Steve Eisman, the investor made famous by Michael Lewis’s “The Big Short,” said this week he is trimming his portfolio because the rally is starting to feel bubbly.

Eisman flagged that Nvidia (NASDAQ:NVDA) is now larger than the entire S&P 500 healthcare sector, a sign of how concentrated the rally has become.

Defensive Sectors Are Vanishing

On his weekly podcast, Eisman said the S&P 500 has quietly shed its defensive ballast during the rally. The combined weight of healthcare, consumer staples, energy and utilities has fallen to 19% of the index, down from 31% at the end of 2022.

In their place, the chip complex has taken over, semiconductors have ballooned to over 18% of the index from 14% at the start of 2026, and Micron Technology (NASDAQ:MU) has cracked the top 10 alongside Nvidia.

That sector rotation has powered a sharp round-trip. The S&P was down 4% on the year at its March bottom and is now up 9%, with the Nasdaq up 15%.

“I am nervous about the sustainability of this meltup,” Eisman said, adding that he lightened up on his high-flyers this week.

Inflation And The 4.5% Rubicon

Eisman’s bigger worry sits in the plumbing. Wholesale inflation re-accelerated last month, with PPI jumping 1.4% versus the 0.5% consensus and pushing the annualized rate to 6%, the highest reading since December 2022.

That has dragged the 10-year yield back toward 4.5%, a level Eisman described as a structural “Rubicon” for equity markets.

He also questioned the market’s assumption that the U.S.-Iran war is over, noting Trump rejected Tehran’s latest peace proposal this week.

Retail Is All-In On The Mag 10

CBOE data cited by Eisman showed retail traders are buying calls on the MAG 10 basket, which includes Nvidia, Palantir (NASDAQ:PLTR), Advanced Micro Devices (NASDAQ:AMD) and Broadcom (NASDAQ:AVGO), at the heaviest 10-day clip since 2021. Of new positions opened, 52% were call buying.

Polymarket Traders Are Not Buying The Bear Case

Polymarket’s “AI bubble burst” contract gives the industry a 23% chance of a downturn by Dec. 31, 2026, with $2.8 million in volume. One of the resolution triggers requires Nvidia to fall 50% from its all-time high.

The “US recession by end of 2026” market is trading at 26% with $1.5 million in volume.

While Eisman is treating 4.5% yields and hotter PPI as a cue to trim, Polymarket traders are still pricing in a continued bull market.

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