Prof G Markets – Episode Summary

Episode Title: Google Doubles Down on Spending as AI Fear Returns
Date: February 5, 2026
Hosts: Ed Elson (Vox Media Podcast Network)
Guests: Scott Devitt (Managing Director, Wedbush Securities); Jared Holtz (Healthcare Equity Strategist, Mizuho); Rohan Goswami (Business Reporter, Semaphore)

Overview

This episode dives deep into three key stories shaking the capital markets:

1. Google's blockbuster Q4 earnings and its mammoth AI-driven CapEx plans
2. The diverging fortunes of Eli Lilly and Novo Nordisk in the GLP-1 weight-loss drug market
3. The high-stakes Netflix–Warner Brothers Discovery merger and its reception on Capitol Hill
   The hosts and guests explore broader themes of AI-driven upheaval, market reactions, and where opportunity lies amid uncertainty.

1. Google Q4 Earnings and the AI Investment Wave

[Starts: 02:13]

Key Points:

• Google’s Record Revenues:

  • 2025 annual revenue exceeded $400B for the first time
  • Second consecutive $100B quarter, fueled by Search (up 17%) and Cloud (up 48% YOY—versus 38% expected)

• CapEx Bombshell:

  • Google plans $175–185B of capital expenditure, nearly doubling from last year and far ahead of expectations
  • Initial stock drop of 7%, rapidly recovers as investors digest

• AI Integration Drives Growth:

  • Search acceleration attributed partly to AI “overviews” in search results
  • Cloud's outperformance highlights enterprise AI adoption momentum

Analysis & Insights:

• Scott Devitt on Google’s Strategy:

  • “The growth is very strong...the infusion of AI overviews into the search results have definitely benefited the platform.” (03:55)
  • “It’s front-footed growth. But, you know, the market has to digest periods where companies are spending so aggressively ahead of revenue and operating profit...These are the right investments to be made.” (03:55)

• Market Response to CapEx:

  • Investors initially spooked by aggressive spend (consensus for 2026 was $120B; Google dropped $180B)
  • Recovery reflects belief in long-term AI returns, echoing similar patterns at Meta and, possibly soon, Amazon

• Longer-Term Perspective:

  • “Stock performance tends to be best in harvest mode—on the back of an investment cycle...You have to climb that hill, and then the hardest period on this spend is probably 2027, 2028. So, you’re looking at like a three-year horizon.” (07:18)

2. The Software Sector Meltdown & The Anthropic Effect

[Explored throughout; recap at 26:46]

Key Points:

• Software Stocks Rout:

  • Big players (Workday –5%, ServiceNow –6%, Salesforce –8%, HubSpot –19%, etc.) hammered; sector down 11% in a week
  • Sparked by launch of Anthropic’s Claude Cowork and plugins targeting traditional enterprise SaaS domains

• Why the Panic?

  • Fears that AI tools will eliminate demand for seat licenses—the model underpinning most enterprise software
  • Uncertainty: “The market hates uncertainty...It’s been many years since we’ve had this level of uncertainty in so many of these companies.” (10:37)

• Will AI Destroy Software?

  • “Right now, the initial response is sell everything, and then I think investors will parse through it, and then you’ll get winners and losers. So, it’s going to be a different software world in the future, but doesn’t mean that they’re all losers.” – Scott Devitt (08:54)
  • Ed Elson: “To me, that spells potentially a buying opportunity...just the level of dislocation that we’re seeing.” (10:11)

• Historical Parallels – Google’s AI Scare:

  • In 2022, ChatGPT arrival crushed Google stock; now, AI integration led to huge rebound
  • “AI did not kill search as everyone thought it would. Actually, AI enhanced search… and it was, in fact, the reason why Google was able to reach a $4 trillion valuation.” (26:46)

• Investment Opportunities:

  • “This is a market of confusion, a market of panic, a market of concern. And as Warren Buffett always says, when others are fearful, you want to be greedy. These are the kinds of conditions where you want to start thinking about buying...good software companies, companies that can demonstrate an ability to embrace and integrate AI like Google did.” (26:46)
  • Mark Mahaney’s term: “DHQs”—Dislocated High Quality companies

3. GLP-1 Wars: Eli Lilly vs. Novo Nordisk

[Starts: 11:29]

Key Points:

• Eli Lilly Surges:

  • Q4 earnings up 43%, 2026 revenue guidance raised to $80B, stock up 10%

• Novo Nordisk Slides:

  • Warns of 2026 profit/revenue declines, hit with 18% stock drop
  • Causes: Pricing pressure from White House deal, oral pill sales growing but at lower price and margin, injectable share slipping (down to 30–40%), drug already on IRA price regulation list

Analysis & Insights:

• Jared Holtz’s Take:

  • “You’ve got one company growing very meaningfully in Eli Lilly, and really seeming to not be losing any momentum...And on the other hand, you’ve got Novo Nordisk…seeing revenue degradation already.” (12:42)
  • “On the injectable side…they’re seeing their market share slip to about a third of the market. And then…the conversion to the oral therapy…is very significant in terms of volume, but at a fraction of the price…It’s just a recipe for a very challenging near term.” (13:28)

• Orals vs. Injectables:

  • Novo is first to market with a pill; Eli Lilly’s is pending approval
  • But pill revenue is small compared to the old injectable blockbuster phase—market punishing Novo despite “first mover” status

• Stock Punishment:

  • Ed Elson: “Novo Nordisk is trading at $47 a share now. That’s basically the same price that it was at in 2021 before the whole GLP1 craze, which seems kind of insane to me…Would you agree it’s being a little over punished?” (16:17)
  • Jared Holtz: “It’s unbelievable what’s happened to the company and to the stock…almost at a decade low…they would have been better off going in a different direction altogether and not even pursuing obesity if this is where we knew they would come out over the long term.” (16:45)

4. Washington Spotlight: Netflix–Warner Brothers Discovery Senate Hearing

[Starts: 19:34]

Key Points:

• Senate Antitrust Hearing:
  • Senators grill Netflix (Ted Sarandos, co-CEO) and Warner Brothers Discovery reps over pending mega-merger
  • Topics: competition, jobs, consumer impact, and (unexpectedly) political/cultural “wokeness” in Netflix content

Scene Report and Analysis:

• Rohan Goswami’s View:

  • “Let’s be clear, this was a chaotic day in D.C….You had a bit of everything: senators talking about ‘woke’ programming…but also a lot of fair and detailed analysis and scrutiny…it’s not an everyday thing. There was a lot of fair and…I think righteous, almost interrogation…” (20:37)
  • “But also, this is kind of a sideshow, if we’re being honest. These guys don’t really have a lot of power to stop things. That’s the DOJ and that’s the Europeans…that’s where the fight gets interesting.” (20:37)

• Political Theater vs. Substance:

  • Hearing partly devolved into debate over “wokeness” (Sen. Eric Schmidt: “the wokest content in the history of the world”)
  • Real business, per Goswami, was the “one-on-one meetings” with DOJ, regulators, and White House staff

• Streaming Competition Landscape:

  • Netflix/Warner argue that competition is from TikTok, Instagram, YouTube—not other streamers
  • Confuses partisan lines on antitrust: “If you are anti big tech, weirdly, you might want to be pro this deal…” (24:16)

• Lasting Impact:

  • Goswami: “The hearing itself, no. But it’s an important sort of symbolic gesture…These kinds of things can sometimes become prescient where you look back 20 years later and you see, oh my gosh, Ted Sarandos was right all along…” (25:54)

Notable Quotes & Moments

Google and CapEx:

• “The market is very skittish right now around AI and you’ve seen software companies’ multiples collapse.” – Scott Devitt (05:23)
• “The hardest period on this spend is probably ’27, ’28. So you’re looking at like a three-year horizon on these stocks.” – Scott Devitt (07:18)
• “This is a market of confusion, a market of panic, a market of concern. And as Warren Buffett always says, when others are fearful, you want to be greedy.” – Ed Elson (26:46)

GLP-1 Drug Drama:

• “Part of me feels like they would have been better off going in a different direction altogether and not even pursuing obesity if this is where we knew they would come out over the long term.” – Jared Holtz (16:45)

Netflix Merger Hearing:

• “This was a chaotic day in D.C.…There was a lot of fair and…I think righteous, almost interrogation…” – Rohan Goswami (20:37)

Episode Timeline

• 02:13 — Market check: Google, Uber, AMD, Bitcoin
• 03:39 — Scott Devitt on Google’s earnings and CapEx
• 11:29 — Eli Lilly vs Novo Nordisk earnings: Jared Holtz
• 19:34 — Netflix–Warner Bros. Discovery merger hearing: Rohan Goswami
• 26:46 — Host recap: Software stocks, AI, lessons from Google/ChatGPT

Takeaways

• AI-Driven Transformation is accelerating capital investment at the world’s largest tech firms.
• Market psychology remains fragile: Large, unfamiliar threats (AI) and policy actions trigger volatility and risk aversion—but also open opportunities.
• Industry shakeouts are likely in both enterprise software and pharma; those who successfully integrate new technologies (e.g., AI) or pivot business models will win disproportionate gains.
• Political spectacle does little to slow the pace of disruptive M&A—or to rewrite who the real competitors are in a digitally convergent world.

For daily capital markets analysis and more deep dives, catch Prof G Markets every weekday.