Prof G Markets Episode Summary

Episode: How Big Tech’s Debt Machine Is Powering the AI Boom
Date: November 19, 2025
Hosts: Ed Elson
Guest Analysts: Joe Feldman (Telsey Group), Robert Schiffman (Bloomberg Intelligence)

Overview

This episode explores two key stories impacting capital markets:

1. Home Depot's Earnings Miss: What recent results reveal about the American consumer, housing market, and tariffs, with analysis from Joe Feldman.
2. Big Tech's Debt-Fueled AI Expansion: Why tech giants are borrowing record amounts to bankroll AI growth, featuring Robert Schiffman’s expert take. The episode concludes by connecting today's debt surge to the credit-fueled booms (and busts) of the past.

Ed Elson maintains an inquisitive, accessible tone, pushing guests for clear explanations and market implications.

Segment 1: Home Depot Earnings—A Window Into the Economy

with Joe Feldman, Telsey Group
[02:20 – 12:02]

Key Points

• Market Reaction:

  • S&P fell for a fourth day; Home Depot shares dropped 6% post-earnings.
  • Revenue slightly beat expectations, but missed on EPS.
  • Home Depot cut its full-year guidance for 2025, expecting earnings to fall 5%, not 2% as previously projected.

• Expectations Mismanagement

  • Joe Feldman:

    “Expectations were a lot higher heading into the print, really self-induced by Home Depot... they thought the second half... would be even better.” [03:48]

  • The anticipated post-spring surge never materialized; stable comps (1% growth) but hurt by lack of severe storms.

• Weather’s Surprising Role

  • Feldman explains hurricanes boost Home Depot’s sales—storm repairs drive regional demand.

    “Usually hurricanes are a good thing for Home Depot... and when that didn’t happen, it caused further pressure on sales.” [03:48]

  • The absence of major storms in Q3 2025, compared to the previous year, meant less emergency repair shopping.

• Consumer Resilience & Caution

  • Home Depot’s core (maintenance and necessary repairs) business is stable, but consumers are skittish on discretionary big projects (kitchen/bath remodels).

    “Big ticket sales were actually up... That would imply that the consumer has the money to spend... but they’re not digging in deeper.” [06:19]

  • Factors: interest rate sensitivity, sluggish housing turnover.

• Tariffs and Price Pressures

  • Tariffs not a major hit for Home Depot (over half products are sourced domestically), but price pass-through is creeping deeper into consumer prices.

    “They’ve been able to mitigate a lot of the tariffs through negotiation... There has been selective pass-through.” [08:22]

  • More impact expected across retail (e.g., Walmart, Target).

• Guidance and Broader Implications

  • Feldman sees a “cautious” 2026—stable but uninspiring housing market, lingering consumer pressure from tariffs and rates:

    “Their guidance shows that caution... we’re just not getting that incremental lift from the industry.” [10:40]

  • Hopes for a spring/summer pickup, but expects “more of the same for the next couple of quarters.” [11:56]

Notable Quotes

• On the role of weather:

  “It’s a strange thing in the business, but... when a hurricane comes and there is some destruction... you see a big positive boost.” — Joe Feldman [04:58]

• On tariffs’ consumer impact:

  “The consumer is very much feeling the impact of tariff-related price increases… It’s causing consumers to be a little sharper and tighter with how they spend.” — Joe Feldman [09:23]

Segment 2: Big Tech's AI Debt Explosion

with Robert Schiffman, Bloomberg Intelligence
[15:32 – 30:29]

Key Points

• Record Debt Issuance

  • 2025 is a record year: $6 trillion in global debt.
  • Amazon ($15B), Google ($25B), Meta ($30B), Oracle (over $100B outstanding plus $38B new) are all borrowing heavily.

    “It’s even bigger than what you said...” — Robert Schiffman [17:09]

• Why Borrow With Full Coffers?

  • These companies can (not need to) borrow; interest rates are relatively attractive; borrowing preserves flexibility for both AI capex and shareholder returns.

    “You borrow money when you can, not when you have to.” — Robert Schiffman [18:24]

  • Many, like Amazon and Meta, might need debt soon given their spending trajectories.

• Demand for AI Infrastructure Is Real, Not Just Hype

  • Schiffman dismisses the “circular demand” bear case:

    “There’s been a lot of incestuous type of investing here. That doesn't mean that true third party demand doesn’t exist. I actually think it does.” [20:46]

  • All sorts of businesses are demanding “AI backdrops” they can't build in-house.

• Equity vs. Credit Market Perspectives

  • Equity investors show more anxiety (valuations soared, now correcting) vs. credit markets, which remain calm:

    “The credit markets... much more based in reality... The market is pretty comfortable that those cash flows are going to be there in the future.” [22:17]

• Is There Too Much Debt?

  • Elson pushes: "How much is too much?"
  • Schiffman: With leverage still low and demand sky-high (“deals are being way oversubscribed”), we’re far from the danger line.

    “I don’t think we’re anywhere near it... This market is ripe for dramatically more borrowing.” [26:42]
    “People are not used to these levels of debt. I’m telling people: get used to it.” [27:12]

• Risk Is Mostly on Equity Holders

  • Even if big tech’s AI bets underperform, stockholders—not bondholders—will feel the pain:

    “The equity holders are actually taking much more risk than the debt holders, from my perspective.” [28:29]

• Why This Could Be Good for Society

  • Schiffman: For everyone else, all this investment simply means AI advances will reach consumers and businesses faster:

    “For the everyday person... this is a great thing. This means the benefits of AI are going to come to you sooner than later.” [29:24]

Notable Quotes

• On the AI buildout “if”:

  “The very important word there is if... there are a lot of ifs which I think make people... kind of nervous.” — Ed Elson [26:06]

• On credit vs. equity risk:

  “If you go from AAA to AA, you’re gonna get your money back... but if your equity is valued at 30 times earnings... your stock price could be cut in half and you can get crushed.” — Robert Schiffman [28:05]

• On historical comparison:
  Ed Elson references Andrew Ross Sorkin’s book “1929”:

  “The almost singular through line behind every major financial crisis is one thing: debt... Problems arise when we get greedy and take too much. Nobody knows for sure where the line is or what to do when we discover we've gone past it.” [32:55]

Key Timestamps for Segments

• 02:20 — Market vitals; Home Depot earnings context
• 03:33 — Joe Feldman interview begins (Home Depot earnings detail)
• 05:53 — Discussion on hurricane impact
• 06:19 — Analysis of consumer strength
• 08:10 — Tariffs’ effect on pricing and consumer
• 10:40 — Home Depot guidance and macro implications
• 15:32 — Transition to Big Tech’s debt (“We’re back with… What’s the hot new trend in AI?”)
• 16:33 — Robert Schiffman interview begins
• 17:09 — Breakdown of tech's record-setting debt deals
• 18:24 — Why big tech borrows even when cash-rich
• 20:46 — AI “circular demand” skepticism addressed
• 23:59 — Who might be at risk (e.g., Oracle, CoreWeave)
• 26:42 — “How much debt is too much?” and the case for more
• 28:29 — Where risk really lies: equity vs. credit markets
• 29:24 — Societal upside of AI debt
• 32:55 — Historical parallels: debt as root of financial crises

Memorable Moments & Quotes

• Ants in Consulting Joke:

  “That is the percentage of ants that never do any work… they’re all in consulting.” — Ed Elson [01:50]
  (Sets the episode’s wry, conversational tone)

• Weather and Business Realities:

  “Usually hurricanes are a good thing for Home Depot... and when that didn't happen, it caused further pressure on sales.” — Joe Feldman [03:48]

• Debt, Optimism, and Crisis:

  “Debt… draws the wealth of tomorrow into the present. Problems arise when we get greedy and take too much.” — Andrew Ross Sorkin, quoted by Ed Elson [32:55]

Tone and Takeaways

• Both analysts bring measured, evidence-driven optimism—cautious on the economy (consumer & housing), but bullish on tech’s AI future.
• Recurring theme: borrowing is both a lever for innovation and a risk if optimism runs unchecked.
• Closes with a reminder: debt powers progress—until it doesn’t.

For listeners:
This episode explains why Home Depot’s sales tell us as much about the average American as the AI-fueled debt extravaganza says about the future of tech. Whether you’re a cautious investor or full-on AI bull, the connections between debt, risk, innovation, and history are front and center—delivered with the Prof G Markets’ signature wit and clarity.