Investors Are Turning Against Data Centers (Here's Why)

Scott Galloway and Ed Elson break down why the data center buildout is making Wall Street increasingly anxious and examine some of the risks facing the industry. Then, they turn to Netflix’s struggles this year, with Scott explaining why he remains bullish on the stock despite its recent decline. Finally, they discuss Oura’s upcoming IPO, the concerns surrounding the company, and whether they’d want to get in on the offering. Subscribe to the Prof G Markets Youtube Channel 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. 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.

• 0:01Ed Elson?

  Support for the show comes from AlphaSpace by Yahoo Finance. AlphaSpace by Yahoo Finance is the advanced investing platform you've been waiting for. My co-host Scott Galloway is a fan of the platform. Here is what he had to say.

• 0:14Scott Galloway?

  So I have been using Yahoo Finance as my portal for finance for, I'm not exaggerating, about 30 years. I think they do a great job.

• 0:23Ed Elson?

  You can explore AlphaSpace with a Yahoo Finance Gold subscription. And right now, your first year is 50% off. Head to yahoofinance.com/profg. That's yahoofinance.com/profg. Bill, there's $239.70 for the first year, then $479.40 thereafter. Offer valid for new subscribers in the US. Offer ends October 31st, 2026.

• 0:51Speaker 02

  Exchanges on the M&A and IPO landscape. Exchanges on the dynamics affecting global trade. For the sharpest analysis on finance, business and the economy, count on Exchanges, the Goldman Sachs Podcast. Listen now.

• 1:07Speaker 03

  If you're looking to hire, you need Indeed. With Indeed sponsored jobs, you can spend less time searching and more time actually interviewing candidates who check all your boxes. Less stress, less time, more results. And listeners of this show will get a $75 sponsored job credit to help your job get the premium status it deserves at indeed.com/podcast. Just go to indeed.com/podcast right now and support our show by saying you heard about Indeed on this podcast. Indeed.com/podcast. Terms and conditions apply. Need to hire? This is a job for Indeed sponsored jobs.

• 1:51Scott Galloway?

  Today's number 40. That's the percentage of global container exports that come from China. Ed, this morning I decided to play Frisbee with my youngest and it kept getting bigger and bigger and I couldn't figure out why. And then it hit me.

• 2:15Scott Galloway?

  It's kind of cute, right? It's kind of cute.

• 2:18Ed Elson?

  Dad jokes 101.

• 2:19Scott Galloway?

  Does it make you want to have kids?

• 2:20Ed Elson?

  Absolutely. I can see it now. Frisbee in the backyard, playing catch. I'm already, I'm already very excited.

• 2:29Scott Galloway?

  Yeah, them screaming, I hate you and not coming home and you're up late worried. Yeah. Yeah, that's part of it too, just so you know.

• 2:36Ed Elson?

  Rich.

• 2:37Scott Galloway?

  Just so you know.

• 2:38Ed Elson?

  Oh damn, okay. It's not what they advertised.

• 2:41Scott Galloway?

  I'm having such a nice time. My son, as you've probably heard, is a freshman at college and I call him every day to relive college. I'm having such a, I'm back at college.

• 2:51Ed Elson?

  You're calling him every day? Let's ease up on that.

• 2:53Scott Galloway?

  I speak to both my sons every day.

• 2:56Ed Elson?

  Wow. And maybe, maybe I just don't, don't speak to my parents enough or didn't speak to my parents enough.

• 3:02Scott Galloway?

  So I think what you're saying is your parents didn't give you enough love.

• 3:04Ed Elson?

  No.

• 3:05Scott Galloway?

  No. It's kind of my, I think of it as my, I do it a couple, for a couple, well, I'm virtue ignoring right now, but it's good. I think it's more for me. It lowers my blood, blood pressure to hear my boys' voices. But I think that, yeah, I think it's good for both of us.

• 3:23Ed Elson?

  You're probably right. I'm probably being quite unfair.

• 3:27Scott Galloway?

  And it's not like a long drawn out conversation where I give them a lesson about interpreting Odyssey for their life. It's, it's, hey, what'd you do today? How'd you do on the biology test? Bitch, you're not working. I'm paying for everything and you need to do better. And then, you know, who, who are they playing this weekend? What's going on? All right. Have a good rest of the night. I love you. As long as it's quick and crisp.

• 3:48Ed Elson?

  Yeah, you're right. Because actually I think one of my problems with my conversations with my parents is we don't talk for a while and then each phone call, you know, it's going to be like a 30 to 45 minute thing because you, there's so much context that you've got to catch up, catch them up on. So yeah, maybe that's the solution. Just sort of like a one minute check in daily. It sounds like a lot though, but maybe it's good.

• 4:09Scott Galloway?

  Oh, it's such a good hack. It's pick up the phone, what's going on? What are you doing? It's such, it's like a, I'm serious. It's like an anchor for me emotionally and mentally, just hearing their voice quickly. And occasionally they don't answer, so I just call back like an obsessive girlfriend. I'm like, there's no hiding from the dog. There's no hiding from the dog. And then I start texting them and I'm like, you know, I haven't paid your tuition yet. Pick up the phone.

• 4:38Ed Elson?

  Do you schedule the phone calls or are you just spontaneous?

• 4:42Scott Galloway?

  I try and do it around the same time so I know that they're free. I find, I try and do it kind of like a little bit before bedtime, sort of as a, I like the idea that our conversation are the last things they, they do. But you know, my dad had a similar practice with me. On the dot, every Winter Olympics, he would check in.

• 5:00Ed Elson?

  That's good. He was consistent.

• 5:06Scott Galloway?

  Every four years. When, how are you, how are you doing, you oatmeal savage? Who is this? Dad? Dad?

• 5:14Ed Elson?

  I like that. Every four years. Maybe there's a happy medium.

• 5:18Scott Galloway?

  No matter what, Ed.

• 5:19Ed Elson?

  No matter what. Well, I was judging at the beginning, but I think you've turned me. I think you're right on this. I think every day is good. I think it's healthy. Quick, brief check-ins. I like it.

• 5:28Scott Galloway?

  If you wanted to do something, especially if you're a mom, just call her every day for 30 days and freak her out. She won't know what's going on. Hey, just checking in. Hey, just checking in.

• 5:38Ed Elson?

  Everything good?

• 5:40Scott Galloway?

  Yup. I'm at that age now where I'm so anxious. When my friends call me, I'm literally like, they pick up and I'm like, who's dad? It's, it's, but no, just, I would love, actually, this would be a great experiment to, hopefully, I imagine, your parents sound like really bright and interesting and discerning, so I doubt they listen to this podcast. But I would love an experiment. Call your mom seven days straight and don't, you know, don't, not, what's up? Oh, nothing. I just wanted to check in. Do that seven days straight and then report back.

• 6:12Ed Elson?

  Yeah, I think it's a good idea. Now I'm feeling bad about how often I call my parents, but that's probably a good thing. Something to reflect on.

• 6:20Scott Galloway?

  Well, it's not like they gave you life. I'm totally flipped. Now that I'm the parent, I'm into guilt trips.

• 6:29Ed Elson?

  I think it's good. A little, little bit of guilt is probably, probably pretty healthy.

• 6:33Scott Galloway?

  All right, let's talk about data centers.

• 6:35Ed Elson?

  Let's do it. We've got a lot to get into here.

• 6:46Ed Elson?

  The data center build out is starting to make Wall Street anxious. Last week, Oracle sent a force majeure notice to the developer of its data center project. The company wants the option to delay payments if the data center is not operational by 2028. That news sent Oracle stock down 5%. Meanwhile, several other companies tied to the data center industry have delayed their planned IPOs. One of them is SB Energy, which was supposed to go public this month, but according to the New York Times, its bankers couldn't find enough buyers at the company's targeted valuation of $50 billion. The company is reportedly waiting to go public until investor sentiment towards data centers improves. And it's not alone.

• 7:31Ed Elson?

  Whole Tech Nuclear is also postponing its IPO indefinitely. And AgriCo, I think I'm pronouncing that correctly, is delaying its own timeline. So Scott, a lot of issues in data center land. We have SB Energy, which is quite literally a data center company by definition, was supposed to go public. It's now delaying that. We will get into that in a moment. Whole Tech, this nuclear services company that also delayed and according to the CEO, it's because the business is quote, viewed as connected to data centers. AgriCo, which is this generation company, also services data centers, also delaying. And then the big news, Oracle sending a notice to the developers of Project Jupiter, one of its biggest data center projects.

• 8:15Ed Elson?

  And they cited what is known as this force majeure, which is essentially this legal maneuver that is designed to relieve you from any liability, any obligation if some event happens that would prevent you from fulfilling your agreement. And a lot of people, I think, are correctly interpreting that as Oracle isn't sure that this whole data center build out is actually going to work out. So what happened? Oracle stock falls 5%. Blue Owl, and those are the guys that are financing the development of this data center, that stock fell 7%. So a lot of risks to the data centers, a lot of delays, a lot of red flags. What do you make of this?

• 8:51Scott Galloway?

  The only edit I would have is I think force majeure is like force of God, like something like an earthquake or a war, right? Where you have a legitimate reason to say, okay, this is just not normal business, standard operating procedure, and I should have an out here. So the framing here, or the question is, is SB Energy the canary in the coal mine? And I would argue that it's, it's the canary asking for a $50 billion valuation on a mine that hasn't even been dug yet. And if Anthropic and OpenAI are having to delay their IPOs, there's just a ton of second-tier septic tank AI.com AI,

• 9:34Scott Galloway?

  you know, pretending jazz hands AI companies that are not going to get out. And this company had no business going public. Let's just talk about the numbers here. Two hundred and fourteen million in revenue, down eight percent. So that's, I'm sorry, at fifty billion. They wanted to go out at two hundred and thirty-four sales for a company that's, revenues are declining. Zero operating AI data centers. This is just fucking ridiculous. This is, and I love that the markets are just gag on this thing. Only about nine percent of contracted capacity is under construction. Essentially, what they're trying to do here is they're trying to get a fifty billion dollar valuation on a PowerPoint with a SoftBank logo.

• 10:18Scott Galloway?

  And if you compare it to, I think the closest company would be Solar, it's worth about one point two billion. So credit to them for Adam Newman-like salesmanship, trying to elevate the world's consciousness or decrease it enough such that they could fool people into paying two hundred and thirty-four times sales for a company that's declining. The kind of the bigger story and the more important story is this kind of quote-unquote Oracle's force majeure. That's, that's an act of God clause. And when Oracle invokes force de majeure, what they're really saying is that the God is credit markets. This isn't an existential event. This is the market saying, you're out over your skis.

• 11:03Scott Galloway?

  And that is, this might be the dark fiber of this cycle. In the dot com buildout, telecoms laid tens of millions of miles of fiber. You weren't around, but this is generally what happened. B to C, pets.com, oh, wait, that's not working. Oh, wait, B to B, internet capital, oh, wait, that's not working. Well, I believe in the internet, so just invest in the infrastructure. Invest in the steel in the ground. And all this money piled into Global Crossing and Cisco. And those things lost, if they didn't go bankrupt, lost ninety percent of its value. And it wasn't that the fiber wasn't wrong. It was just early. And it's the definition of wrong when it goes on a balance sheet.

• 11:47Scott Galloway?

  The physical world is the real friction risk here. And that is forty-five projects where sixty-eight billion dollars were blocked or delayed in three months and thirty to fifty percent of this year's capacity is facing delays. One of the most powerful entities in this AI story right now is a senior citizen who's angry and doesn't have a lot, you know, has a lot of time showing up at a town hall. So the IP window is to tell, private markets lie and public markets don't. Private markets can have stupid marks. Public markets have granular marks and will say, no, we're not, we're not buying this. We're not going to let you wave your AI hands over this and turn this chicken shit into chicken salad.

• 12:32Scott Galloway?

  And when the bankers can't find a book, it means the smart money has stopped buying the story and, and, you know, wants to see actual progress. That the K-shaped economy is a decent metaphor for AI right now or the AI trade. And that is, one has cash flow like Nvidia and the hyperscalers. And the other has quote-unquote potential like SB Energy, Whole Tech, the Neo Clouds. And, and the second group is about to get very familiar with the term cost of capital.

• 13:05Ed Elson?

  Yeah, it's kind of halting that investors aren't buying this BS.

• 13:10Scott Galloway?

  Agreed. I like this.

• 13:11Ed Elson?

  It is BS. I think SB Energy is like the perfect example. Here is this sort of declining solar business that decided now we're going to get into data centers. They say that they have all these data centers, except they don't have any data centers. They have zero data centers that are operating. As you said, nine percent are under construction. The other, more than ninety percent haven't even broken ground. They keep on talking about this multi-hundred billion dollar revenue backlog, but then you kind of dig in and you realize, hold on, none of this is actually going to materialize within the next two, five, even 10 years. And then you start to realize this thing doesn't make any sense, especially at fifty billion dollars. And that is the problem. It's like, okay, your business is a nascent business. It's very speculative.

• 13:55Ed Elson?

  There's a lot of risk. Let's see that reflected in your price. But they refuse to do that. They say, no, we're worth fifty billion dollars. We're worth more than two hundred and thirty times sales. We're going to go out and we're going to do this thing. And you, you hope that people look at it and go, no, thank you. This doesn't make any sense. And that is exactly what happened. They were rejected clearly when they tried to shop this thing around on Wall Street. And it seems like investors are kind of understanding what the BS here actually is and what to look for. And we're seeing it across the board here. We're seeing it with all of these other companies. It might be what we're seeing in terms of the OpenAI delay. I mean, it's not totally clear why they're delaying. We know that Sam Altman said that he didn't think that it was the right time.

• 14:39Ed Elson?

  But I think probably what he's realized is we're in an era where investors are actually quite discerning at this point. They're not just going to gobble up your BS no matter what. And I think there are multiple dynamics here that are playing into this data center buildout risk. One of them is more of a technical risk, which is I would say that constructing these things is actually quite difficult. And financing these things is quite difficult because the input prices are very volatile. You have the price of memory and the price of energy and the price of GPUs and liquid natural gas. And these are all multi-year projects that can basically be terminated if they're late by even a year. So that's already a difficult thing to deal with.

• 15:23Ed Elson?

  And it seems like a lot of data center companies are just pretending that that risk doesn't exist. Then you also have, as you point out, this demand-supply problem, which is that similar to nineteen ninety-nine, we actually don't know what the demand will look like. A lot of people are just saying stuff. They're putting their PowerPoint decks together. They say, demand's going to go like this. We're going to have huge CAGR. It's going to be incredible. But of course, no one actually knows. And there is a high likelihood, a high probability that we will overbuild, we'll have too much supply, and then suddenly you won't be able to charge the lease rates that they're charging today. And suddenly the economics don't make sense. That needs to be recognized. And then the third thing I think is the most important, which you mentioned, is that America hates this stuff, just flat out.

• 16:07Ed Elson?

  Seventy percent of Americans oppose a data center in their neighborhood. This is becoming the issue. It's becoming almost like the midterms are a referendum on AI. Every politician needs to have an AI strategy. And it seems like most of them are just going in a direction of, it's bad. I'm going to be against it. I think that, I mean, maybe the exception would be the president. He's been very pro-AI. But clearly, this is going to be a problem. And I just want to point you to a quote from the CEO of CoreWeave, which is another one of these NeoCloud companies. And to me, this really encapsulates, Mia found this quote, this really encapsulates the problem here. He said on the Q2 earnings call, he said, quote, "We feel like moratoriums are not going

• 16:49Ed Elson?

  to impact the demand for this infrastructure," which to me is like a massive vote of no confidence because clearly this has become a problem that is too large to ignore. And yet, a lot of these leaders of these data center companies are ignoring it. They're saying it's not a problem. AI is going to be great. The moratoriums won't be a problem. Clearly, this is something that needs to be actually addressed. And if you want to inspire the confidence of Wall Street, then you need to acknowledge the elephant in the room and explain and lay out exactly how you're going to address it. I don't think these companies are doing that. And I think that is why they're getting punished when they try to go to Wall Street and they try to take these things public.

• 17:28Scott Galloway?

  The question is, is this the beginning of the correction or just a bump in the road? Like, this company trying to get public and not being able to get public, which is a good thing. And then people just highlighting how ridiculous some of this shit is, is it feels very ninety-nine to me. It feels very, when we looked at some of this stuff and said, okay, this just doesn't make sense, that felt like a key component of pre-stage crash, that finally the market says, no, no, this is, you know, even we aren't this stupid.

• 18:05Ed Elson?

  Yeah, part of me wonders, though, is that a bearer signal or is it perhaps even a bullish signal? Because it might say that we're in a healthy market where the skepticism is now being priced in. And I, I'm actually not sure where I stand on this, but one thing that I've been looking at, which I think is quite interesting, is Nvidia's valuation right now. And Bloomberg just wrote a whole article on this, which I thought was very good, pointing out that on a forward earnings basis, Nvidia is trading at seventeen times earnings, which is its lowest level in more than a decade, down from thirty-two in twenty twenty-five.

• 18:43Scott Galloway?

  That's just wild.

• 18:44Ed Elson?

  So I can't tell, I mean, I think there are a lot of things in that, in that price. I think that what we're seeing priced in is the fact that Nvidia has been the largest player in terms of GPUs. And now they have a lot of competition and Google's building chips and Amazon's building chips and all these companies are also competing with them. And so it seems as though their moats are beginning to narrow. But I also wonder if we're starting to see the skepticism priced into the broader market. And I'm not sure, I keep going back and forth on this because I'd kind of want to see it come down a little bit more. I mean, if we look at the trailing PE, it's a little bit of a different story, but, you know, still similar.

• 19:29Ed Elson?

  The trailing PE is down to twenty-eight times earnings. I mean, it's down from fifty last year. But that's still higher than the S and P average, which you'd expect for a company like Nvidia. But I think that there is a question here of to what extent are investors pricing this into the most important and systemic stocks in the AI trade? And Nvidia, to me, is the metaphor for the AI trade. And on a multiple basis, it's, it's trading down and the earnings are rising way faster than the stock itself. So I don't know. Do you have any views on that? I'm, I'm personally a little torn. I always think maybe this is a buy, but I'm not, I don't know if I'm there yet.

• 20:11Scott Galloway?

  Josh Brown is, you know, he said Nvidia's, I think Nvidia has been the best thing that happened to Ritholtz Wealth Management. And to Josh's credit, I think he was in it really early and it's, you know.

• 20:22Ed Elson?

  Yeah, it was one of his bedcoals.

• 20:23Scott Galloway?

  He's up like ten thousand percent on it. You know, the P ratio looks, it makes the stock look cheap. The problem is certainty around those earnings.

• 20:32Ed Elson?

  Yes.

• 20:33Scott Galloway?

  Because you have a company that seems to be engaging in a lot of seller financing and circular deals. And it feels like the first place as people, if, if the unbelievable expectations around the business required to justify this capex doesn't keep doubling every 60 or 90 days, it's logical to think that people will scale back their capex. And at the tip of the spear, that really feels that pullback would be Nvidia. At the same time, if you were going to do a play in the AI space, I'm not even sure I would do a basket of AI because I feel like there's so much crap in it right now. It's like when, when I talk about buying a basket of Chinese stocks and Aswath says,

• 21:17Scott Galloway?

  don't do that because there's so much crap. You do need to be a stock picker. It does feel like Nvidia is Manhattan real estate. And that is in good times, it goes up 20% and bad times, it goes down eight. It's just not, it feels like Nvidia is a safer play. And to your point, I mean, is Nvidia like Facebook or Meta where it has all these existential risks, but we all wish we'd bought in when it was trading at these multiples of earnings, right? So in the honest answer is I don't know. But to your point, if I were going to put money into the AI trade, and I haven't, and I'm just furious because I'm one of these guys who missed the whole thing and kept saying, it's too expensive, it's a bubble. And then it triples.

• 22:02Scott Galloway?

  That feels like going, going to Malibu beachfront real estate, which is, you know, they're the, they're the class of the whole thing. They're, they're the ground zero of this and it's well run. Jensen is a great promoter. He comes across as somewhat earnest as he tries to convince us that it's in our best interest to sell China our most advanced GPUs, which in my opinion makes absolutely no sense. But I'm sympathetic to the notion that there might be, you can see Nvidia doubling from a P perspective. The question is, can you imagine an eight or a $10 trillion company, right?

• 22:44Scott Galloway?

  So it's, but I, I agree with your sentiments that if you were going to, if you probably were going to put fresh capital into the public markets because you don't have access to the private markets, it does feel, I don't want to call it cheap, but less insane than some of this other crap.

• 23:00Ed Elson?

  Yeah. I mean, if you were trying to get into the AI trade and you had a choice between investing at Nvidia here or investing in like the Anthropic IPO at $2 trillion or whatever the number's going to be for the OpenAI IPO, to me, I'd say this is your pick, hands down. Because it has gotten somewhat punished. I mean, I think this goes to what we've been saying about where the bubble actually is. This is not a comprehensive bubble that is, that is afflicting the entirety of the market. The bubble seems to be, there seem to be multiple bubbles in little pockets of the market, including, I would say, the private markets, especially OpenAI. Granted, we'll see when they go out to the public markets.

• 23:43Ed Elson?

  And as we've, as you've said, the public markets are a lot more discerning than private markets. In a lot of ways, you'd say that the public markets are the smart money compared to the private markets, which might be the dumb money, which will just eat anything up. But I do think that that's going to be the dynamic to watch. And you also brought up the, the durability of forward earnings, the credibility of forward earnings. That to me is a really big question. I feel like we take forward earnings as a given. We just assume that it's just, it always happens and that we should trust it. But I think with numbers this large, and when you do have Oracle going to its largest developer and saying like, hey, if something happens, just count us out, please.

• 24:28Ed Elson?

  And what actually is the definition of an extraordinary exogenous event? Yeah, it could be like an earthquake, could be a pandemic, or as you say, it could be related to their credit rating. It could be something that actually is not that extraordinary, given the circumstances that we're seeing financially with the company. When you have all of that, that really calls into the question, the credibility of the earnings that we're supposed to see in the future. And so I think that there's a lot of uncertainty with this right now, a lot of risk, but it might be priced in. The investors might, that might be why the multiples come down so significantly. But it's definitely a toss up and it's really interesting.

• 25:10Ed Elson?

  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 on YouTube, Spotify, or wherever you get your podcasts.

• 25:28Scott Galloway?

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• 26:12Scott Galloway?

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• 27:07Ed Elson?

  Support for the show comes from AlphaSpace by Yahoo Finance. Instead of bouncing between countless tools and tabs to manage your portfolio, AlphaSpace by Yahoo Finance brings your entire investment workflow into one easy to use platform. AlphaSpace by Yahoo Finance utilizes a Yahoo Scout powered assistant to build a personalized view around exactly what you want to analyze, then syncs it with your portfolio for real time tracking. You can compare multiple tickers, explore everything from candlestick and line charts to fundamental data, and layer in indicators like moving averages, Bollinger Bands, RSI, MACD, and more. My co-host Scott Galloway is a fan of the platform. What did you think of it, Scott?

• 27:49Scott Galloway?

  I have been using Yahoo Finance as my homepage for finance, or for the web, actually, for 30 years. And as someone who has advised hedge funds, run my own money, prides themselves on being good at investing, and it takes up a big part of my life, I think they do a fantastic job.

• 28:10Ed Elson?

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• 28:42Ed Elson?

  We're back with Prof G Markets. There has always been one company that seemed destined to win the streaming wars, and that company is Netflix. But this year, that certainty has faded. Netflix stock is down more than 40% over the past year, and the company just received two analyst downgrades within a week. Both analysts said growing competition from YouTube and declining engagement were weighing on the stock. Meanwhile, Disney Plus and Hulu are raising their prices for the full time in four years. The biggest increase will be to the ad free tiers, which will cost 13% more than they did last year. The latest example of what people are calling streamflation, as streaming services continue to raise prices while consumers have more options than ever.

• 29:24Ed Elson?

  So Scott, Netflix has gotten crushed, down more than 40% in the past year, down more than 20% year to date. It just received two downgrades on Wall Street in the span of a week. Wells Fargo cut its price target to 57. It's at 71 right now. HSBC cut it to 76. So actually, that's a hold, but they still cut. This has been a disastrous 2026 for Netflix. And of course, this is happening while Paramount has just settled and essentially has gotten the green light to go ahead and acquire Warner Brothers Discovery, which Netflix wanted at one point, and they seems to be in that auction.

• 30:09Ed Elson?

  Now they're out for sure. What do you make of Netflix getting punished?

• 30:13Scott Galloway?

  I got this wrong when I saw, I saw Ted Sarandos and the head of, oh gosh, I'm blanking on her last name, Bella, like super impressive woman who oversees a $17 billion content budget. And I said to them, you, you know, you dodged a bullet here. You've now got $120 billion to go, you know, acquire Disney or massively increase your content creation calendar. And the stock is just plummeted, which is, which caught me off guard. I think that essentially this isn't about Netflix's underperformance. It's about that this indicates what I believe is just a structural shift in the way we

• 30:57Scott Galloway?

  consume content and the subsequent shareholder value that's able to be captured. Specifically, their problems can be summarized in two words. The first is you and the second is tube. YouTube is now, the most important media company in the world doesn't make any content. It commands 14% of US TV usage. I mean, think about what YouTube's done. They've built the world's largest studio.

• 31:24Scott Galloway?

  But managed to outsource the payroll to 20 million creators. I mean, this business model is just, it's very hard to compete with. And you want to talk about a decline in fortunes. Netflix has lost more market capitalization from its high than Paramount is paying for all of Warner Brothers Discovery twice over. The market, while we're all obsessed with the Ellison's and Warner Brothers Discovery and Rob Bonta announcing he's running for governor with this pure stupid regulatory theater of trying to like block them or all that distraction. The market just erased two Hollywood studios from Netflix's market capitalization. And hours are up 2%, but content is up, spend is up 10%.

• 32:09Scott Galloway?

  So that's a negative arbitrage. When you spend 10% more to get 2% more attention, your attention arbitrage is negative, right? And then what you have is 58, with Gen Z, 58% spend more time on social video than streaming. So the competitor here isn't Disney Plus. It's a 19 year old with a ring light. And streamflation, you mentioned that word. It's kind of like bundle recidivism. We cut the, we cut the cord to avoid, for some reason, I ended up paying $300 for my cable bill in New York. But we've, we've rebuilt the bundle one app at a time with worse user interface and forced four price hikes in a year. And it seems to have hit, hit a wall.

• 32:55Scott Galloway?

  I've always believed these guys have pricing power, but what it may be is that it's like a restaurant raising prices as the, as the room empties. And I, I still think Netflix has probably the strongest management team in what I'd call traditional media. But there is a structural shift that they can't, I don't care if they come up with the next K-pop demon hunters or whatever the, whatever the, you know, the, the next hit is. The way we consume media is moving towards a model of shorter form content with a host, with millions of creators who all have their own trailer, their own production values.

• 33:39Scott Galloway?

  It's just such an, it's just such an unbelievable model to figure out a way to get other people to pay for your content. And you just put a, a thick layer of innovation on top of it. And again, my idea, and I pitched it to Ted Sarandos three years ago, was something called Net Vibes. And I said, take the 98% of your content that gets 2% of the watch time, you know, it's, it's a hit driven business. And make it open source and let creators slice and dice, add different music, create different storylines and then repost it. But they need to do something that feels more YouTube and TikTok because I think going to the hits of trying to come up with the next Game of Thrones.

• 34:23Scott Galloway?

  I, I think that's going to be a tough one.

• 34:25Ed Elson?

  I have long felt that traditional streaming is just a terrible investment for a lot of the reasons that you described. And you know this about me, I've said on the podcast, I mean, I've been bullish on YouTube for years now. Because it has this very different identity, its genetics are very different from Netflix in that it, it benefits from network effects. It is in a lot of ways, a user forward social media platform where they, as you say, that they're not paying to create all of the original content. The users are doing all of the original content for free. And you, all YouTube has to do is sit there, make sure that their algorithm works. And by the way, their algorithm is excellent. And I think that is a big reason for why a lot of people are, are watching on YouTube.

• 35:11Ed Elson?

  And it, we're users or creators on the platform. It works for us. I mean, we have invested significantly in YouTube and it pays off for us. We're, we're, we're increasing our downloads, we're increasing our views, we're still able to monetize that. And so the YouTube model works for us. And yeah, we pay a, a pretty significant cut on the AdSense revenue, but it still works for us because we're monetizing in video ads at the same time. So to me, I, I think YouTube has just crushed it on every level. And the way I think about streaming, I, I don't see any moats in traditional streaming aside from having better, more original content.

• 35:54Ed Elson?

  And to me, that is an almost impossible moat to operationalize. So I've long felt we should only be investing in these companies at valuations that reflect that, that lack of moat. I think they, that we should be demanding significantly lower multiples. And I, I'm, I'm going to take a semi victory lap here because last year I officially realized like Netflix was overvalued. And I don't know if you remember this, but there was that, that article that came out that Netflix was internally talking about how they wanted a trillion dollar valuation. And I don't know if you remember what happened after that, but the stock ripped because suddenly investors were like, oh my God, look how ambitious the management at Netflix is. They want to go for a trillion. What does that mean?

• 36:39Ed Elson?

  What does that say? I was looking at the stock at $120 per share in July of 2025. Here is what I said about it.

• 36:51Ed Elson?

  Netflix is now valued at roughly the same multiple as Nvidia and a higher multiple than Apple and Google and Meta. But Netflix, unlike those companies, isn't diversified. It doesn't have a hardware business or an ad empire or a cloud platform. It has one product, streaming. And in that world, it's even being outcompeted where it matters most, time spent. In the past year, YouTube has increased its total share of US streaming views by roughly three percentage points. Meanwhile, Netflix's share actually declined slightly. And now we're trading at $70 a share. So it's come down basically 40% since we put that episode out.

• 37:33Ed Elson?

  I think the question now is like, has it been punished enough? I mean, we're, we're looking at 22 times trailing earnings.

• 37:44Ed Elson?

  There are other banks that are actually overweight Netflix. Evercore, their price target is 110, BMO's price target is 135. The average on Wall Street now is 94. So that would imply more than 30% upside from here.

• 38:01Ed Elson?

  So, you know, maybe now's the time. My personal view is I think that it still has room to come down. I just, I, I'm not, I'm not excited by, by this business. And I just think it's such a tough business to be in. The churn rates, the fact that you have to spend all of this money on original content, the fact that they're not benefiting from the network effects that YouTube clearly is. I just don't see that them in a structurally sound position to grow in the way that Wall Street wants them to.

• 38:32Scott Galloway?

  So what I sense in your comments is what I suffer from. And one of my biggest flaws as an investor is no matter how cheap something gets, I think it's going to get cheaper. I, I look at it, stocks get cheap because they're facing structural or cyclical headwinds. And you think, wow, it's going to get cheaper. I didn't want to buy a house in, in Delray Beach because I'm like, oh, recession is coming. And my partner forced me to buy it and it's tripled. You know, it's just, it is very hard to pick the bottom. The reason why I'm actually looking at Netflix stock is that you always got to look at valuation. You basically made this, made the case of like, look, it's a great business and it's overvalued. It's trading like a growth software company and it's not, and it's, it's more vulnerable than the valuation would imply.

• 39:16Scott Galloway?

  And you were right, the stock's almost been cut in half since then. The multiple has compressed from 12 to six times sales. And it's essentially the, one of the best media companies in the world, or arguably the best media company in the world. If you think of media companies actually creating content and it's trading like a cable company. And in, in more broadly, I think of Netflix as the best run company. That is essentially the operating system for entertainment. And that is, it is the home screen for so many TVs now that they just have so much influence. When I, when I heard that they were getting into podcasting business, I thought, okay, how's that going to impact us?

• 40:00Scott Galloway?

  Because effectively anyone, any podcast they put on their home screen becomes one of the 10 biggest podcast companies in the world. And similar to Apple or Instagram's become an operating system, they are kind of the starting point or the homepage for entertainment. They have an incredible management team and an incredible content machine. They're going to have to do something, they're going to have to, to come, come up with some sort of product innovation around, around the clipable economy or clip economy, what you call it. Their ad sales business has been stronger than I think I'd anticipated. And is a, you know, is, is now, I think, responsible for a large portion of their signups at a lower cost.

• 40:43Ed Elson?

  Yeah, that was a good move.

• 40:44Scott Galloway?

  I just don't think you want to bet against this management team and those 350 million households that start their relaxation time on their home screen. I'm, I actually am quite bullish, I think, on Netflix right now.

• 40:58Ed Elson?

  Okay, I, I like it. We, we disagree, but I, I see your point and I think it's fair.

• 41:03Scott Galloway?

  You think it's got further to go down?

• 41:05Ed Elson?

  I'm not super confident, but what I know is that I don't want to buy it.

• 41:09Scott Galloway?

  There you go.

• 41:10Ed Elson?

  I, I just, I don't like the long-term prospects of the company. I, I could see, but you know, I don't think that it's got much more. I, I don't think it's going to increase significantly this year. I'll, I'll say that, maybe we can check in at the end of the year.

• 41:23Scott Galloway?

  But the more interesting conversation is, can you link your bearish sentiments on Netflix to the fact that your parents don't love you?

• 41:34Scott Galloway?

  I've been waiting for several minutes for an opening there.

• 41:36Ed Elson?

  There are all these internal biases that I need to figure out before I start assigning price Oh, trust me, boss. You're gonna need a bigger boat. When I try to suss out like all

• 41:47Scott Galloway?

  the dysfunction in my life from the bad decisions I make, that is, that is, that is a long walk through a crowded forest.

• 41:54Ed Elson?

  Maybe I need to go to therapy before I start talking about stocks again. Maybe that's what the.

• 41:59Scott Galloway?

  I went out to dinner last night. I'm in Aspen and I'm walking home and there's a bear and I honestly, I had to ask myself, have I finally lost it? Am I hallucinating? Is this like, is this that moment where they take away my driver's license and?

• 42:14Ed Elson?

  That's even scarier than thinking it's a real bear. That's, that's a terrifying thought.

• 42:19Scott Galloway?

  That's what I thought. I thought, okay, is that really a bear or I might find we just fucking lost it.

• 42:25Ed Elson?

  That's amazing.

• 42:27Scott Galloway?

  And it was a real bear.

• 42:28Ed Elson?

  Good. That's great.

• 42:29Scott Galloway?

  There's bears everywhere over this town right now.

• 42:31Ed Elson?

  I'm so glad it wasn't an illusion. Uh, just the final comments here. Um, we're about to see a different world in media because Paramount is going to buy Warner Brothers Discovery here. Um, because we saw this Paramount settlement, uh, essentially David Ellison won. I'm just.

• 42:52Scott Galloway?

  Yeah. Define one. Talk about the dog catching the car. Anyways, go ahead.

• 42:57Ed Elson?

  That might mean something for Netflix. I think you made an interesting point, which is your point to Netflix was like, okay, now you have like a hundred billion dollars to spend on something else. I, I think that the, one of the reasons they've been punished so much is because investors hated what seemed like a lack of ideas from Netflix and the fact that they lost in a, in a battle that they wanted to pursue. I think investors said, why are you doing that? You're, we thought that you were so confident that you're going to become a trillion dollar company and now you want to go spend a hundred billion dollars trying to buy Warner Brothers Discovery. What does that say about your vision for the future? Probably nothing good. Um, but these things are all related. Paramount, they're

• 43:42Ed Elson?

  gonna merge. So how does that change things for you, if at all?

• 43:45Scott Galloway?

  I don't think Netflix's competition is a Warner Brothers Paramount. I think it's YouTube. And if, first off, Rob Bonta trying to block this thing is ridiculous. All of a sudden he's decided he's Lena Kahn and he should be evaluating. And my favorite was the settlement. Have you, did we talk about this? They have to put together an editorial board?

• 44:08Ed Elson?

  We, you and I did not talk about it, but talk about it. Cause it's, it's fucking ridiculous.

• 44:13Scott Galloway?

  Well, I want to announce that Prof G Media is putting together an editorial board of Leia, my great dane, who will have more impact and influence on my editorial decisions than this board. He said, you can't sell your two lots. That's fucking socialism. Owners get to decide and companies get to decide whether they buy and sell. There was no reason to block this merger. If they, he had blocked this merger, Paramount would become a distressed asset, probably sold for parts. I mean, CBS News has no future as an independent company. It just producing quality journalism, which CBS mostly does, is, is a terrible value proposition. And it doesn't matter how good Landman is. This is now a business of scale. Warner Brothers

• 44:56Scott Galloway?

  Discovery is a great company with incredible IP that would have been fine, but it didn't have much of a future. They need, these guys need to bulk up against an already bulky Netflix and a bulkiest of the bulky YouTube. So that was ridiculous regulatory theater trying to get in the way of this merger and asking them, my favorite was, we want you to make more movies, guaranteed to make more movies. Well, okay, that's like, if JP Morgan and Goldman merged, do you force them to have more ATMs? Maybe they shouldn't make more movies. And, and also they're allowed to fire people. That's part of capitalism. So I, I think that was total, total BS.

• 45:33Ed Elson?

  I totally agree. You know, I, I would have been, I would have been okay with it if he'd actually achieved a decent outcome, but the fact that he goes out there, he says, this can't happen, and then gets basically nothing and then parades around as if he won something. It's like, oh, great. We're gonna get editorial oversight and who's gonna be in charge of the editorial oversight? David Ellison and Redbird Capital, the, the, the two entities that already control the company. So no, we're not getting any editorial insight. That's not a brag. You didn't win anything for free speech or democracy in any dimension. And then, yeah, then they just bring up this kind of BS stuff about, oh, now, now you, we're gonna make sure that you spend more in California, as if that's something that

• 46:14Ed Elson?

  ever mattered to Paramount in the first place. Like, none of that mattered. It was just such a, such a dismal failure on the part of Bonta and the AGs trying to act big, trying to act tough, losing and then pretending that they still won at the end of it. So I totally agree with you.

• 46:31Scott Galloway?

  I think Governor Newsom played a role here. I would imagine the governor stepped in and said, boss, California just can't be an AI story. We need our media ecosystem as healthy as possible. And Ellison started making noises about moving to Nashville, which I thought was, was probably also bullshit. But no billionaire son is gonna hang in Nashville. Nobody can, nobody can live large with that Ellison at Seymar go or go to, or go to San Vicente Bungalows in LA. Anyways, but this was, I'm glad the merger went through. My-

• 47:00Ed Elson?

  You're glad it went through?

• 47:01Scott Galloway?

  There's no reason, I believe in capitalism. These companies need to bulk up to compete against YouTube and Meta. They're not, they don't work as independent companies. So I'm, I don't like media consolidation, but I'm also a realist and a capitalist. They get to buy this, this combined company did not trigger monopoly law. They get to buy shit. And the faster, the only way you get people to hire is you let them fire if they want. So, and this was pure, pure theater. I, I, you know, I hope that, I hope that they can compete against YouTube and Netflix. We want a robust third player. And so I don't, I wonder how the, also, I don't know if you saw, but my other sister wife, podcast co-host,

• 47:44Scott Galloway?

  Kara Swisher is all over the news because she's like, I'm out of here. She's like, I'm leaving. I hate the Ellison's.

• 47:49Ed Elson?

  I think she always announces that she's about to leave. When is she gonna actually leave?

• 47:54Scott Galloway?

  I'm leaving. I'm like, wait, she's back. I'm leaving again. I'm like, she's leaving.

• 47:59Ed Elson?

  I love Kara.

• 48:00Scott Galloway?

  Just leave. Stop talking about it. I'm, I'm sure. Yeah. Okay.

• 48:03Ed Elson?

  She knows, she knows that it's a great story. That's probably what's going on.

• 48:08Scott Galloway?

  Well, I can't get over how much media coverage it's, it's received. Anyways.

• 48:12Ed Elson?

  It's a fun story, but I want to see her actually leave. Kara, leave. Let's see you leave.

• 48:17Scott Galloway?

  What I've said to her is, the Ellison's might fuck with 60 Minutes because quite frankly, 60 Minutes doesn't, I mean, journalists who all think they're really precious think that 60 Minutes is some iconic asset. Not really. 60 Minutes could go away and it doesn't really matter. It's a small business. It's $60 million. It doesn't make, I don't think it makes a lot of money.

• 48:37Ed Elson?

  Certainly making less money now with Ross in charge, but yeah.

• 48:40Scott Galloway?

  They can't fuck with CNN. CNN does 1.8 billion in revenue and 6 or 800 million in EBITDA. And when dad has 50 billion, is on the hook for 50 billion in debt, you gotta leave Fareed and Anderson and Smirconish and Danabat.

• 48:58Ed Elson?

  Do you think that'll happen? Will you lock in that prediction that there will not be a massive shakeup in personnel?

• 49:05Scott Galloway?

  Oh, no way. CNN is gonna look surprisingly.

• 49:10Ed Elson?

  He did it with CBS and he was down. You think CBS is less iconic and therefore he won't touch CNN?

• 49:15Scott Galloway?

  My guess is he gets, he offers Mark Thompson a lot of money to up his contract and says to everybody, call me if you need me, but I'm hands off here. If he starts fucking with CNN, I mean, the thing is a cash, is difficult a business as CNN has been, and it has gone down. It is still a cash gusher. And if they move away from that center left positioning, someone else will fill the void and just take that, those ad dollars. The Ellison's, I'm almost entirely convinced, like money more than they do GOP politics.

• 49:52Ed Elson?

  I don't know.

• 49:53Scott Galloway?

  There are much less expensive ways. With $50 billion, they spent $120 billion on this thing. With a billion dollars, they could swing three senate seats in, uh, in the midterms and have a lot more impact on politics. They're, I think they're capitalists at the end of the day. I don't, and I had the kid.

• 50:12Ed Elson?

  I just don't think that he's necessarily a very good one. I agree with you that I don't think this is his grand plan to take over the political conversation, spin things in his direction. But I do think that he thinks that traditional media is bad in its current iteration and is willing to do dramatic things to shake things up.

• 50:29Scott Galloway?

  That's different.

• 50:30Ed Elson?

  And I think that that's what we saw at CBS. I think he is gonna do something dramatic at CNN. I don't think it's gonna be necessarily cynical or pernicious. I'm sure it will be reported that way, but I think that he'll probably go in there and say, we don't need Anderson Cooper. We don't need this. Anderson might be, but not Anderson. I'm gonna take back Anderson. But I would imagine that he would, cause he's too iconic. But I would imagine that he does shake things up in the name of not political reasons, but in the name of innovation and a new frontier. And I would bet that it, it doesn't go down well.

• 51:02Scott Galloway?

  There's two things. There's product innovation. If he comes in and says, you know, we need to spend more capital on increasing the subscription model. I don't think he's gonna mess with the content. I, my prediction is he ups Mark Thompson's contract and tries to say, look, uh, you know, I'm gonna go make superhero films and go to Oscar parties with hot women. I think at the kid is center left. I don't think he's.

• 51:24Ed Elson?

  Yeah. He's donated to the Democrats. He's, he's not.

• 51:27Scott Galloway?

  Again, we're, we live in such a politically charged time that we see everything through the lens of politics. Journalists think they're sacred. They, they want the upside. They want private market economics with government or nonprofit prestige and protection. This is a business. The Ellison's have massively levered up. They overpaid. They cannot, they cannot fuck with Fareed. I mean, that's the bottom line. Uh, they've got a, they've got a hit. In my opinion, they're, they're gonna be hands off because they, they need that cash flow.

• 51:59Ed Elson?

  Let's make it a bet. Should we say within six months of the close, I would bet, I don't know who, but I would say that there would be a significant shakeup in the CNN talent pool. You, should we make that bet?

• 52:13Scott Galloway?

  Well, describe significant.

• 52:15Ed Elson?

  A couple of dream team superstars, I would say.

• 52:19Scott Galloway?

  Not by their doing. Those people might leave of their own volition, but I don't, okay, I'll make that bet. The Ellison's aren't gonna fire any of those people, in my view. No way.

• 52:27Ed Elson?

  Okay. All right. Let's, I, I think they will. Let's, let's.

• 52:30Scott Galloway?

  All right.

• 52:30Ed Elson?

  Let's lock it in. Six months from the close.

• 52:32Scott Galloway?

  I'm leaving. I've had it. Wait, she's here again. I'm leaving again.

• 52:40Scott Galloway?

  And I'm not saying anything I didn't say two hours ago on Pivot. Talk about a diva. Just leave. Okay, we get it. You're out. You don't like us.

• 52:52Ed Elson?

  Do it. Do it. Do it, Cara. I respect it, but do it.

• 52:57Ed Elson?

  We'll be right back. And for even more markets content, sign up for our newsletter at profgemarkets.com.

• 53:13Speaker 05

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• 55:19Ed Elson?

  We're back with Prof G Markets. Aura, the maker of the popular smart ring, is planning to go public this week at a $15.6 billion valuation. The company is looking to raise $2.2 billion, and the offering will be an important test for the broader IPO market. A weak debut could signal that investor sentiment is turning. If Aura succeeds, it could be a bellwether for another trend, growing consumer interest in health and fitness data tracking. The CEO of Whoop, the maker of the fitness tracking bracelet, recently said that his company is also targeting an IPO within the next 18 months. Meanwhile, Apple is reportedly developing a fitness wearable that could compete directly with Whoop.

• 56:03Ed Elson?

  So, Scott, Aura is going public.

• 56:08Ed Elson?

  I know that you have been looking into this company a lot. What do you make of this?

• 56:13Scott Galloway?

  Well, you know, do as I do, not as I say. I'm desperately trying to find shares in the IPO. I think this is, and this will be my prediction, I think this is going to be really well received in the marketplace.

• 56:26Scott Galloway?

  I went to dinner last night. Everyone around the table for half an hour talked about how much money we are spending on quote-unquote wellness, whether it's red light therapy, or the Wolverine stack, or saunas. I mean, people are spending so much money on fractal lasers and athletic greens and probiotics. Even people your age, young people rank mental and physical health above marriage and kids as goals by 35. And if you think about wellness being the new luxury in just a booming industry, how do you play wellness as a retail stock investor? There's just very few ways to play it.

• 57:10Scott Galloway?

  And Aura, in my view, is doing it correctly. Whereas Meta's tried to put a computer on your face and pretend it's jewelry, Aura is jewelry. And its customers are mostly women, three quarters are women, and two thirds earn over $100,000. Women who earn over $100,000 are the premier cohort, or they're the most valuable consumer cohort on earth, and the one that makes all the household purchasing decisions. 40% of subscribers come from word of mouth, which leads to really reasonable, attractive customer acquisition costs.

• 57:49Scott Galloway?

  Its valuation is fair. It's not cheap, but it's basically going out at about eight times revenue, somewhere between Garmin and Apple. But you're paying a multiple, a Garmin or Apple multiple, for a company that's growing 123% and has 83% renewal on its monthly subscription business, which is $6 a month. So in addition, and I wrote this up in No Mercy, No Malice, there is no company in the world that I can think of that has the fluidity of what I'll call first-party data. The most valuable companies in the world have first-party data. YouTube gets first-party data from you. Netflix gets first-party. Instagram gets direct first-party data.

• 58:30Scott Galloway?

  What other company in the world gets first-party data from its customers 23 hours a day?

• 58:36Ed Elson?

  Whoop, but yeah.

• 58:37Scott Galloway?

  I imagine a thin or a thick layer of innovation of AI on top that says, okay, Scott, we've detected a 14% chance you develop

• 58:47Scott Galloway?

  prediabetes in the next five years here, the following health. It's really interesting, the Apple Watch, I didn't know this, but a ring on your finger is a much more robust collection mechanism of health data than a wristwatch. And this is anecdotal evidence, and I'm curious if you feel the same way. But the people I know who own an Aura are obsessed with it, absolutely obsessed with it. So what do you have? You have renewal rates that are like software. You have a company doubling its revenue. You have what I would argue is one of the few hardware companies in history that have first-party data 23 hours a day. It feels like a reasonable valuation that is tapped into.

• 59:30Scott Galloway?

  Their killer app is fertility tracking for women. So I love this company. I think hardware is really difficult. There's a small number, a handful of companies, that have been able to build a really solid hardware company. I love the growth. I think it's going out at a reasonable valuation, so see above. I'm trying to find shares.

• 59:48Ed Elson?

  Yeah, I think I agree with all of that. I think I agree with a lot of the bull case here. I'm going to try to get access to the IPO myself. We'll see what happens when it actually goes out public. But if we can get in, that would be great, because I do think that the wellness trend is a big deal. And you pointed to some of the statistics there about Gen Z and millennials and young people being so obsessed with this stuff. They are so obsessed with mental health, with physical health. This is tapping into that. The financials are pretty strong. I do think what happens in the long run is a different story, because I think that there are some significant risks here that they do really need to focus on and think about. One will be the competition. You've got Whoop, you've got Garmin, you've got Fitbit, which is cheaper.

• 1:00:32Ed Elson?

  You've got Apple, which is reportedly developing a health tracker that is similar to Whoop. And while I would acknowledge that Aura is kind of has a luxury positioning, I think because they've they've really dialed into it being fashionable and it looking good, which I think is really important in the wearables industry, and you've talked about this a lot. This is the thing that Meta did not recognize when they were going all in on the headset, is that you look like a fool when you wear it. You don't look stupid when you wear an Aura. You look kind of cool. You look kind of health-conscious. It is a it is a style statement as far as wearables go. But I think Apple has it, is just as able to do that as Aura is.

• 1:01:13Ed Elson?

  And I think that there is a significant question about can the competition beat Aura? There is another question of efficacy. And the reason I bring this up is because there is a lawsuit that is accusing Aura and their sleep tracking features of not being accurate. They say that this, what the claims that Aura makes about the sleep health, that it's not possible with the current technology. Aura says, no, it is. I have no idea. I'm not a tech expert. But that's something to think about, because that's an ongoing lawsuit, and that'll be a problem if they win that. Final thing I think is the most important. Is this a fad? Because fads happen, especially in style, especially in wellness.

• 1:01:57Ed Elson?

  I mean, we all thought that Peloton was going to be ubiquitous across the world back in 2020 and 2021. They got absolutely pilloried in the markets. The stock has come down like 99% since then.

• 1:02:10Ed Elson?

  There are there are health fads. This is what happens. And can Aura protect itself from being just a thing that was cool for a few years and become something that is actually systemic to the health world? And can it actually live the test of time? I'm not so sure right now, which is why I'm a little hesitant. But that's what I want to hear from them. I want to hear how they're addressing that problem. Do you have any thoughts on that?

• 1:02:35Scott Galloway?

  Yeah, I'll go from what I think are the least valid concerns to the most. I think the lawsuit itself is pretty weak sauce.

• 1:02:43Scott Galloway?

  I've read it, and I don't think it presents much of a risk. I think it probably gets settled. I think it was mostly a nuisance lawsuit, taking advantage of the fact they're trying to go public, thinking they could extract a pound of flesh. The elephant in the room is Peloton, right? A hardware device, huge IPO, huge valuation, crashes. I would describe Peloton as a COVID stock, and when people were stuck at home and couldn't go to the gym, you know, this is different. This is on your person 23 hours a day. Peloton was three, four, five times a week, maybe for an hour a day, and a much larger initial price point. This company's grown every year for 10 years. I don't I don't think it's a fad. It could be. I think of

• 1:03:27Scott Galloway?

  I think this is inextricably tied to wellness, not as a fad itself. And to your point, What the tech guys get wrong is that people won't put anything on a visible part of themselves, their hands or their face, unless they think it makes them more attractive to potential mates. And I think the Oura ring, that's true. Look how handsome I look in these.

• 1:03:51Ed Elson?

  I always laugh at the way you phrase it. I agree with you.

• 1:03:54Scott Galloway?

  Look how handsome I look in these things. You wear a mixed reality headset and it's like you're basically deciding to end the DNA branch that is your company.

• 1:04:01Ed Elson?

  I'm always caught off guard by two potential mates as a phrase, and I shouldn't be because I hear it all the time.

• 1:04:09Scott Galloway?

  That's what it's all about, Ed. The answer's in each other. Partner with someone, have kids, that's everything.

• 1:04:13Ed Elson?

  I agree. I agree.

• 1:04:14Scott Galloway?

  And then, you know, and then call them every day at school. Anyways, the, I don't think, I don't think it's a faddish. I mean, everyone has that drawer of fuel bands, you know, jawbones. This has between 83 and 80% renewal rates, meaning after 12 months, eight to nine out of 10 people still have it and decide not only to keep wearing it, but to sign up for another year of $6 a month recurring revenue.

• 1:04:42Ed Elson?

  Which is higher retention rates, by the way, than Netflix, which is

• 1:04:46Scott Galloway?

  Crazy, right?

• 1:04:46Ed Elson?

  Yeah.

• 1:04:47Scott Galloway?

  The things that I think, the things I don't like about this, the majority of the proceeds are buying, are going out to secondary or buying out existing shareholders.

• 1:04:57Ed Elson?

  Yeah, not a great sign.

• 1:04:58Scott Galloway?

  That's not a good sign. And a lot of people, a lot of people say, well, it's VCs who went early or are cashing out. Fine. Okay, maybe. I personally would like to see that capital going into the company for growth. That's not, that's not a good sign. Anytime Apple is near you and anything, it's an existential threat. Supposedly, Apple isn't thinking about a ring. I was shocked. My prediction was when that company filed, that Apple or Samsung was going to buy them.

• 1:05:25Ed Elson?

  They just don't buy anything. They never do it.

• 1:05:28Scott Galloway?

  Yeah, they're not, that's not their culture. Having said that, I do think this is an existential threat to the watch. My sense is this has better data and greater loyalty, greater renewal than the watch itself. But anytime, anytime Apple gets near is potentially like one reach away from your business, that is a real risk. But yeah, there's, there's definite risks here, but looking at the potential upside versus the risks, I really like this one.

• 1:06:03Ed Elson?

  The ring itself is unique. Other companies are not building rings. Apple's building a watch type thing or a wristband, same with Whoop. I think that's a good point of differentiation. The, the financial growth is pretty strong. I think the thing that we want to hear from Oura is what actually is the growth story? Like, we can talk about how are you going to deal with the risks, but how are you going to double in the next couple of years in terms of your, your valuation? How are you, how are you going to significantly increase your footprint? You're at 5 million subscribers. How are you going to get that up? Are you going to expand into new products? Do you have a plan for new products? What will those

• 1:06:46Ed Elson?

  products look like? Do you have a plan for expanding the subscription business, which as it stands is weak compared to the hardware business? I don't think that's a bad thing, but is that the place where you're going to see the growth? Those are the questions that I want to see them really tackling, because I do think that there's a lot of promise here. It's rare for hardware wearables to break through. It's really, really hard. Some of the biggest, most profitable, most well-capitalized companies in the world have tried to do it, and very few have figured out how to do it in the way that Oura has. And to make it, by the way, profitable, they are profitable right now, which is a lot more than you can say about any of these AI companies, which are burning billions of

• 1:07:30Ed Elson?

  dollars a year. So there's a lot of potential here, but I can see a lot of worlds in which they screw it up. And I want to see them show us how they're going to make sure that that doesn't happen.

• 1:07:41Scott Galloway?

  I'll give you one example. There are GLP-1 companies, I think Eli Lilly are sending out Oura rings with certain programs. It's, it's being attached to GLP-1 fitness and sleep. I mean, so I think that, I think for the next few years, I mean, the company doubled this year. What other non-AI companies are doubling? Anyway, point taken.

• 1:08:06Ed Elson?

  My piece of advice in terms, and I want to hear what you would think about this in terms of new products. This is something that we were all debating as a research team, which is that there is a growing sector of baby wellness tech products. For example, there is a company called Owlet that has started producing a $300 oximetry tracker, who knows what that is, that is attached to the baby's sock. There is Huckleberry, which is a $120 membership program for, quote, optimized nap predictions. There is a company called Cubo AI, which is a smart baby monitor with, quote, AI-scheduled lullabies. I think all of this stuff is a little bit ridiculous, but I also think that we are a generation that is neurotic when it comes to health, and we're especially neurotic when it probably

• 1:08:51Ed Elson?

  comes to our children. So I could see that, for example, as a potential pathway. Maybe you get into different markets. Maybe you look at wellness products for babies. Maybe you look at trying to expand your footprint with men, as you mentioned, three quarters of the customers are women. If you had to recommend a new product or a new product line for Oura, what would it be?

• 1:09:14Scott Galloway?

  Something that is the third leg of the stool around GLP-1s. What I've been reading about GLP-1s, which as you know, is my favorite technology, the success is not about the GLP-1, it's about pairing it with fitness and nutrition. And I think that GLP-1's success is dependent upon support around the actual medication. And I think the Oura ring will be seen as part of the support or, or success of GLP-1s. And some of the stuff you're talking about with babies, I think is, I think there's all kinds of product ideas. I think you can get maybe with the Apple Watch, with AI and Oura, to a point where it's going to say, Scott, your, your risk of stroke has gone way up. You

• 1:09:58Scott Galloway?

  need to talk to your doctor about this. I think we're obsessed with our health. You know, women are obsessed, as they should be with their fertility. I see, and it's only 2% of the wearable market right now. So it has, it has a lot of room to grow. I don't, if I were on that board, I would be, the, the discipline we need is not what to do, but what not to do. Because I think their current business model has a lot of juice left to squeeze.

• 1:10:23Ed Elson?

  Oura, hit up Scott Galloway. Give him some shares.

• 1:10:27Scott Galloway?

  There you go.

• 1:10:27Ed Elson?

  Okay, let's take a look at the week ahead. We'll see earnings from Micron and Nike. We'll also see inflation data from the personal consumption expenditures index for August. And finally, we'll see consumer confidence and the employment report for September. Scott, do you have any predictions?

• 1:10:44Scott Galloway?

  Micron beats. Memory is the AI trade nobody talks about because every GPU needs high bandwidth memory. So I think that Nvidia gets all the headlines, but Micron kind of cashes a lot of the checks. So I think Micron's going to beat. Oura prices first trade, 30-plus percent on the first trade from the IPO pricing. And I get the sense they're just going off the tech stuff. I think Nike is still in turnaround purgatory. And they're still paying the price for

• 1:11:14Ed Elson?

  Such an interesting stock.

• 1:11:16Scott Galloway?

  For opting for DTC over being in touch, quote unquote, with their retail athletes and brands, or, or, I'm sorry, the retail stores and brands. So I think Micron and Oura to the upside, Nike to the downside. But yeah, that's, those are my predictions.

• 1:11:34Ed Elson?

  All right. My prediction, in light of what we're seeing in treasury yields, which keep going up, the 10-year and the 30-year, this entire administration is a complete shit show. I made the prediction earlier on in the year that I thought the midterms would be a sweep. I just want to double down on that. I think the Democrats are going to take the House and the Senate, which people thought was not possible earlier in the year. But I think it is possible now. And I think we're seeing it in the markets. This episode was produced by Claire Miller and Alison Weiss and engineered by Benjamin Spencer. Our video editor is Jorge Carti. Our research team is Dan Chalon, Chris Nodan here, and Mia Silverio. Jake McPherson is our social producer. Drew Burrows is our technical director, and Catherine Dillon is our executive producer. Thank you for

• 1:12:19Ed Elson?

  listening to Prof G Markets from Prof G Media. If you liked what you heard, give us a follow and tune in tomorrow for a fresh take on the markets.

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