman recently joined Bloomberg’s Odd Lots podcast to share the sub-themes and companies he is watching within Infrastructure and AI. Infrastructure improvements due to the demands of AI technology was a prevalent theme throughout the conversation.

Infrastructure

The United States has not had an industrial policy in anyone’s lifetime and it has one now. The combination of the IRA (Inflation Reduction Act) and the IIJA (Infrastructure Investment and Jobs Act) adds up to about $1.2 trillion over 10 years. That will turbocharge these four themes.

Sub-Theme 1: Onshoring

Companies are bringing parts of their supply chain back to the United States. That’s a 10 year story. We are in like year 2.

Sub-Theme 2: Data centers

Data centers are an AI offshoot that has industrial implications. The GPUs that Nvidia and AMD are selling utilize 3x more electricity than a CPU, and they also are incredibly hotter. So they require a whole lot more cooling systems into those data centers.

Sub-Theme 3: Electrical grid improvements

The grid needed improvements from before because of all the pressure we have been putting on it. But now that you add the GPUs on top of it, the pressure on the grid is even higher. All the industrial companies that deal with utilities that are spending a ton of money to improve their grids, that’s a long term theme in its early stage.

    Sub-Theme 4: Greenification

    Additional sub-themes

    • Cooling
    • Grid construction
    • Utilities on the green side

    Companies across all themes

    • Quanta Services Inc (PWR): infrastructure services for electric power, pipeline, industrial and communications industries
    • Eaton Corporation (ETN): multinational power management company
    • CRH (CRH): manufactures and supplies a wide range of products for the construction industry
    • Vertiv (VRT): provider of critical infrastructure and services for data centers, communication networks, and commercial and industrial environments
    • Equinix (EQIX): specializes in Internet connection and data centers.
    • Digital Realty Trust (DLR): real estate investment trust that owns, operates and invests in carrier-neutral data centers across the world. The company offers data center, colocation and interconnection services.

    Artificial Intelligence

    AI at this point is benefiting only a small number of companies, most of whom are very large. We have focused are attention on those. Everything else at this point seems to be hype or potential. We don’t own those companies. We own what’s obvious. After that we’ll see.

    Companies

    • Oracle (ORCL): Steve sees an opportunity given the vast amount of databases & data Oracle supports.
    • Apple (AAPL): Assuming that more and more AI apps will start to be used on the phone, Steve postulates that Apple could be a big beneficiary.
    • Microsoft (MSFT)