Big Tech’s AI Vibe Shift

Scott Galloway and Ed Elson break down earnings from Microsoft, Meta, Tesla, and Apple. They also weigh in on Trump’s pick of Kevin Warsh for chair of the Federal reserve. Finally, they discuss which companies are poised to go public this year — and whether retail investors should try to get in. Subscribe to the Prof G Markets newsletter Order "Notes on Being a Man," out now Note: We may earn revenue from some of the links we provide. Subscribe to No Mercy / No Malice Follow the podcast across socials @profgmarkets Follow Scott on Instagram Follow Ed on Instagram, X and Substack Send us your questions or comments by emailing [email protected] Learn more about your ad choices. Visit podcastchoices.com/adchoices

Speaker names marked ? are inferred from speaking time and the show’s known hosts — they are not voice-verified.

• 0:01Speaker 00

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• 1:00Speaker 03

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• 1:29Scott Galloway?

  Today's number, $5,923. That's the price of the cheapest ticket to the Super Bowl this year. Ed, I don't even watch the game. I watch... But the commercial is my favorite commercial. Cardi B's Wet Ass Pepsi.

• 1:53Scott Galloway?

  What's going on, Ed?

• 1:54Ed Elson?

  I'm doing very well. It's still freezing cold here. It's unbelievable. Mountains of snow on the streets of New York. It's, it's pretty insane. How are you doing?

• 2:02Scott Galloway?

  I'm good. I'm in Jackson Hall. I spoke at one of these master, another master of the universe conference. And decided to stay here and ski. When I say ski, I mean, sit inside a beautiful room and do podcasts all fucking day long.

• 2:13Ed Elson?

  Just to confirm, you, you, I know you already did one. Is it two in Jackson Hole? Or is it just the one and you're there for, for a few days?

• 2:21Scott Galloway?

  No, it was just the one. I've done a bunch of meeting though, because one of the great things about having the footprint that I enjoy is if you post where you are, people like you haven't heard from like, oh, remember me? We played basketball together in the 11th grade. You want to have coffee? I'm like, no, but it's good to hear from you.

• 2:38Scott Galloway?

  People, it's so funny. I was out last night and a bunch of people came over and the people are with, like, do people come up to you? I'm like, yeah, they come up to me a lot. And they said, why do you think that is? It's because everyone assumes I'm so fucking pathetic that they're doing me a favor coming up and saying hi. Everyone assumes that I'm so lonely and so desperate and depressed and have so few friends that people don't come up to me and say, I mean, they come up and they're very nice, but they're more like, do you want to join us? Are you okay? So it's.

• 3:09Ed Elson?

  I highly, highly doubt that.

• 3:12Scott Galloway?

  It's a different type of approach. But anyways, I'm here in Jackson Hole. It is, it is beautiful.

• 3:18Ed Elson?

  Are you skiing?

• 3:19Scott Galloway?

  No, I'm all about injury. The only time I ski now is with my boys because I'm all about injury prevention. But I'm gonna go snowshoeing. I'm officially an old man. In between World War II documentaries, I'm gonna go snowshoeing.

• 3:30Ed Elson?

  You're not skiing because you're afraid of getting injured? Really? So that's a little bit of a lame excuse. I just gotta be real with you.

• 3:36Scott Galloway?

  I don't like the outdoors and I especially hate skiing. I can't stand, the reason I ski is I want to be able to trap my boys on a mountain for four or five hours where they have to talk to me.

• 3:47Ed Elson?

  Yes.

• 3:48Scott Galloway?

  And so I ski, I maintain, I'm, I'm also not very good at it. Are you a good skier?

• 3:52Ed Elson?

  I'm a decent skier. Yeah. I'm not, I'm not amazing, but I'm okay.

• 3:56Scott Galloway?

  I'm not. And their mother is such an extraordinarily beautiful skier. I remember the first time I saw her ski, I was like, wow, that's amazing.

• 4:04Ed Elson?

  It is very cool and people are good at skiing.

• 4:06Scott Galloway?

  And she grew up very kind of lower middle class, middle class in Poland. Instead, her parents just always put her on skis two or three weeks a year. And I said, we gotta do that for our boys. But unfortunately, when you do that, you have to actually ski with them. So, but no, if I, if I don't, I would much, I'm sitting in here, I'm gonna go work out. I might, you know, do one of these. Weird like hot stone Reiki massage treatments with some dude with beads who's gonna talk to me about my chakra. And I like that shit now. I'm turning into like the white women of wine. I'm just into the spa. And I'll just hang out and we'll go for a really nice dinner. But here I am stuck in the middle of you. Anyways, are you resisting and unsubscribing, Ed?

• 4:50Scott Galloway?

  Isn't that next month? Next month? Bitch, do you even follow anything I do? Starting on Sunday, and I know Ed's very interested, we're trying to engage in a targeted national economic strike against big tech and the companies enabling ICE and the Trump administration's policy of terror and anxiety come to you in your own town. And we're putting on a site listing all these companies that might move the S and P. Trump responds to markets, not to protests or to political pressure. He responds to markets. And we think we found a way to press on the soft tissue of the markets, and that is to go after these big tech firms by just unsubscribing. We talked about this in the last one, but the site goes live on Sunday. We think it's, we think we're on to something in terms of a low tax, low effort

• 5:35Scott Galloway?

  way to perform what is the most radical act in a capitalist society, and that is not participation. But I've been spending a lot of time on it, Ed. People have called challenge on my bullshit and said, the music needs to match the words. What are you actually doing? Now you have to do something. I know, I hate that. I hate that. I'd rather just bitch. I'd rather just heckle from the cheap seats, Ed. Can't we just talk about stuff? Can't I just pretend to be concerned? This is an outrage. Up to, up to Jackson Hole for skiing.

• 6:17Ed Elson?

  Most of the magnificent seven reported earnings last week. Overall, it was a strong quarter with Microsoft, Meta and Apple all beating expectations on the top and bottom lines. However, the reactions from the market have been not as consistent. So we're going to go through all of these earnings, Scott, see what you make of them. And I think that we should probably start with Meta. Fourth quarter sales rose 24% from a year earlier. Also issued stronger than expected sales guidance for the current quarter. The stock rose as much as 10%. So that has been the biggest performer. I think, you know, a few

• 6:59Ed Elson?

  things stand out to me about the Meta earnings. I mean, one is, as we'll see, the earnings were pretty similar to what Microsoft reported, but it was a tale of two stocks here because Meta rose around 10%. Microsoft fell around 10%. Microsoft wiped out nearly half a trillion dollars in value. So I think the big question here is what was different about Meta? And I think the thing you have to sort of look at here is this unbelievable revenue growth of 24%, $60 billion in revenue over the year. So that is just a staggering increase from what we've seen before. And I think what Zuckerberg is basically proving is that

• 7:44Ed Elson?

  AI is turbocharging the business. And now investors are realizing, okay, this guy probably knows what he's doing. We could also talk about the CapEx, which exploded, or at least the guidance exploded, 115 to 135 billion dollars in CapEx guidance for 2026, up 60% from last year. He's doubling down on AI. Last year, people were scared about that. Now investors decide, actually, we trust this guy. Scott, any initial reactions to Meta? And then we'll get into the other earnings as well.

• 8:14Scott Galloway?

  Well, it appears that it's better to be in the business of leveraging AI than in the business of AI. And there's few companies that can boast that they have adopted to greater effectiveness AI than Meta right now. The users clicked on Facebook ads three and a half percent more off in this quarter and boosted conversions on Instagram by one percent. And the number you talked about, they increased, what was it? They increased their revenues 23%?

• 8:40Ed Elson?

  Twenty four percent.

• 8:42Scott Galloway?

  On that number, on that top line number, what I would have loved to have seen is, I don't think they did it with many more employees. So, you know, they are kind of, I mean, quite frankly, anyone who's on Instagram or on reels or on threads understands the power of AI because I keep getting served with more and more relevant, I mean, almost kind of those eerie moments where I'm talking about doing a trip to, you know, DC with my kids and I start getting served ads by the Park Hyatt DC and say, oh, they look, you know, it just, it's incredible how they've been leveraging AI. Microsoft, it was that, and you said this, that the new expectation is that you beat expectations and they only met expectations.

• 9:26Scott Galloway?

  So it wasn't, you know, and they took the stock down 10%, which I'm not entirely sure I understand. Maybe it's because they're just got out over their skis. But the metal one really struck me. Any thoughts on Microsoft, Ed?

• 9:40Ed Elson?

  Yeah, Microsoft is pretty staggering. You know, $440 billion in market value just erased pretty much overnight. After they, I mean, you say met expectations, which is more accurate. They beat by like marginally, I mean, revenue was up 17%. I think saying they met expectations is the right characterization. I think two issues for Microsoft. One is that Azure, the, the cloud growth, this is all that investors really care about because this is representative of how, how growthy is your AI business. It grew 39%. I still think that's a pretty big number.

• 10:22Ed Elson?

  It also beat expectations or as you say, met expectations, but it's slightly lower than the previous quarter. So I think investors are kind of upset about that. I think maybe in comparison to Meta, they see the growth of that business and they don't like that. But I think the big problem I would estimate and we'll see over the coming weeks. Is their RPO number, their remaining performance obligations, their future future commercial bookings, basically, this is how much revenue they have in the in the pipeline, the contracts they've secured, which they're going to see in the income statement in the next few quarters. It grew dramatically to $625 billion. So that's

• 11:01Ed Elson?

  great news. However, 45% of that backlog is attributable to OpenAI. I think investors have decided what we have been saying for a long time, which is you can't really trust this company. If you're making one and a half trillion dollars in spending commitments all over the place, and you're only making generating $13 billion in revenue, and you're going out there and you're kind of struggling to raise, not struggling to raise, but they're raising, they're talking about raising, you know, $100 billion, but that that doesn't cut it. There's so much so much money they have to spend on these contracts in the next few years. And basically, Microsoft is coming out there there and saying, hey, we have

• 11:42Ed Elson?

  a bunch of growth opportunity coming down the pike, but half of it is going to come from OpenAI. And it appears that investors are saying, eh, we call bullshit. We don't think that that revenue is actually going to come in. I would guess that that is the main concern. I think there's the additional concern that compounds the mistrust in OpenAI, which is where is that revenue actually coming from? Well, it's not coming from their profits. This is not a profitable business. It's coming from Microsoft. Microsoft is the main investor in OpenAI. So this is just a circular transaction happening again. Microsoft invests, and then it comes back to Microsoft in the form of these remaining performance obligations, which makes it doubly concerning. So I think these are, this is

• 12:26Ed Elson?

  the investor response. People are coming around and saying, you know, this OpenAI thing, this has gone a little a little too far at this point. And so if you come out and say, yeah, we've got all this money coming in, but most of it's OpenAI, we're not going to take it all too seriously.

• 12:40Scott Galloway?

  I see a theme emerging where it's better to draft off of the AI wars in terms of capital expenditure than to be on the front lines. And that is, it feels like people are increasingly skeptical that OpenAI is going to be able to justify an $850 billion valuation, much less the trillion or trillion and a half dollar valuation that's been floated for a public offering. And that there's only about three or five percent of its users actually upgrade to a paid subscription, and it looks like they're being bested by Anthropic in the enterprise market. So that's beginning to infect Microsoft, who again is looking to, similar to the way

• 13:20Scott Galloway?

  that Tesla is claiming Optimus Robots are going to be their growth vehicle, being reliant or claiming that you can justify a $4 trillion valuation because of all the additional profits and revenues to your point you're going to get from your investment or your relationship with OpenAI that looks like there's no way it can meet its expectations is a dangerous place to be. At the same time, when you're a company like Meta, or even I would argue a company like Waymo, where you're leveraging AI, you're drafting off of or free riding off of other people's cheap capital and massive investments. I mean, even Apple, I think Apple will probably be a beneficiary of AI because what they'll do is similar to avoiding the search wars, they'll stay out of it and they'll start figuring

• 14:03Scott Galloway?

  out ways to provide licensing agreements or access to the billion consumers. But it feels like the new kind of litmus test is, all right, it's great to be in AI, but your valuations have gotten out in front of your skis and you're spending so much money that the sweet spot is to leverage AI and leverage the falling price and inference and show that you know how to leverage AI, see above Meta's targeting capabilities. Can we talk about Tesla for a second, Ed?

• 14:31Ed Elson?

  Yeah, we should talk about Tesla. I mean, just before we move on to Tesla, I would just add one caveat, which is that Meta is spending like crazy on AI.

• 14:40Scott Galloway?

  Yeah, their CapEx is not.

• 14:42Ed Elson?

  I mean, that CapEx was unbelievable. But I think that to your point, what investors want to see is like, show us that you have leveraged AI, show us that there's real money coming in. Meta was able to do that, which gives them the option to go out and spend like crazy. That could reverse on a dime, and we've seen this continue to happen over the past year. I think what we're increasingly Seeing in the AI wars is this is this is a war of vibes, a narrative. This is all about like, does the market generally agree that you know what you're doing with AI? And are you associating with the right people?

• 15:15Scott Galloway?

  Great point.

• 15:16Ed Elson?

  Last year, associations with OpenAI was a vibe to the upside. Now it's reversed, it's a vibe to the downside. I think it's highly possible that vibe could keep whip soaring back and forth. But there is no question, the vibe is massively important to valuations right now. It's literally moving hundreds of billions of dollars at a time.

• 15:35Scott Galloway?

  Well, just, just, just to use an acronym here, ROI, right? It's all about ROI to some extent. And there's a raft of new unicorns and it's an exciting part of the economy. And we got to give AI, you know, its credit. It's created an ecosystem of companies that put a thick layer of innovation on top of inference and then sell into niche, niche, you know, products and services into, into specific sectors. And they're basically free riding off of the massive, the massive I, right? And they get a big return because they can free ride and have small I themselves, which makes the ROI bigger. And then there's companies that are huge on the I, but it's not entirely clear what the R is. I would put OpenAI in that bucket.

• 16:17Scott Galloway?

  It's like, it's very hard to figure out how all of this spending and these trillion dollar commitments, where the R is going to be big enough. But the sweet spot is companies that have huge R and huge I, because they're seen as pulling away from everybody else, but also are showing the massive kind of return. And right now, that's Meta. Huge CapEx can make that CapEx so they can pull ahead of. Pinterest didn't lay off people because of AI efficiency. It laid off people because it can't compete with a company like Meta. And in addition, it's showing huge R. So the sweet spot that creates, you know, what might be the most valuable company in the world at some point is enormous R and enormous I, so to speak. Tesla?

• 16:59Ed Elson?

  Tesla.

• 17:00Scott Galloway?

  Tesla? Oh my gosh. I love that he's trying to distract a company. Talk about weapons of mass distraction on the, on the earnings call. I don't know if you saw this, Musk updated investors on Tesla's new mission, which is, open quote, "to build a world of amazing abundance." And we're going to build a world of amazing. Abundance. I would translate that into an abundance of ketamine before the earnings call. He also focused on Tesla's humanoid robot product, Optimus. Sales of the robot are expected to begin in 2027. Musk mentioned Optimus 28 times on the earnings call. I'm shocked he didn't threaten to bomb Iran at this point to distract from the fact that

• 17:44Scott Galloway?

  the Cybertruck is a total fucking disaster and revenues were actually down. Automotive revenues declined 10% year on year and their pre-tax profit margins in 2025 were about 6% less than half as much as Toyota's. And just to give you a sense for what is, I would say, the exception of Palantir, the most overvalued company in the world, Tesla trades now at 400 times earnings. Toyota, which in my view is the best managed automotive company in the world, trades at 10 times earnings. Your thoughts on that?

• 18:16Ed Elson?

  I would love to know if there have been companies in history, and I would go with large cap companies in history, that have traded at near 400 times earnings and yet their revenue has been in decline for not just multiple quarters, but getting on to multiple years now. I mean, that is just unbelievable. The fact that revenue, the stock actually jumped in after hours. Then it came down. People seem to kind of, I guess, come to their senses a little bit, but revenue was down 3% year over year. And yet, this is the company of the future. It's a declining business.

• 18:54Scott Galloway?

  It's a declining business trading at 400 times earnings.

• 18:57Ed Elson?

  And we could just go through more of the statistics. I mean, there's no question, this was a horrific year for Tesla.

• 19:01Scott Galloway?

  Operating margins down, everything.

• 19:03Ed Elson?

  Yes. Free cash flow down 30% year over year. Net income down 61% year over year. Also, A lot of the reason why they're staying afloat is because of these regulatory credits, where they registered half a billion dollars because of these regulatory credits. Without them, profit would have fallen another 65%. And of course, the big, beautiful bill is going to get rid of those regulatory credits going forward. But the genius, and I mean, you call his bluff, and so do I, and I think so do many investors, but the market seems to believe it. The genius is Elon has been able to just launder in a new future growth project every few years to keep the multiple afloat.

• 19:48Ed Elson?

  He's not, he's not keeping this business, this valuation up through fundamentals. He's decided he doesn't even care about that. The car sales are done, whatever. But he's laundering in his next project, which is the Optimus, which, as you say, he mentioned 28 times on the earnings call. He said he's going to stop producing the Model S and the Model X because he's going to increase the production capacity for these humanoid robots. So that's one piece. And then there are these rumors out, or at least Bloomberg has been reporting this, that he's considering merging Tesla with SpaceX and also merging Tesla with XAI and also investing, having Tesla invest $2 billion into XAI. So then the stock goes up again on that news.

• 20:31Ed Elson?

  So this guy is just like a magician of, I guess, brand laundering would be perhaps sort of maybe multiple laundering, valuation laundering. I'm not sure what exactly what it is, but it's working because somehow this business is in decline and yet the markets are saying, yeah, it's okay. We've got the, we've got the robots coming later. We've got the AI coming later. It'll be fine.

• 20:55Scott Galloway?

  I think he's going to attach every anchor to the, the ship here that is SpaceX. I think he's going to roll it all up into one kind of AI story about space, communications, connectivity, self-driving cars, robots, and talk about a world of abundance where you can get to where you need to be faster, communicate with people faster, new ideas, new communication, new means of, of self-expression, unlimited abundance. I think it's going to turn into this giant kind of tomorrow belongs to me narrative with all these. Granted, amazing products and companies and the ones that aren't working, he'll roll up into the ones that are working.

• 21:39Ed Elson?

  Right.

• 21:39Scott Galloway?

  But I think this has been his plan all along. It's you're right, it's a ton of jazz hands. It's trying to sell the narrative over the numbers and constantly get people to look away from the numbers.

• 21:49Ed Elson?

  Yeah.

• 21:50Scott Galloway?

  So they're focused on the narrative and also the narrative is very exciting. Space, launch capabilities, you know, huge communications platform, self-driving cars, electric EVs. I mean, it's like every eight-year-old's dream is this company, you know, or every eight-year-old boy's dream is this company. And then never lets, never lets the company settle in enough to let analysts say, okay, this is what this company is.

• 22:16Ed Elson?

  Yes.

• 22:16Scott Galloway?

  And this is the multiple it should be trading at, or the range of the multiple it should be trading at.

• 22:21Ed Elson?

  I think it's so true that there's a benefit to having analysts and commentators and investors and observers just arguing over what actually is the company.

• 22:29Scott Galloway?

  Yeah, just whipsaw it around.

• 22:30Ed Elson?

  Yeah, and it gives it this, this air of like, it's so mysterious. We don't even know what it is. How do you even define it? You can't even pin it down.

• 22:39Scott Galloway?

  You just described Palantir.

• 22:40Ed Elson?

  Exactly, Palantir as well. And it's like, it's almost as if that's what you need to do as a CEO these days. If you want to get that extraordinary multiple, you have to just sort of obfuscate around this. You, you can't define what our company does. Our company does so many different things. We're doing all these things out in the future. You don't, you don't even know what we're doing. And then we all quibble in the comments about what is Tesla? Is it a car company? Is it not a car company? And ultimately, I think it translates to an extraordinary multiple. I find it ridiculous, but I mean, I guess give the guy credit because it's working. He's selling that narrative and it's working well. We'll be right back after the break. And if you're enjoying the show so far, send it to a friend and please follow us if you haven't already.

• 23:30Speaker 00

  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 InBev Michelob Ultra Beer, St. Louis, Missouri.

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• 25:04Ed Elson?

  We're back with Prof G Markets. We talk about Apple. Not that much interesting here. Stock is up a little bit, around 1%. Better-than-expected earnings. Revenue was up 16%, which is pretty impressive.

• 25:19Ed Elson?

  Beat on EPS. I think, you know, I think one analysis that we found kind of interesting that says something about Apple. I'm not particularly bullish on Apple, as you probably know. But this was an analysis from Sherwood. They got this data from the Consumer Intelligence Research Report, which found that people aren't buying iPhones for the new features of the iPhone. In fact, that number is only 14%. Everyone is buying an iPhone either because their iPhone is old or because their iPhone is lost or it's broken. And they they lay out these numbers. It translates to around seventy

• 26:01Ed Elson?

  percent of new iPhone purchases are for one of those two reasons. And for me, I mean, I I think Apple has gotten so entrenched in our society as a product that the iPhone has at least. And it is impressive that they are growing sales. But in the long term, I don't think it's very exciting what they're doing. I think the market's response kind of reflects that. It's like, yep, you did well. You're doing things right. Congrats. And we're going to reward you with, you know, a one percent bump in the stock. I'm not going to give you a super extraordinary multiple right now. But, you know, things are going well. I mean, it seems that Apple is more and more becoming a a legacy tech company. And it seems to be

• 26:43Ed Elson?

  reflected in in in the numbers and also in the way they're handling the business. But any reactions from you?

• 26:49Scott Galloway?

  I think you're being a little unfair. I I was actually, I was actually shocked that they grew their revenue sixteen percent. I mean, that's on a company of this revenue base, sixteen percent is real.

• 26:59Ed Elson?

  Yeah.

• 27:00Scott Galloway?

  And it's actually, it's fastest quarterly growth in more than four years. So it looks like growth is kind of revved up again. And its earnings per share increased nineteen percent. I mean, there's, that's an incredible quarter for a company this size. And that's despite a pretty lackluster AI story. The growth came from, as you mentioned, better than expected iPhone sales and record services revenues, which have, you know, greater margins in hardware. So I was, I I would say, the top line number surprised me more than any other company. Sixteen percent on this company is, I mean, basically, they grew this company, you know, kind of like the, the size of Procter and Gamble in one quarter. I mean, it's just

• 27:42Scott Galloway?

  sixteen percent. I mean, let me put it this way. Tim Cook would love to repeat this quarter over and over. And it just shocked me because I I always get the new iPhone more is more signaling than anything else. It's just automatic for me to have the newest iPhone. But I don't really sense any difference. As a matter of fact, I think the operating system is a little bit confusing. I think it's sort of a step backwards.

• 28:03Ed Elson?

  Right.

• 28:04Scott Galloway?

  They say the camera's better, but at some point, you know, camera, the last camera seemed pretty incredible. But they grew their revenue sixteen percent top line. I just

• 28:14Scott Galloway?

  I was, quite frankly, I was really shocked to the upside by the revenue growth.

• 28:17Ed Elson?

  Yeah, I think that the sixteen percent, I think that's a totally fair point. The sixteen percent revenue growth is very impressive and it's because people are buying the iPhone. And, you know, I think that that is a testament to their marketing capabilities. I don't think it's a testament to the product itself. I think that is my point. The thing that you're saying there about the iPhone itself, I mean, I got the new iPhone. The reason I got it was because my old iPhone was, the battery was kind of dying and I figured, okay, like, I guess I should get the new iPhone and it's time for an upgrade. But I'm not impressed by the new iPhone, not impressed by the product. That's what I'm hearing from most people. I don't think anyone's really impressed by the operating system and the growth potential of AI is not really there.

• 29:02Ed Elson?

  He was asked about how they're going to monetize AI, Tim Cook was on the call, and he didn't really have an answer to that. So I, I think, I think that's true. I think it is impressive, the sales growth of the iPhone, but I just don't view it as that sustainable going forward because I just don't, I don't see them introducing new products that people are really excited about.

• 29:26Ed Elson?

  But, you know, perhaps I'm being, perhaps I am being too harsh on Apple. Perhaps I'm upset with Tim for going on the Melania show.

• 29:34Scott Galloway?

  I think Apple is going to basically, essentially create an enormous new licensing agreement with one of these LLMs that's raising ridiculous amounts of capital to have, to be the AI LLM of choice to their billion wealthiest consumers in the world. I think they're doing the same thing. I think they're going to stay out of the AI wars and leverage their, leverage their custody of the billion most important consumers in the world and enter into some sort of similar agreement as they have with search. You know, they never got into the search wars. They said, we can't compete. It's better to, it's better to rent our consumer base than go vertical in this. I think they're doing the same thing in AI. So, anyway, we'll see.

• 30:19Ed Elson?

  President Trump has nominated Kevin Warsh to be the next Federal Reserve Chair. If confirmed by the Senate, Walsh would replace Jerome Powell in May. The major indices fell slightly on the news. Meanwhile, the dollar climbed and long-term bond yields rose. In a Truth Social post, Trump said, quote, "I have known Kevin for a long period of time and have no doubt that he will go down as one of the great Fed Chairman, maybe the best. On top of everything else, he is central casting and he will never let you down." We finally got our Fed Chair. People thought it was going to be Kevin Hassett. People thought it might be Chris Waller. Then people thought it might be Rick Reader. It is going to be Kevin Warsh.

• 31:03Ed Elson?

  My initial reactions to this, the options were not that great, at least if you were to look at Kevin Warsh versus Kevin Hassett versus Chris Waller. I don't know as much about Rick Reader because he came onto the scene very late. What I do know is that, in my opinion at least, Kevin Warsh is the least bad of the options. You know, he's definitely been a sycophant of late, but he could not have been more sycophantic than Hassett has been and also than Waller has been. And what is also quite interesting is, you know, he is traditionally known as a monetary hawk. His view is, at least in his past, has been you need to fight inflation, which means

• 31:46Ed Elson?

  higher interest rates, which is interestingly the exact opposite of what Trump wants right now. He is, of course, changing his position a little bit lately to make Trump like him. I mean, they're all doing this. They're all playing the sycophant role. But it will be interesting, and I could see this playing out quite similarly to the Jerome Powell situation, where Trump said very similar things about Jerome Powell, and then eventually Jerome Powell held his own. And he did what he thought was right for inflation, and now they're in this war against each other, and the administration is trying to investigate him. So. I think he was the least bad of the options. So I think this went about as well as it could have gone, given the circumstances.

• 32:27Scott Galloway?

  That feels right. I think the markets are doing a collective exhale right now. And the key term you used is hawkish. I think the fear was that he was going to put some sycophant alkylate in and the person was immediately going to cut interest rates to 1% and ignite an upward spiral, a death spiral of inflation. And that was kind of the doomsday scenario. And this guy is known as a hawk. Yeah, he likes Trump's policies, but we knew that was going to happen. Canadian Prime Minister Mark Carney, who's seen as a responsible guy, he was the first non-UK citizen to, I think, chair of the Bank of England, called him a fantastic choice. He's also said, Varsh has also been critical of the Fed for enabling

• 33:08Scott Galloway?

  too much deficit spending, which I'm, I'm a big fan of that viewpoint. So, you know, he has ties to the billionaire class, he's a Trump fan, but he's, I, I think, you know, I think this is a good pick. We'll see.

• 33:23Ed Elson?

  Yeah, we'll see. I thought the central casting quote was hilarious. It's possible that he meant that he has the right resume, but I think it's more likely he meant that the guy's good looking and tall.

• 33:32Scott Galloway?

  I think he's listening to our podcast. Central, out of central casting is our term.

• 33:37Scott Galloway?

  I think he listens to Fox News and he turns into Ed Elson. Get that young guy. What's that young guy think? What's that young guy? You know, the guy with the communist professor? Let's arrest him. Let's put him in a cell next to Don Lemon.

• 33:52Ed Elson?

  Yes. That's what's gonna happen.

• 33:54Scott Galloway?

  By the way, just a brief note, breaking news this morning, Don Lemon was arrested. And this wasn't an arrest of like a bunch of people trespassing. So one by one, this was a targeted arrest by our Attorney General. And when you start targeting journalists, it's not enforcing the law, it's trying to shape reality. And just to bring this back to markets, whether it was Turkey in 2013 or Russia in the early 2000s, the moment you start. Policing speech, it creates a level of self censorship that is really bad for democracy and bad for economics. And history is brutally clear here. The moment you start censoring people and arresting journalists, markets just start to fail and the nations become much poorer and much angrier. So distinct of what you think of First Amendment rights,

• 34:38Scott Galloway?

  targeted abuse and arrests of people who speak out against the Trump administration, be clear, if we, it's a fast hill down and a slow hill back up to restore free speech. But the moment you, you, you put up with the arrests of journalists, your nation is about to get much, much poorer.

• 34:58Ed Elson?

  We'll be right back. And for even more markets insights, sign up for our newsletter at profitemarkets.com/subscribe.

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• 36:51Ed Elson?

  We're back with Prof G Markets. 2026 could be a blockbuster year for IPOs. In fact, Blackstone's president said the company had lined up, quote, "one of our largest IPO pipelines in history." SpaceX is reportedly targeting a mid-June listing, seeking to raise up to $50 billion at a roughly $1.5 trillion valuation. That would make it the largest IPO in history. OpenAI, meanwhile, is reportedly raising additional funding at a valuation of $830 billion, with discussions underway about a potential IPO later this year. Anthropic and Databricks are also expected to go public this year. So, Scott, everyone

• 37:35Ed Elson?

  said last year was going to be the year of the IPO. It was kind of the year of the IPO, but not really. We didn't really see any huge, big splashes in the IPO market. It seems that this actually will be the year. And according to John Gray, President of Blackstone, he says it's going to be the largest ever. Your thoughts?

• 37:58Scott Galloway?

  It may be the largest ever, but it'll be the largest ever by gross dollar volume raise, and unfortunately, it'll be crowded into a small number of companies. We've been sort of, we keep getting hints of some sunshine that the kind of the nuclear winter in the IPO market is coming to an end, and there's a beginning of a thaw, and it never quite gets its mojo. So I think they're saying this is, there's so much pent-up demand, and these companies have, you know, have reached such exceptional valuations in the private market that they need to find, you know, the greater fool. And the greater fool, I think, in this instance, is we'll be taking these unbelievable brands and an unbelievable technology and giving retail investors the first shot at owning them. In terms of the

• 38:44Scott Galloway?

  companies themselves...

• 38:46Scott Galloway?

  You know SpaceX, I think SpaceX has as big a moat as OpenAI does not. And that is SpaceX, I think it's like 80 or 90% of launch capability now is controlled by one company SpaceX. I think the next big, big thing in terms of a company with no revenues being worth 200 billion is going to be space defense. All the moons are lining up around that. And the infrastructure play, the Nvidia of space, quite frankly, is SpaceX. I just, I think, I don't, I have trouble thinking of a company that has built a wider moat than SpaceX.

• 39:25Scott Galloway?

  OpenAI, I think could be, I think OpenAI could get pulled. I think there's a non-zero probability that Gemini and some of these open weight gained so much traction against OpenAI and Anthropic is kind of beating them in the enterprise. It's done a better job of branding. Instead of branding catastrophe, Anthropic has branded itself as a partner, if you will, and their ads are much clever. They're more about humans and saying this is a tool, not the, you know, not something that could be the end of the world. I don't think OpenAI has done a good job managing the brand of late, especially the proximity between Sam Altman and the president.

• 40:10Scott Galloway?

  I think people are starting to gag on that. And I think they're way out in front of their skis in terms of the valuation that they're anticipating. Anyways, I'm very bullish on SpaceX. I don't know from a valuation standpoint, you know, how unreasonable the valuation's going to be, but I very rarely see a company that has the kind of competitive advantage or sustainable advantage it has. And I think OpenAI's sustainable advantage is really, really thin.

• 40:38Ed Elson?

  You mentioned the valuation of SpaceX. You know, it's a question, is it unreasonable or unreasonably high? The answer is pretty much yes. I mean, one and a half trillion, that would be a price to sales multiple of ninety seven. And you just look at

• 40:55Scott Galloway?

  Palantir.

• 40:55Ed Elson?

  I mean, yeah, true Palantir. But, you know, Microsoft, when when Microsoft hit a trillion dollars, they had ninety seven billion dollars in revenue. Google had one hundred and eighty three. Apple had two hundred and sixty five. SpaceX has less than sixteen billion dollars in revenue in twenty twenty five. But to your point, the moat of this company and the potential growth of this company is also unreasonably high. I mean, as you say, eighty to ninety percent of all global launches, SpaceX is responsible for them. They have and operate twice as many satellites as the rest of the world combined. Also, they're

• 41:35Ed Elson?

  way cheaper than all of their other rivals. And I do think it's it's it's gonna be, you know, the growth potential of just space as an industry is just gigantic. I totally agree. Space defense could be a huge thing as well. So one and a half trillion dollars, I mean, it's hard to come up with a reasonable valuation for a company that is pursuing such an unreasonable and crazy and unknown business. But the number itself is staggering. One and a half trillion is just completely insane. By the way, if it happens at one and a half trillion, Bloomberg estimates that this will increase Elon Musk's net worth to nine hundred

• 42:18Ed Elson?

  and fifty billion dollars. And now, according to Kalshi, the probability that he will become a trillionaire next year is sixty four percent. So it's more than likely that Elon will be a trillionaire next year.

• 42:35Scott Galloway?

  Well, thank God he's he's responsible and not an addict. That could be scary, having that much power in one person's hand if that person, I don't know, had a drug addiction or was generally seen as not having a great deal of empathy for HIV positive mothers or, um, yeah, so thank God, thank God he's so stable and doesn't sleep with a loaded gun next to his bed.

• 42:56Ed Elson?

  It is quite striking. Um, that would mean that his net worth would be equal to 3% of America's GDP. And if you compare this to John D Rockefeller, widely known as the richest man in the history of America, at the peak of the Gilded Age, his wealth amounted to 2% of America's GDP. So Elon is basically the wealthiest as a percentage of the pie, the wealthiest man in the history of this country, about to get even wealthier likely because of this SpaceX IPO. I feel like there's a lot to talk about there.

• 43:35Scott Galloway?

  Yeah, and I want to be clear. I think we need billionaires. I'm not sure we need trillionaires, but I think we need billionaires. Now, one of the wonderful things about capitalism is the incentive structure to make just a crazy amount of fucking money. The thing that bums me out about that is that now that he lives in Texas, he's going to end up paying, does 1202 matter? I don't know. He's going to end up paying a tax rate probably of like 15 or 18% on that money. Whereas the people who work, the engineers who work at SpaceX who make 2, 3, 400,000 dollars a year will end up paying, especially the ones back in California, will end up paying 40, 45, some will probably pay 50%. Anyways, our first, wow, wow. So, calcio polymarket predicts it's going to be, it's more likely than not, he'll be a trillionaire. That's just wild.

• 44:20Ed Elson?

  By next year, if you look at by 2028 or 2029, the odds go up to above 80%. It's basically baked into prediction markets that Elon will become a trillionaire within the next few years, likely, more likely than not, as soon as next year.

• 44:35Scott Galloway?

  Yeah, hand it to SpaceX and Elon Musk. I mean, technology is changing the world of protest. It's changing, what would have happened, what would have the response been to the activities of ICE in Minneapolis had there not been the advent of camera phones, right? Or of cameras on phones. It just would have been... You know, one narrative versus the other. And also SpaceX or Starlink terminals in Iran have helped kept the world apprised of what's going on. So both of these technologies, and I think Elon's done a really good job of trying to ensure, I assume it's him, trying to ensure that the people of Iran have some sort of communications hotspots.

• 45:18Scott Galloway?

  And also, when I paid like fifty or seventy thousand dollars to have crazy high-speed internet in my home in London, and they had to run a cable across Regent's Park or whatever, and of course, it went out. And this guy was running around, and he, what did he do? He installed Starlink. And it wasn't as good as the fiber, but it was the quickest, best, quick solution. It's an incredible product. I used Starlink on a plane the other day, and I could have done a podcast. It was that good. It was, anyways, I just don't think there's any denying, I think SpaceX is going to be worth more than X, worth more than Tesla, worth more.

• 45:59Scott Galloway?

  I think that's, that's his, I don't know, his golden egg, if you will.

• 46:04Ed Elson?

  A question about investing in IPOs. I mean, this is obviously the question.

• 46:10Scott Galloway?

  Don't.

• 46:11Ed Elson?

  Excuse me?

• 46:12Scott Galloway?

  It's an easy one. If you have access to the IPO, absolutely. But buying on the first trade is usually a bad idea.

• 46:18Ed Elson?

  Right. Yeah. So we've got Canva, we've got Revolut, Stripe, Databricks, Anthropic, OpenAI, SpaceX. Your view on these is don't invest?

• 46:27Scott Galloway?

  The game is fucking rigged. It's essentially either you're powerful and know the CEO, or have influence, or you're an institution that gives so many fees to these investment banks that they give you an allocation. They purposely price it ten to forty percent below what they think the market, the first trade will be. The institutions and the powerful friends of management get in, get easy money, and then the retail investors get to come in and buy the first trade, which is usually You know, at market. So buying on the first trade of these things has not been a high return strategy in the last couple of years because these things have been so priced so aggressively.

• 47:04Ed Elson?

  That is exactly the data I've got in front of me. Institutional investors earn about three times more than retail investors on the IPO. The reason being the institutional investors, the insiders, they get early access, which gives you access to a price that is almost always discounted to what the stock goes at when after it's gone public. So we saw that with Figma as an example. And as a reminder, again, we were saying that Figma was a good buy at 33, which was the IPO price. Then it gets listed on the public markets. Some people got access to that price. But if you did and you're a retail investor, if you got access, it's most likely you only got one share, then it lists and it goes up

• 47:45Ed Elson?

  to 120. So it's likely that the same thing is going to happen for a lot of these IPOs. And I think because there is so much pent up demand, because we've seen so few IPOs over the past year, it basically means that that opening price is going to be even more crazy because everyone's going to want to get in on the OpenAI IPO and the Anthropic IPO and the SpaceX IPO. And it's going to be a completely irrational price. But what will be interesting is to see the insiders price. What are they going to price it at for them? And I think for those guys, it's basically a given that you want to buy at

• 48:26Ed Elson?

  that price. Because yeah, I think it's, as you say, it's, it is a totally rigged game. I'm not sure what to do about it. From a regulatory perspective, it seems unfair that insiders just get better returns. That's just the way it is. But yeah, I think that's, that is the truth that you highlight.

• 48:49Scott Galloway?

  One interesting idea is the tokenization of companies from a very early stage. So everyone has access, early stage, fewer transaction fees. The thing I hate about the secondary market, I get opportunities all the time, as anyone does through setter, you know, these secondary markets, is it's very inefficient. They want to charge you 7%. You don't have confidence to buy because it's not a liquid market with a price. But I like the idea of some sort of tokenization where you use AI to grade the compliance of the company. And the disclosures and the transparency, but from a very early stage, you can buy tokens in these startups and they don't go public. They just have a publicly traded currency that represents ownership. The problem is that creates all sorts of disclosure requirements.

• 49:34Scott Galloway?

  But I wonder sometimes if the SEC and these regulatory bodies want to hold on to their jobs as opposed to acknowledge that, you know, the entire market has become very speculative. So, and there's so much opportunity for speculation that people have with their money. What exactly, who exactly are you protecting from what with these, you know, and I think AI could serve, we've talked about this, there's a pretty thick layer of disclosure where you buy a token and your buddy that started that company, Rogo, that has that layer of innovation on top of AI for financial services companies, you know, should that company have tokens right now that anyone can buy? And it doesn't, it never goes public. It just keeps increasing

• 50:14Scott Galloway?

  or decreasing in value. But there's got to be some sort of innovation here that gives retail investors access to this, access to this stuff.

• 50:25Ed Elson?

  Yeah, I think my, my view on this is the line between private and public markets has become so blurred at this point that it should really just be eliminated. I mean, the fact that we're, we have all these investor accreditation laws that are supposed to protect people from buying shares in OpenAI. Meanwhile, you can buy CumRocket and PepeCoin is just completely ridiculous.

• 50:46Scott Galloway?

  Or bet on the Super Bowl on like what, if the next play is going to be a run or a pass. I mean, enough already.

• 50:52Ed Elson?

  Exactly. And it's like, oh no, we want to, we want to make sure that you're only investing in real companies. So that's why we're going to have to go through this accreditation process and you're going to have to prove to us that you've made $200,000 a year for two years in a row. And then you're able to invest in these private companies. It's just completely ridiculous. So all of these private companies, everyone should be able to invest in them. If we're going to say that crypto is legal, then investing in private companies should also be legal. My only problem with the tokenization point is I feel like it assumes that it needs a crypto aspect because crypto is highly associated with tokenization. I don't think it needs that. I think all you need to do is say, anyone can invest in private companies. That's the law.

• 51:38Ed Elson?

  And so let them invest. And then that will mean that the New York Stock Exchange and all these public exchanges can reach out to private companies and have them list. And it basically just means that everyone can list as a public company. I don't think you necessarily need crypto or AI to enable that to happen. I take your point about, you know, getting the auditing done on some of these companies. But the reality is we're not auditing prediction markets. We're not doing any of that shit on crypto. So why are we pretending that we should be doing it with companies too?

• 52:10Scott Galloway?

  Yeah, but I was thinking about, you know, we do a plan every quarter or we get, I get all the financials from them. I try to pretend I have a board at Prop G Media. By the way, I love not having a board, but I try to pretend I have a board and I do kind of an internal quarterly board meeting where.

• 52:26Ed Elson?

  Who's on the board?

• 52:27Scott Galloway?

  Oh, it's Scott Galloway and his 17 alternative personalities.

• 52:33Ed Elson?

  News to me, I didn't know we had a board. I didn't know we had a pretend board.

• 52:36Scott Galloway?

  I'm gonna have the second and third board members will be those two hotties from that gay hockey series. I want to put those two on my board. But what I do is I put together a board deck or something resembling a board deck. Basically, I ask Karen and the finance team to put together all these metrics and I run it through AI where is there opportunity, where there isn't, I look at it. I've gone through a million board decks. But I was even thinking about publishing it because A, I think it's illuminating how an entrepreneur thinks about a small media business, a niche media business, it's trying to grow 20 or 30% a year and trying to grow its EBITDA 40% a year. But also, I do think that I just, I think AI, I think AI could say, all right.

• 53:18Scott Galloway?

  I think there's a business in becoming an SEC, an AI version of SAC where it says, all right, we need the following, I need the following access to the following APIs. I need access to your company's bank account. It'll be anonymous, not going to release any information. I need access to your payables. I need access to your client contracts. I need access to, and if you give me access to all of those things, I'm going to put out a rating on your company and I'm going to write fantastic analyst reports. And it'll give people the confidence to invest or not invest. And you could create it almost like, well, if you don't have this good housekeeping seal of approval, stay away. And then you could have a much simpler, much lower cost means of buying and selling shares or tokens in that company as long as it had this AI

• 54:02Scott Galloway?

  audit on a regular basis. And it could do it every day, but just total transparency, you wouldn't have insider trading problems because everyone would kind of know everything. And if a company says, well, for strategic reasons, we don't want the AI publishing that we're in a deal, we're thinking about acquiring this company. It's like, yeah, there's certain things that are anonymized, certain things that are not disclosed publicly, but we have metrics on how well the AI in a millionth of a second says there, this is how good they are at return on invested capital. This is how good their turnover is or bad it is. This is how good they are managing their IP. This is how good they are managing their expenses. This is their renewal rates. And it doesn't even need to publish that. It just gives it a rating and says, oh, also, on a fraud detection thing, we see almost

• 54:46Scott Galloway?

  no evidence of fraud, or there's something fishy going on here, or their internal checks and controls don't seem to be up to snuff. It's just, there's this gigantic administrative infrastructure bureaucratic government layer in between investors and companies that is expensive, cumbersome, and I would argue is now not probably adding the value that an AI infrastructure or AI layer could. I mean, again, it's the boring shit that moves the needle. It doesn't sound fun, right? But I think that could be.

• 55:19Ed Elson?

  Doesn't sound fun, but it also sounds difficult. And you better hope that AI isn't hallucinating. Current technology will not really guarantee you that at all. I mean, if it's possible for ratings agencies and Moody's and S and P to hallucinate as they frequently do, then think about the hallucination rates of the AIs. And then are we taking that at face value? This is, this is the truth? This is what, what's going on with this company? These are the risks?

• 55:46Scott Galloway?

  Well, what's closer to an objective truth, right? Because Moody's had AAA ratings on all the bonds, the subprime bonds, bonds before they literally folded and almost took down their global economy. What I think is important is the reason you have Moody's and Fitch is, and I forget the third one.

• 56:01Ed Elson?

  S and P.

• 56:01Scott Galloway?

  Is you benchmark them against each other. And what I always do, I never ask. One L L M, a question of any importance without asking two or three and then cross referencing them. And I think you could do that here. I think you would run it through a variety of L L Ms to say where, because you're right, it gets it wrong all the time. But I would argue.

• 56:20Ed Elson?

  It gets it wrong all the time. I mean, it, I'll ask it a question and I'll say, this is the answer and they'll say, no, it isn't. And they're like, oh, you're right. No, that's not, it's this. No, it isn't. Oh, sorry. You're right. It's this. I do this on and on and on and on.

• 56:37Scott Galloway?

  I find the ratings agencies and those guys have finally been so weaponized by who their clients are. And anyways, I find it's the boring shit that moves the needle. If I were thinking about an AI startup, I would think about trying to connect a downstream with Galaxy Digital or something around tokenization and some sort of rating method, AI driven, no mercy, no malice, can't influence it, can't bastardize it, that puts out a rating on a company that you then have the opportunity to buy tokens in.

• 57:06Ed Elson?

  Okay. Let's take a look at the week ahead. We'll see job openings for December. We'll also see ADP employment data and the employment rate for January. Meanwhile, we will get earnings from Amazon, Google, Palantir, AMD, Disney, Uber, Pfizer, Eli Lilly and Novo Nordisk. Scott, any predictions?

• 57:25Scott Galloway?

  Well, I'm talking my own book here, but basically I think these economic strikes are about to become a static part of a new arrow in citizenry quiver of pushing back on governments. And that is, and we talked a lot about this, my observation is that the current administration and also leadership around the world is now responding more to markets than they are to the citizenry or even the Supreme Court. And that while protests are effective, I'm not suggesting they're not, they're very cinematic. But I would argue that the current administration has only responded to changes in the economy and the markets. And the greatest political movement in history in terms of action, in size of action was in Q1 of 2020.

• 58:10Scott Galloway?

  With COVID. And again, it wasn't because hundreds of thousands of people started dying. It's because GDP went down 31%. And the greatest act of, again, the greatest act of radical transformation, you know, kind of radical action in a capitalist economy is not participation. And I'm seeing a bunch of economic strikes, including the one that we're organizing, pop up. And I think that the marketplace's vulnerability around such a huge concentration of value across a small number of companies who also happen to be the companies, many of whom who are enabling the president with their sycophantry or showing up to premieres or giving money for a new White House or whatever it is. Your free gift with purchase here is that

• 58:51Scott Galloway?

  a small number of companies have a big impact on the S and P. So a small amount of action, canceling Apple TV+, canceling your Amazon Prime just for the month of February, going to one streaming platform, having one LLM versus two, and being loud about it will get a lot of attention. And you're going to see national economic strikes, you're going to see a bunch of them, and they're going to about to become a static part of the resistance. And if you like what I'm saying, don't like and subscribe. Resist and unsubscribe. And by the way, that's our website, resistandunsubscribe.com or unsubscribe February. We have a list of the companies at ground zero that would have a disproportionate economic impact on the markets. And then we have something called the blast zone, and

• 59:33Scott Galloway?

  that's companies ranging from Home Depot to Hilton, who are kind of aiding or participating in the support of providing infrastructure to ICE. And anyways, prediction, national economic strikes are about to become the new technology of pushing back on what I think are fairly upsetting policies of terror and anxiety in the United States.

• 1:00:00Ed Elson?

  This episode is produced by Claire Miller and Alison Weiss. Mia Silverio is our research lead. Our research associates are Isabel Kinsel, Dan Shalon, and Kristin O'Donoghue. Benjamin Spencer is our engineer. Drew Burrows is our technical director, and Catherine Dillon is our executive producer. Thank you for listening to Prof G Markets from Prof G Media. Tune in tomorrow for a fresh take on the markets.

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