Pod Insights The Prof G Pod with Scott Galloway Prof G Markets: NVIDIA’s $1 Trillion Valuation, Pairs Trading, and Understanding Analyst Estimates About this episode This week on Prof G Markets, Scott examines why NVIDIA has left other chip makers such as Intel in the dust. He also explains why he’s thinking of taking up a pairs trading strategy to hedge against today’s market dynamics. And finally Scott and Ed take a listener question about where analyst estimates come from.
Learn more about your ad choices. Visit podcastchoices.com/adchoices
Transcript Speaker names marked ? are inferred from speaking time and the show’s known hosts — they are not voice-verified.
0:01 Scott Galloway? Support for the show comes from Northwest Registered Agent. Your business identity is everything that makes your business legitimate and professional. With Northwest Registered Agent, you don't just form a business, you start a complete foundation built for privacy, credibility, and growth. That includes registered agent service, a business address, operating agreement, domain, website, professional email, phone number, and built-in privacy. In other words, your home address, personal email, and phone number stay private. Don't pay hundreds or thousands of dollars for what you can get from Northwest for free. Visit northwestregisteredagent.com/profgfree and start using free resources to build something amazing. Get more with Northwest Registered Agent at northwestregisteredagent.com/profgfree.
0:48 Speaker 01 Your heart can tell you a lot about your health. Apple Watch Series 12 measures your heart rate every five seconds with the most accurate heart rate sensing in wearable. So your vitals app, now with heart rate variability, can tell you when something is off. And your readiness score can let you know when to rest and when to push. Hear the story in every heartbeat with Apple Watch Series 12. The features described are for wellness purposes only and not for medical use. iPhone 11 or later required. Based on Apple conducted study of heart rate accuracy, August 2026. Visit apple.com/aplewatchseries12.
1:18 Scott Galloway? This week's number, 5,475 miles. That's the distance between London and Costa Rica, where my team was bonding on the beach. True story, when Ed got back, he went to the doctor complaining of stickers on his butthole. And the doctor said, "Those are stickers from a banana."
1:38 Scott Galloway? Ed, how are you? How are you feeling?
1:41 Scott Galloway? Too much? No, I think that's just right. That's just right. I'm getting so many emails about my profanity. I'm just going to lean into it. I'll show them.
2:01 Scott Galloway? Welcome to Prof G Markets. Today, we're discussing Nvidia's trillion-dollar valuation, Paris trading, and earnings estimates. Here with the news is Prof G Media Analyst Eduardo Elson, direct from Rica de Costa.
2:15 Ed Elson? So, we got here last night at around 6:00 and we doing some work and then we sat down for dinner at 8:00. And immediately as we sit down for dinner, giant thundering rainstorm just starts descending down on us. So, I think it's a sign from the gods that they want us to keep working.
2:33 Scott Galloway? But that happens a lot down there, right? It's very jungly, right? First off, where are you staying? I don't even know where you guys are. I just know you have my credit card. Where are you staying?
2:39 Ed Elson? We're in a place called Tamarindo.
2:41 Scott Galloway? Yeah, I've been there.
2:42 Ed Elson? At Cala Luna.
2:43 Scott Galloway? Wow. And what's the hotel like?
2:45 Ed Elson? It's awesome. We have four suites and one room. So, guess who got the room that I'm currently in? In Claire's suite right now.
2:56 Scott Galloway? Well, if you stopped having sex with bananas, they might trust you to share a room. Anyways, and what are the activities planned for the team in Costa Rica?
3:05 Ed Elson? So, we're going surfing tomorrow, I think. Maybe on Saturday, we're going snorkeling. They have ATV rides, which I'm pretty excited for. And then we're going to be partying at night. It's going to be good.
3:19 Scott Galloway? So, you can go ATV riding, the rest of the team cannot because it's very dangerous.
3:25 Ed Elson? Is that right?
3:26 Scott Galloway? So, true story, I started a brand strategy firm in my second year of business school. And I pitched Yamaha Motors, came to the School of Business and said, "We want to do a student project. We want someone to help us understand the youth market for motorcycles for Yamaha." And so I said to my soon to be business partner, like this is our opportunity. Let's write them a proposal and try and launch our business. And you know, I'm first semester, second year at the hot school of business. And so I wrote a proposal saying, look, you need to be serious about this. I'm going to go out and survey 2000 teens. I just took a market research course, which makes me an expert in market research. And we'll come back and after surveying youth, we'll come up with some insights and product recommendations.
4:10 Scott Galloway? I pitched them and I didn't know what to charge. So I called a friend of mine who had been recruited by and hired by McKinsey. And I said, what would McKinsey charge for this? And he said, we charge a half a million bucks. So I put $250,000. And my partner was like, what the fuck are you thinking? We're second year MBAs and you're trying to charge it for a quarter of a million dollars? We're not, you have no background in consulting. I have no background in any of this. And then I remember I had an apartment in Rock Ridge, Oakland, and I was paying $280 a month. And went to the mailbox. This is back when I actually looked at mail, opened it and there was a check from Yamaha Motors for $100,000. And a voicemail from Matt Takazawa saying, sorry, we've been really busy. We didn't get back to you. We're really excited about this project.
4:55 Scott Galloway? You should have already received the first payment. And I remember when I saw the check and I looked at it and realized what had happened. I got physically scared that I had just done something illegal. And that was, that was the beginning. That was the launch of Profit Brands Strategy, which then became Profit, which I then sold to Densu. And is now a, I think a five or 600 person firm.
5:19 Ed Elson? Yeah.
5:19 Scott Galloway? And there's a lesson in all of this is that the key to starting a business is starting.
5:23 Ed Elson? Yeah.
5:24 Scott Galloway? And just committing to doing good work. And they were very happy with us. They used us several times, but our first engagement was with Yamaha Motors. Anyways, ATVs are really dangerous. They don't look dangerous. They're very dangerous. So you and no one else can go ATVing in Costa Rica. Anyways, talk to us about the markets, Ed.
5:44 Ed Elson? Let's start with our review of market vitals.
5:54 Ed Elson? The S and P 500 finished May down a fraction of a percent while the tech-heavy Nasdaq was up nearly 6%. Bitcoin was down 3% on the month and the yield on 10-year Treasuries closed out the month marginally up. Shifting to the headlines, Elon Musk has officially reclaimed the title as world's richest person from LVMH CEO Bernard Arnault. That's thanks to an increase in Tesla's stock and a decline in LVMH. The Wall Street Journal reported that executives and early investors in SPACs made $22 billion by selling shares before they plummeted. SPACs, also known as blank check companies, they are shell firms that are created to take another company public, have lost more than $100 billion in value
6:37 Ed Elson? so far and at least 12 have gone bankrupt. Job openings in April surged above 10 million, that's the highest in three months, and the unemployment rate rose to 3.7% in May. That's up from 3.4% the month before, but it's still near historic lows. And finally, Washington passed the debt ceiling bill, which will suspend the borrowing limit and rein in government spending until 2025. Notably, the deal slashes the IRS's budget by around $21 billion. Scott, what are your thoughts?
7:10 Scott Galloway? So the SPAC thing is super interesting and not surprising. It's shocking but not surprising. You can't punish people for having the wisdom to sell when a stock is high and investors at the end of the day are investors because they want to invest and then ultimately they want to sell. The question is at some point, is it more than just reputational risks they're taking? Are they taking risks with other people's capital, retail investors' capital? And when they're on, wherever they are, you know, whether it's Richard Branson saying... This will inspire new generations. I mean, essentially, Virgin Galactic was a vessel to transfer wealth from retail investors that were excited about the prospects of
7:50 Scott Galloway? the commercialization of space to his failing cruise and airlines. And basically, give me money, I'm going to sell stock as fast as I can, and then I'm going to prop up my old earthbound companies. And there's nothing illegal about that. The question is, at some point, if you own over a certain amount, and you go online and start promoting a stock, should there be some sort of regulation that creates, basically makes you an insider?
8:18 Ed Elson? I wonder if SPACs should even be allowed to exist. It just seems pretty insane to me, the idea that we have a vehicle where you can raise public funds for ideas and companies that don't exist.
8:30 Scott Galloway? Yeah, well, I mean, there's two ways to look at this. Retail investors want access. They don't want to feel as if they're being held out and only the quote-unquote, those rich white people get to play in tech and get to invest early. So, to a certain extent, there's a fulcrum between, or a tension between infantilizing investors and protecting them. And so, that's where you find, you know, what is, how do you thread that needle? Because as my colleague at NYU says, I swat the motor, and the best, the best regulation is life lessons. And SPACs were essentially a form of investment banking. They've been around a long time, but it was essentially a group of people who said, I'll be an investment
9:12 Scott Galloway? banker and take companies public that the investment banks don't want to take public. And here's the issue, for two to three million dollars, you get, I think, 20% of the company. So, say it's a company that goes out at a valuation of 500 million, and you own 5% of it, why wouldn't you just go on CNBC and use your Twitter following to try and get people excited about it, get it to a billion, and then hit the sell button, and in exchange for a million bucks, you've just made 50 million? In terms of job openings, it's good news, bad news. It's great that the job market is strong. We're at a historically low Unemployment, it's bad news for inflation. And there's a bunch of things at work here.
9:54 Scott Galloway? And that is because of anti-immigration laws, we've lost about 2 million immigrant workers. So there's just fewer people to staff a lot of positions. We've also had 2 million, I think it's 2 to 3 million people retire early. And that is post-COVID. They think, you know what, I've had it. They saw their stocks go up. They have some money, some retirement money, and they're like, I'm just not going back to work. And we also lost a million Americans. So the labor force has shrunk. A lot of women were taken out of the workforce because they shoulder most of the burden at home. And those burdens were dramatically increased, mostly because of remote schooling. What's interesting around that, this is a side note, is that female participation in the workforce has not only returned to where it was, it's now at an all-time high.
10:39 Scott Galloway? But we have an absolute shortage of workers. I think there's 1.8 open jobs for every person looking for a job. Let's talk about the debt ceiling bill, too. What are your initial reactions to that? We predicted that the deal was already done. And that strategically Biden, who is a pragmatist, and Speaker McCarthy, who cannot afford to have this go sideways. If it goes sideways, he's out. He'll be one of the shortest-serving speakers in history, if not the shortest-serving speaker. So I believe they got together a few weeks ago and said, all right, how do we get this done? And Biden said, I'm not going to negotiate with terrorists. And McCarthy said, look, I've got to throw my weirdo some red meat. Give me something symbolic that I can claim as a victory that is meaningless.
11:23 Scott Galloway? And we'll take this right up to the 11th hour and then we'll get it done such that I can claim victory. You don't really have to give up much. And we can get back to the, you know, we can act, at least pretend to be responsible fiduciaries for the American public. And it looks like that is exactly playing out. They've took it to the 11th hour. And President Biden has given some... Gives that are mostly symbolic, that are almost meaningless, taking IRS budget down from 80 billion to 60 billion, which is, okay, meaningful at the IRS, but
11:53 Ed Elson? Just to just to clarify on the IRS, it's it's it's not going down to 60 billion this year. It'll only go down one and a half billion this year. And then 20 billion will be over the next two years allocated away from the IRS to other government programs. So all in all, you're taking out 20 billion over three years. They're kind of reducing it by around nine percent each year. The meaningful budget cuts are in the IRS. And the thing that I think is that I find ridiculous is that the IRS is the one agency responsible for generating more government revenue. And that's the whole problem that we're trying to solve here. We're trying to reduce spending. We're trying to fix the deficit. But part of doing that also
12:34 Ed Elson? means increasing government revenue, which the IRS is responsible for. And we've talked about this before. I mean, a couple of years ago, we were celebrating that Biden was going to invest 80 billion dollars into building up the IRS into increasing audit rates, which have fallen 93% over the past 60 years, so that wealthy people and corporations start actually paying their fair share. Instead, the the Republicans and Democrats have agreed upon, actually, we'll just cut back the one thing that's going to make us money in the long term. Am I alone in feeling like this is doesn't make any sense?
13:10 Scott Galloway? It's insane. I mean, first off, you got to give it to the Republicans. They managed to get 47 or 48% of the popular vote by representing the top 1%. And the wealthy have weaponized and corporations have absolutely weaponized the tax code in government. They make the tax code exceptionally complex. They go from 400 pages to 4,000, all sorts of loopholes, all sorts of tax credits, which means the following. If you're the IRS, it costs X to audit a middle income, a middle class household. I mean, your taxes are pretty simple. You'll you'll put down what you make, won't even automate, or you do standard deduction, boom. If you start writing off half your rent, or try to, a red flag will go up. It'll take
13:52 Scott Galloway? a case officer an hour, two hours, boom, you'll have to pay penalties, super easy to audit you. If somebody wants to audit FedEx, or if somebody wants to audit, you know, George Soros? You need a team of a dozen people for six months. And so every dollar you cut in funding to the IRS, the government needs 23% of GDP to operate. They have to get it from somewhere. So if they're not going to get it from wealthy people because they're too expensive to audit and they just don't have the resources, they've got to raise taxes on everybody else. So any cut in budget at this point of the IRS is nothing but a transfer of wealth from lower and middle and upper middle-class income households to the rich and to corporations
14:38 Scott Galloway? who the IRS can no longer afford to audit because of the complexity of their taxes at the hands of a tax code that is purposely complex, such that I can weave in Bob, when you know how to navigate by starlight, you want to run your boat races at night. And that's what the wealthy and corporations and Republicans have figured out a way to do. This is nothing but a transfer, again, of wealth from the poor to the wealthy and corporations.
15:07 Ed Elson? We'll be right back after the break with a look at Nvidia's rise to the trillion-dollar market cap club.
15:22 Scott Galloway? Support for the show comes from Bilt. Most of us work hard to earn our keep, but usually there's no one around to hand you a cookie when you successfully pay your monthly housing bill. No one except Bilt, that is. Bilt has expanded from their original renter rewards program, and they have a lot more going on for members now. For example, members can earn points on mortgage payments, too. Every housing payment gets you points that get you a lot more than baked goods, such as flights with top travel partners, including United and Hyatt, Lyft rides, Amazon.com purchases, and much, much more. Here's another benefit of Bilt membership. You also get access to what they call a neighborhood concierge. It can make restaurant reservations, book fitness classes, and find new local spots, all while rewarding you at more than 45,000 merchant partners. It's simple. Being a renter and now owning a home feels a lot better with Bilt.
16:07 Scott Galloway? You can download the Bilt app and join the membership for where you live at joinbilt.com/provg. That's J-O-I-N-B-I-L-T.com/provg. Use our link so they know we sent you.
16:22 Scott Galloway? Support for the show comes from Vanta. As AI adoption grows, so does your company's security risks and requirements. New frameworks, audits, and vendors keep piling on, but your team isn't getting any bigger. Most compliance tools promise automation, but you're really stuck doing all the work by hand, chasing screenshots, validating controls, and playing catch-up when audit season comes around again. Vanta works differently. The regentech trust platform is built to scale with you, not slow you down. With over 1,400 automated tests across 400-plus integrations, Vanta collects evidence and monitors your controls year-round, cutting your audit prep by 82%. Plus, you can access the Vanta agent everywhere you work, whether your team is in Vanta every day or living in tools including Claude or Cursor. Want proof?
17:07 Scott Galloway? Over 16,000 fast-growing companies like Ramp, Ryder, and Harvey save time and resources while scaling fast with Vanta. Learn more at vanta.com/profg and get $1,000 off. That's spelled V-A-N-T-A dot com slash profg for $1,000 off.
17:33 Ed Elson? We're back with Prof G Markets. Chipmaker Nvidia hit a market cap of $1 trillion. Nvidia is the ninth company in history to reach that milestone, and there are only five other companies worldwide worth more than a trillion. Those are Apple, Microsoft, Google, Amazon, and Saudi Aramco. Nvidia's stock explosion is a result of the AI boom. Nvidia is the premier designer of graphics processing units, or GPUs, which are essential for building and training AI models. Sales rose 19% last quarter, and the company's revenue forecast for the current quarter was roughly 50% higher than analyst estimates. So Scott, clearly Nvidia is riding the AI wave, but there are a lot of other companies that should probably be riding it too.
18:18 Ed Elson? AMD makes chips, so does Intel, so does Qualcomm, which have historically been Nvidia's biggest competitors. But as it stands, Nvidia's market cap is roughly six to seven times larger than theirs. What about Nvidia is making it such a winner?
18:34 Scott Galloway? If you think about market valuation, it's really two things. It's performance and promise, and probably not in that order. It's probably more important to have promise and performance. We got to give it to them. In terms of performance, they have Essentially never miss their earnings. They've only missed their revenue projection seven times out of the last 75 quarters. They either meet or beat all of their expectations. So the street and analysts just say this company just continues to deliver. It's also better to be lucky than good. They make graphic processing units. And it turned out that the exact type of processor to do this, or the type of chip foots really well to the needs for generative AI. And now Intel is playing catch up.
19:16 Scott Galloway? And essentially AMD, Nvidia and Qualcomm focus on chip design. And TSMC focuses on manufacturing. Intel tried to do both. They were vertical. And what's interesting, and I've said this a lot, is that most companies beyond a trillion are vertically integrated, but Nvidia is a designer, not a manufacturer. In some Nvidia was just able to see around the corner better than the other folks. I mean, it's just incredible. It's up 163% year to date. I think it's responsible for something like 10 or 15% of the S and P's gain. The question is, what does this mean in terms of valuation? There's just no doubt this company is incredibly well positioned with a market cap of 952 billion. It's worth as much as, get this, Intel, AMD, Qualcomm and TSMC combined.
20:00 Scott Galloway? And it's trading at an enterprise value to EBITDA of 145 versus 18 at Meta or 22 at Apple or 17 at Google. The question is, is this company overvalued? Or is it an amazing company, really well positioned? And I think the answer is yes. I think relative to valuation, I wouldn't get near this thing.
20:22 Ed Elson? So something you mentioned, Intel's strategy, which used to be a juggernaut, it's down 45% in the past five years. Their strategy was, okay, we're going to design and we're going to manufacture their chips. That's very different to Nvidia, which outsourced manufacturing to TSMC and Samsung. And now here we are and their GPU is 39 times faster than their previous one. It's the premier GPU in all of AI training. Nvidia is clearly making the case that businesses should strive to be specialists versus generalists. Do you think that that applies to all business and where does it not?
20:55 Scott Galloway? This is a tough one because I've been preaching for a long time that you can't get above a trillion dollars without vertical integration. Because in order to get above a trillion dollars, you have to have such an incredibly strong culture and brand, you need to control the entire consumer experience. You know, verticalization is kind of the trend over the last thirty or forty years. These guys have bucked the trend and they've been focused more on design. Now, what they have done is they've sort of taken the Uber and Airbnb model and said, we're going to leverage other people's massive, multi-billion dollar investment in chip-making plants. I mean, chip plants cost billions. And I think what they may have correctly assessed was that there's a lot of manufacturing capacity.
21:38 Scott Galloway? What's lacking is truly differentiated chip design around a very specialized IP as it relates to graphics that ends up being really relevant to generative AI. And they just hit the bullseye here, and they probably have better margins because they don't have this five or seven-year lag or wait time trying to build a multi-billion-dollar chip plant. Now, the question is, does that make them vulnerable? At some point, when they don't control the manufacturing, and if manufacturing capacity slows, are they stuck out in the cold? I think that's the question around whether this company can get much further beyond a trillion dollars without controlling its manufacturing.
22:19 Ed Elson? We should talk about the CEO as well, this guy Jensen Huang, who I had never heard of until a couple of weeks ago. Just some interesting character traits. He always wears a leather jacket in every public appearance. Mia found this stat, which is that there are only two photos on the Reuters photo database that show him not wearing the leather jacket. He has an Nvidia tattoo on his arm. He's got this massive Reddit following. The Nvidia subreddit page has over one million members. Are we kind of witnessing the birth of the next storyteller CEO, sort of the next Elon Musk?
22:59 Scott Galloway? Well, again, this goes back to instinct. And our instinct is that we need a super being. Our brain is big enough to ask very complicated questions, but not big enough to answer them. So into that void slips a super being. When societies become more educated, their reliance on a super being and church attendance goes down, but we still need those super beings. So the Jesus Christ of an information age is no. Doubt Steve Jobs. Technology is the closest thing we have to spirituality and mysticism. No one has any fucking idea how their iPhone works, so it feels magical and godlike. And these individuals are also billionaires, which means that we really, it's like sex appeal on top of godliness. And that's the reason why Elon Musk can say these terrible things
23:39 Scott Galloway? and act so recklessly and everybody decides that it's genius, not just a mendacious behavior. So you have kind of Steve Jobs and maybe Elon Musk is competing for the kind of the Jesus Christ of our information age economy. And then you have sort of the 12 apostles, and they all sort of maintain certain traits. One, they leverage a new medium. If you want to outperform your competition, whether you're a CEO or a company, you need to leverage a new medium. Burberry was great at Instagram. Kennedy was great at television. And Mr. Huang has clearly picked Reddit. In addition, in addition, visual metaphors are really impactful. Steve Jobs had a unique look. And whether it's a black turtleneck or a leather jacket,
24:24 Scott Galloway? the personification of a company, trying to personify it such that you like it, such that you will take the multiple on EBITDA up, such that you can raise capital more cheaply, such that you can then invest more in IP and chip design than your competitors, which creates an upward spiral. Think of all of the CEOs of these companies. They're iconic. They have very strong personalities. They have very strong public images. They're manicured by hundreds and hundreds of people. They manage their brands very tightly. And this individual is doing exactly that and is paying off.
25:04 Ed Elson? Nvidia's meteoric rise is indicative of another structural trend. Investors are betting that the biggest companies will get even bigger. So far this year, the 10 largest market cap companies in the S and P 500 have gained roughly 45%. Without them, the entire S and P 500 index would be in the red. Instead, it's up 10%. Now, this applies not just to tech, but to banking, healthcare, energy, and a whole host of others. In fact, in every US industry, except for telecommunications, the top 10 stocks have outpaced the rest. Now, the thesis that many believe is that this is a flight to safety. Investors are scrambling to buy shares in companies that can withstand economic volatility and technological change. In other words, they're de-risking.
25:49 Ed Elson? Now, Scott, when we discuss this, particularly in relation to Nvidia, you mentioned that you're taking up a new strategy called pairs trading. Could you explain to us what that means and what your thesis actually is?
26:01 Scott Galloway? Well, so first off, I just want to say, I want to lay down the context that unless you have the capital to wildly diversify and you sort of do this for a living, and I would argue I sort of do this for a living, the best investment strategy is low-cost ETFs diversified, invest regularly, force yourself, any sort of tax advantaged, you know, IRA, Roth, any sort of employee match, max all of that out, put it in low-cost funds, diversified funds, and then just ignore it. And when you're 65, you'll be able to retire. I can't help it. I invest in stocks. I do invest a lot in funds. I'm hugely diversified. But an interesting strategy, if you want to take a market risk, is pairs trading. And what that is, is the following. I can't get a grip on this market.
26:46 Scott Galloway? It feels, on the one hand, it just feels historically expensive to me in terms of a price earnings multiple. Given some of the clouds on the horizon and the insecurity in the world. At the same time, I can see something like generative AI unleashing this incredible tech age with all sorts of productivity and I could see the market just catching fire. You could tell me the market was up 20% in the next year or up 20% and I would say, well, of course it isn't. Give you reasons why for each. So a market neutral strategy is to pick two or three stocks to go long on and then pick two or three to go short on. Just looking at Nvidia, it looks very expensive. So you might say, all right. I think that's in trouble. Apple's had an incredible run up. It's trading at 23 times
27:29 Scott Galloway? E V to EBITDA. It's at $3 trillion. So maybe we think those are overvalued. Great companies but overvalued. I look at a company like Netflix. I think Netflix is gonna come out a winner from the writer's strike. I think that most likely other unions will join the writers. There'll be a pause in spending. The kind of second tier players in streaming, which is basically everyone but Netflix, will recalibrate and bring down their spending. And I think Netflix will see the opportunity and pursue their continued Amazon strategy of just drowning everyone in capital. And I think they're gonna reignite growth again. So I can see, I like Netflix's along. I like Google's along because it's been punished. It's trading at E V to EBITDA of 17, which by the way, is not much higher than Intel
28:13 Scott Galloway? and lower than Apple or Meta now, which has run up a lot. I believe that the amount of intellectual capital they have around generative AI is huge and that they're gonna be able to catch up fairly quickly. So you would go short Nvidia and say Apple and you'd go long Netflix and Google. And the reason why you do that is like, I don't want to take a market bet. I want to bet on companies. Technically, this is what hedge funds are supposed to do. The typical hedge fund is 60% long, 40% short, and then they ramp it up with leverage. But we won't talk about that here because they have a bias towards the long position because the natural trajectory of the markets over time is up. The markets
28:55 Scott Galloway? do go up over the medium and long term, but they take out a lot of market risk. That way, if the market gets absolutely hammered, they're still okay because they're short on 40% of their stocks. And keep in mind, market dynamics will always trump individual performance. So you can be amazing, but if we go into a depression, you're getting laid off. You can pick a great company that performs, but if the market gets cut by thirty percent, you're going to wake up and find that that amazing company's stock is down. So this is a means of taking out some of that risk if you're confident that you have some insight into which companies you think are undervalued or overvalued. And I'm thinking about doing it because I want some exposure to the equity markets.
29:37 Scott Galloway? I do think there are some companies that have gotten carried away in the hype cycle of AI. I do think there are some other companies that have been caught on the wrong side of the AI hype cycle, see above Google, and this is a means of exiting from market risk, but still being exposed to some trends and some dynamics in the equity markets.
29:56 Ed Elson? And then finally, just returning to the original stats we were talking about, you know, the S and P would be down if it weren't for the top ten biggest companies. I think last year we had this feeling that big tech was kind of fading out. I think you use the term, or someone used the term biggest tech, referring only to Apple because Apple felt like the big winner. But now you look at the performance of all of these other tech companies. And year to date, Microsoft's up thirty seven percent, Google's up thirty nine percent, Amazon forty two percent, Meta a hundred and eighteen percent. And then obviously Nvidia is up more than a hundred and seventy percent. So I guess the question is, have we officially returned to the big tech era? And if we have, how should investors be responding to that?
30:40 Scott Galloway? Well, I think what's happened is every time there's a massive innovation or kind of the next thing, the next, you know, the next big, big thing, if you will, that usually the value creation accretes to traditional players or to new players. So e-commerce benefited the new guy, Amazon. The phone went to existing players. I think you'd argue that Metaverse didn't really go to anyone. Crypto, the crypto surge went to new players. It looks as if generative AI, if you think it's the next big thing, and it looks as if it is, is going to go to existing players. I mean, OpenAI has a thirty billion dollar market cap or valuation, I should say, in the private markets, but I would imagine that.
31:22 Scott Galloway? Microsoft has increased probably a couple hundred billion dollars since they made that initial investment. So we have kind of the existing players swelling in value and now I think 25% of the S and P is just four or five companies. And the thing about a pair trade, just going back to that, it plays on a couple of other things. One, the reversion to the mean. Everyone says a compound interest is one of the most powerful forces in the universe. I've always thought reversion of the mean is really powerful and that is when a stock becomes just crazily overvalued in terms of PE, eventually it kind of finds its footing again. And the same when it's too low. I mean, just sitting here eight months ago, not even eight months ago, seven months ago,
32:04 Scott Galloway? Ed, Meta was trading at a PE of like nine. I mean, it was trading as if it was Ford Motor and had no growth prospects and it was sitting on top of a massive cash volcano. And what do you know, it's back to where most big tech plays. So reversion to the mean and collapsing that with a market neutral strategy, again, are sort of the attraction here. But we're seeing a crowding again to the big guys and Tim Wu, professor at the Law School of Columbia, says that the biggest threat from AI is that we're again concentrating more power in the hands of fewer and fewer people.
32:43 Ed Elson? We'll be right back after the break to take a listener question on analyst estimates.
32:58 Scott Galloway? Support for the show comes from Vanta. As AI adoption grows, so does your company's security risks and requirements. New frameworks, audits and vendors keep piling on, but your team isn't getting any bigger. Most compliance tools promise automation, but you're really stuck doing all the work by hand, chasing screenshots, validating controls and playing catch up.
33:17 Scott Galloway? When audit season comes around again. Vanta works differently. The regentic trust platform is built to scale with you, not slow you down. With over 1,400 automated tests across 400 plus integrations, Vanta collects evidence and monitors your controls year round, cutting your audit prep by 82%. Plus, you can access the Vanta agent everywhere you work, whether your team is in Vanta every day or living in tools, including Claude or Cursor. Want proof? Over 16,000 fast growing companies like Ramp, Rider and Harvey save time and resources while scaling fast with Vanta. Learn more at vanta.com/profg and get $1,000 off. That's spelled V A N T A dot com slash prof G for $1,000 off.
34:06 Speaker 03 This episode is brought to you by Michelob Ultra. Good times mean competitions between you and your friends, like seeing who can throw some pigskin the farthest or rush the field the fastest. Winner gets an ultra. Because it's not just a superior light beer, it's also giving fans superior access to their favorite sporting events. Superior is worth playing for. Visit michelobultra.com/superioraccess to enter. Enjoy responsibly. Copyright 2026 Anheuser Busch in Bev, Michelob Ultra Beer, St. Louis, Missouri.
34:40 Ed Elson? We're back with Prof G Markets. For our third segment, we're taking a listener question. This is from Muffin. That's not the real name. That's the username on YouTube. Muffin says, can you please do an in-depth explanation about Wall Street expected earnings? For example, are expected earnings made up from a collected average of different predictions? Or is it just one entity that formulates predictions?
35:04 Scott Galloway? In sum, an earnings estimate is a consensus around the earnings estimates of all the different analysts to cover it. And based on the size of the company and the profile, determines how many analysts there are and how reliable the confidence interval, you could say of that consensus estimate. There is a wisdom of crowds. Moderna probably has a couple dozen people following it or analysts. You know, a micro cap company might be likely to have one analyst. So they group all of them and they look for the mean or the average or the consensus estimate, if you will. The problem here is that, one, analysts are typically sycophants and stenographers. And that is they're paid by an investment bank.
35:45 Scott Galloway? That wants to play golf with the CEO of that company and get their wealth management and their follow-on equity raise business. That's not to say they're not good at what they do, but they have the wrong incentives. So ideally, what you want is a independent analyst. They get paid by investors just to give no mercy, no malice analysis. I think Sanford does the same thing. So there's been an emergence of independent equity. I think Lynn Alden is a fantastic analyst. And as far as I can tell, you know, she just calls balls and strikes based on what she thinks. So when you have an analyst from Goldman and Morgan Stanley and a company agrees to take them public, you can bet the analyst is going to come out with a bullish buy report.
36:29 Scott Galloway? And then they tend to be very rear view looking. And that is, once the company announces a better quarter, the analyst, what do you know, takes the price target way up and keeps taking it up until the company throws up on itself and then decides the target price for the stock should have been lower. What I find is really interesting is taking a basic finance course, basic balance sheet, finance valuation, you can take that on YouTube, you can take Demeterance course, who is literally the dean of valuation, and then reading through the earnings transcript on Seeking Alpha and trying to come up with your own valuation. It's just a really interesting exercise and it gives you insight into the markets.
37:07 Ed Elson? Going back to your point about accuracy, there's this one study that found that on a three-month time horizon, analyst earnings expectations are only roughly 18% accurate. Put another way, just very often wrong. To what extent do you pay attention to analyst estimates and expectations when you're analyzing a stock? Or do you just look at what the company says its forecasts are and also its historical performance?
37:35 Scott Galloway? I read analyst reports to understand the company and get a better feel for the company, but I ignore the price target. I think their earnings estimates are worth looking at. Generally, they do get ranked and evaluated based on their ability or their accuracy around earnings estimates, but I don't look at their price target. A lot of times have a lot of insight into the company and you should read both sides, you know, find independent analysts. I mean, some you just want to read everything you can about the company and try and get a real feel for it. I find that there's new sources of information that are really valuable, and that is just doing word clouds on the earnings call just to get a sense for their strategy. Doing an analysis of Google keyword searches.
38:16 Scott Galloway? And that is how many people are searching for Airbnb versus three months ago, which will give you a sense for bookings. How many job openings in AI does a company have will give you insight into its strategy? There's so many new sources of information. People say, well, information is new oil, not really. What's really expensive and valuable is refining capability, and that is intelligence that looks at all of this data and these new data sets and says, how does that all bubble up to a buy or a sell recommendation?
38:44 Ed Elson? Yep. And just a reminder to our listeners, we're reading your questions and comments on YouTube, on Twitter, in our inboxes, so keep them coming and we'll be happy to answer them.
38:57 Ed Elson? Okay, let's take a look at the week ahead. It's a very quiet week for earnings and economic data, but Apple is hosting its Worldwide Developers Conference today and is expected to release its Reality Pro headset. Scott, do you have any predictions?
39:12 Scott Galloway? I think that Apple's headset is going to be one of the biggest tech failures. I think it's going to rival the Oculus, and it will officially be the most elegant final nail in the coffin of this sort of headset-driven VR consensual hallucination.
39:30 Ed Elson? Yeah, I just want to add on to that prediction. I think it's also going to seriously harm Apple's brand from an investor relations perspective, because if you look at the history of Apple products, Apple has basically never launched a product that has failed. They've launched a couple slight failures in the eighties and the nineties.
39:50 Scott Galloway? Since you've been alive, bottom line. I mean, you don't remember the Lisa, the Newton, or the Cube?
39:55 Ed Elson? Yes, correct.
39:56 Scott Galloway? They've had some stinkers.
39:58 Ed Elson? But ever since 2000. So that's 20 years when all of these other tech companies have been releasing a slew of products that have been failures, as you've pointed out, they've had no failures. The only things that have gone slightly wrong have been basically Siri and Apple Maps had sort of a shaky launch. And the thing that you have praised about Apple in the past, and so has ASWAT, is that they've decided to not do a lot of things. Everyone said you should create a car, you should do a TV, you should do a smart fridge. They intentionally chose not to do any of these things. And then what's the one thing that they have landed on after years and years of not creating a new product? It's the fucking
40:38 Ed Elson? headset. So I would add on to that, that I think that if they launch this thing, Apple stock is going to take an immediate hit in this erosion of the brand and erosion of the trust and building up for so many years.
40:53 Scott Galloway? I like it. I like it. We should do a pair straight. This episode was produced by Claire Miller and engineered by Benjamin Spencer. Our executive producers are Jason Stavers and Catherine Delan. Mia Silverio is our research lead and Drew Burrows is our technical director. Thank you for listening to Prop G Markets from the Vox Media Podcast Network. Join us on Wednesday for office hours and we'll be back with a fresh take on markets every Monday.
41:56 Speaker 03 Afternoon glare totally ruined my watch party for the big game. That's when my buddy recommended blinds.com.
42:03 Speaker 04 With custom window treatments made to fit your style, space and budget, customers who shop at blinds.com experienced overwhelming satisfaction. Side effects may include a fuller, deeper night's sleep and a sudden urge to host the watch party again. Blinds.com isn't a medication, but it can improve how you feel about your home. Visit blinds.com to order your free samples today.
42:25 Speaker 05 Now at Kroger, your points add up to more ways to save every trip. Use them your way to take dollars off groceries at checkout or save at the pump. You can even save up to $35 on your next fill-up. Same points, more choices. And with low prices on fresh, quality food, plus digital and personalized offers tailored to how you shop, your dollar goes further. Redeem your points online or in the app. Kroger: Fresh for Everyone. Restrictions apply. See site or store for details.
Previous No Mercy / No Malice: Yes Next Office Hours: Are Young Professionals Leaving New York? Leveraging AI in Your Business, and Should You Hire a Career Coach? Page updated September 30, 2026 · transcript and summary are machine-generated
