This is the pythonic way to do it:
output = "".join(item[0].upper() for item in input.split())
# SCUBA
There you go. Short and easy to understand.
LE:
If you have other delimiters than space, you can split by words, like this:
import re
input = "self-contained underwater breathing apparatus"
output = "".join(item[0].upper() for item in re.findall("w+", input))
# SCUBA
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