Loading summary
Transcript100 lines
- [00:01]
Scott Galloway
Support for the show comes from Public.com, the investing platform that lets you access industry leading Yields including a 4.1% APY you can earn on your cash with no fees or minimum. Go to public.comproPG to fund your account in five minutes. That's public.comproPG paid for by Public Investing. All investing involves the risk of loss, including loss of principal. Brokerage services for U.S. listed registered securities, options and bonds in a self directed account are offered by Public Investing Inc. Member FINRA SIPC. Complete disclosures available available@public.com disclosures support for the show comes from Adobe Express these days there are a million different ways to reach your customers, but that can also mean a million different pieces of content. It can be overwhelming. Adobe Express can help with templates, brand kits and generative AI that's safe for business. Your team can create its own content and will always be polished and professional. When everyone can create content themselves, it's easier to get on brand content out in the world faster. Go from cookie cutter to class of its own. Switch to the quick and easy app to create on brand content Adobe Express. Learn more@adobe.com Express Business True story I have used Adobe Express and I was shocked how easy it is to use and produce content, avoiding your unfinished home projects because you're not sure where to start. Thumbtack knows homes so you don't have to. Don't know the difference between matte paint, finish and satin or what that clunking sound from your dryer is. With thumbtack you don't have to be a home pro, you just have to hire one. You can hire top rated pros, see price estimates and read reviews all on the app. Download today today's number 66%. That's how much sales of US alcohol brands in Canada dropped after Liberation Day. Ed I've been trying to cut down my alcohol consumption so I moved to non alcoholic beer and it's kind of like giving oral sex to your cousin. It tastes similar but you just know it's wrong. How are you Ed? Trying to get us canceled? Ed she's trying to get us canceled.
- [02:23]
Ed Mylett
Trying really hard with the same strategy usually usually involves sex with your cousin. I guess people just don't care about that. That's just fine.
- [02:31]
Scott Galloway
Now you gotta go with what works.
- [02:32]
Ed Mylett
It's getting our numbers up. I think that's the reason people are tuning in.
- [02:36]
Scott Galloway
Not the excellent production, rigorous analysis or insight. Just the profanity.
- [02:39]
Ed Mylett
No no no. Definitely not that. But specifically the sex with your cousin jokes I think that's what people really like about this show.
- [02:46]
Scott Galloway
That's why they're here.
- [02:46]
Ed Mylett
We should run some surveys on that and just confirm.
- [02:49]
Scott Galloway
But I'm glad it's working. Cause we can't stop. Won't stop. Where are you, Ed? Which is my way of saying I want you to ask where I am.
- [02:59]
Ed Mylett
I'm going to take five minutes now to explain exactly where I am. I'm in New York. I'm in the studio. I'm always in. Nothing's really changed.
- [03:07]
Scott Galloway
Yeah, yeah.
- [03:09]
Ed Mylett
Have I bored you yet?
- [03:11]
Scott Galloway
I'm sorry, what were you saying? Ed?
- [03:15]
Ed Mylett
Where are you? Scott?
- [03:16]
Scott Galloway
So Daddy yesterday spoke at the Aspen Institute.
- [03:20]
Ed Mylett
You know, I saw that it was livestreamed, which is cool. Oh, wow.
- [03:24]
Scott Galloway
I didn't know that. I kind of. I just got very self conscious about some of the things I said. But you have never seen so many rich men in their 70s with their third wife in athleisure, desperately trying to keep their man on the porch. I mean, it is. It was like a. It was like a aloe reunion. I mean, so much athleisure, a lot.
- [03:43]
Ed Mylett
Of on running shoes, I'm sure.
- [03:45]
Scott Galloway
Yeah, yeah. And me and Aspen speaking at the Aspen Institute is maybe the widest thing I've ever done.
- [03:52]
Ed Mylett
Who goes to that are there is these business leaders. So who's at the Aspen Institute function during the summer?
- [04:01]
Scott Galloway
The honest answer is I don't really know. But Aspen has a group of, you know, people who are just very civic minded, really into ideas. And the Aspen Institute, which is like 50 years old, does a great job and great programming. So I was actually really excited to speak there. And I spoke to a woman who used to be the U.S. editor of the Financial Times. Anyways, enough of that. I'm bragging. And last night I came to Chicago, where I am speaking this afternoon. And then my youngest, my 14 year old. This is our annual city trip. He gets to pick a city and we go there. I'm staying at the Soho House in Chicago, which has the second nicest gym of any Soho house, just behind Berlin. I worked out this morning. You probably didn't recognize me because of my bulging biceps, but it was so this handsome 30 year old dude comes up to me and he says to me, he's like, dude, what do you do to work out? It was like the total like, you're so inspiring. You're so fucking old. I'm like, get away from me. What do you. It was one of those things like, dude, I think it's great you're here. And I'm like, why? Why do you think it's great I'm here?
- [05:01]
Ed Mylett
You're an inspiration.
- [05:03]
Scott Galloway
Yeah, that's literally. That's what I'm getting. I think it's. I think it's great you're here. I'm like, oh, well, I left my walker downstairs, bitch.
- [05:14]
Ed Mylett
Anyways, yeah, that's not good.
- [05:15]
Scott Galloway
What do you got planned this weekend? What are you up to?
- [05:18]
Ed Mylett
I'm going out to Quog in Long Island. I'm going to Quag. Yeah. One of the less known Hamptons.
- [05:24]
Scott Galloway
I like Quag. Let me guess, that's your in laws. They have a house in Quag.
- [05:27]
Ed Mylett
That's right.
- [05:28]
Scott Galloway
Oh, I got that right.
- [05:29]
Ed Mylett
Yeah.
- [05:30]
Scott Galloway
Oh, lock this shit down. She's got. We like this.
- [05:33]
Ed Mylett
And.
- [05:34]
Scott Galloway
Oh, even better. Hopefully she doesn't have any siblings. No siblings.
- [05:38]
Ed Mylett
I'm not going to disclose any more information.
- [05:40]
Scott Galloway
Yeah, you're choosing your words carefully. All right, let's move on. You're going to clog. You're still in the mating phase. You're still worried about blowing it. You're still worried about the talk. I got the talk about five years ago when my partner said, don't ever mention me on any of your work ever again. Don't mention me to talk about me. Don't reference me. Anyways, should we get to the headlines? Should we get to the headlines?
- [06:01]
Ed Mylett
You are on a heater this morning. I. I barely say anything. I've just. I've just let you go. Let you. Let you run wild.
- [06:07]
Scott Galloway
You're just sitting there.
- [06:08]
Ed Mylett
Get used to it.
- [06:09]
Scott Galloway
It's called your in laws. Get used to it. Now is the time to buy.
- [06:17]
Ed Mylett
I hope you have plenty of the. Whereas all. As second quarter earnings roll in, several companies are reporting significant financial hits tied to the tariffs. Oil services provider Halliburton saw a $27 million hit to its profit. Stellantis reported $350 million in related costs for the first half of the year. Toy company Hasbro took a $1 billion charge tied to tariffs. And General Motors said that tariffs cost the company $1.1 billion, slashing its earnings by a third. And they are warning that the worst may be yet to come. Tariffs have officially landed, or at least they've landed in earnings reports. There are some more examples that we saw in last week's earnings that I didn't mention there. Dow, which is the big chemical company, they reported their first loss in five years due to tariffs. The CEO said, quote, this quarter, the Dow team advanced several aggressive actions in response to the lower for longer earnings environment that our industry is facing amplified by tariff uncertainties. Southwest also cut its outlook due to tariff impact. Stock fell 4%. So in sum, as we discussed a couple weeks ago, earnings are coming in for the second quarter and we had questions over will we see the tariff impact? Yes, we are seeing the tariff impact. It is starting to show up in earnings reports and it's not showing up in a forward looking way like we saw in the previous batch of earnings where you had companies saying that there's an uncertain tariff environment and you know, we can expect in the future a hit to earnings, a hit to profits, giving guidance that was ambivalent. This is backward looking. These are companies saying in the previous quarter our profits were smaller because of the tariffs. That's what we're seeing. Your reaction, Scott?
- [08:08]
Scott Galloway
What is interesting is the Trump administration said that they thought this wouldn't result in higher prices, that companies would absorb this hit. And, and so far they're right. General Motors did not feel like they had the competitive positioning or the margin power to pass those costs onto the consumer. So they took a hit to their earnings. Now they would have much rather just pass it down to the consumer. But on a more meta level what I see is I think 2000 or 2025 will be seen as the year that late night TV just went away. And also that the US auto industry basically entered the 8th or 9th inning of a not a cyclically driven decline such as 08 or the recession in 91 or 92, but I do think this is kind of the end of the US automobile manufacturing. Not even dominance, but preeminence. We're one of the two or three best manufacturers in the world, mostly saved by gigantic trucks. But if you look at a few things that have happened, one, the old guard has announced that these tariffs are now making a material impact on shareholder value which eventually shake, you know, snakes through the economy. They have less money to invest in new factories, new models, less employment, fewer people with good jobs, fewer car purchases and you start, you know, this kind of downward spiral. In addition, our new champion, which has a market cap larger than the rest of the industry combined, Tesla is really floundering. I mean there is just the delta between a trillion dollar market cap and a PE of 180. And a company whose auto sales have declined 12% year on year, 16%.
- [09:41]
Ed Mylett
Sorry, I just want to correct because overall revenue for Tesla as of this earnings that we saw last week, Overall revenue down 12% but auto sales down 16%.
- [09:51]
Scott Galloway
That's right. Their services, their charging station was up, which took that 16% number down to 12%. So to your point, a 16% decline in auto sales has got to be one of the biggest declines in the auto industry globally. And yet this company trades at 180 times earnings that cannot. Those two things cannot coexist. So you got our old guard in trouble because of tariffs. You got our new guard trying to create distractions, whether it's a diner with robots or trying to pretend this is an AI company and spend a shit ton of money on AI and put an AI effectively. What you have is with Tesla, you have a guy who's a genius in terms of the intersection between capital markets and shareholder value and has realized a lot of it is perception, that 180pe is a function of your ability to create a perception that you're the market leader and that you're innovator and disruptor. So he's saying, look over here, we're going to build AI and we have a dining company and flamethrowers and tequila. And this is an AI company. He's doing anything he can because of his $1.4 trillion in market cap across his company. SpaceX, Tesla, Twitter, the majority of it is tied up in a company that is about to implode in terms of market cap, and that's Tesla. So you have GM getting hit hard, Tesla, which in my opinion is the most inflated bubble in the world right now. And then you have this new agreement, and we talked about this yesterday, where effectively Japan has said, okay, zero tariffs, big win for the US on cars coming in. And this stat which we talked about yesterday just blew my mind. About 50 or $54 billion of Japanese autos come into the U.S. we purchase about $54 billion of Japanese cars, they purchase 2 billion of U.S. cars. So fine, yeah, no tariffs on your cars doesn't mean anything to us. So what do you have? You have an economic and trade policy that is hurting U.S. auto companies. You have our champion, Tesla, basically shitting the bed like no tomorrow. And you have the old guard, General Motors, saying, okay, these tariffs are really hurting us. And then you have Japanese cars just got less expensive for American consumers, which means US companies, US Automobile companies are going to cede share to Japanese automobile companies.
- [12:06]
Ed Mylett
It's so funny how both the old God of the auto industry and the new God of the auto industry are being poisoned by the same thing, which is Trump for different reasons. So, for example, I mean, Tesla, we, we just talked about some of the earnings there missed on ebit missed on eps. Huge miss on free cash flow. This was like an awful, awful quarter for Tesla. And the Stock is down 8% after they release these earnings. And why is that happening? It's a brand issue because Elon decided to get in bed with Trump. And you can say that, oh, the market's woke, whatever you want to say, but the reality is that's why Tesla is getting impacted, because it was poisoned by an association with the president. That is just the plain reality of their situation. Meanwhile, the old God, as you say, General Motors, they are getting impacted by the tariffs. Their net income fell 35%. They took this more than $1 billion hit because of the tariffs. And their stock is also down by a similar amount, down 8% after that news. And so they're both being poisoned by Trump. Meanwhile, as you say, you look at all of the Japanese car companies which ripped after the trade deal, 11% for Honda, I believe, up 16% for Mazda, 17% for Toyota. All of those stocks are ripping. So it's just so funny, this idea of we're going to implement these tariffs and all these foreigners are going to pay for it. And what we're seeing is like, no, no, no, that's not the case at all. To your point, GM is eating the tariff here. They have not released any price increases as of yet. I bet that that's going to happen later down the line. But basically what's happened is you've put the tariff up, it hasn't affected the Japanese companies. They're good. And meanwhile, who's getting hurt? General Motors. That is the shareholders of General Motors. So shareholders are the ones who are eating the tariffs right now. Now, the other thing that I would add to this, as you said, these companies are eating the tariffs right now. And I can expect that that's where the conversation is going to go. And people are going to say, look, Trump was right. You know, we put the tariffs up, but look, General Motors is eating them. What I would just add is that there are different things we're talking about here. There's the impact to earnings and there's the impact to prices. And the first stage of these tariffs, what we're going to see is an impact on earnings. And that's what we're beginning to see this quarter. But the pricing impact is going to happen later down the line when these companies realize that their earnings have been hit. They sort of digest that price, that impact, and then they decide, okay, do we want to pass this on to the consumer? And what we've seen from Goldman Sachs is that 70% estimated of those costs are going to be passed down to the consumer, but it's going to be on different timelines. If you're selling cars, which are very expensive, then you're probably going to do it later. But if you're selling, for example, cheap consumer products, if you are Walmart, for example, you're probably going to pass the costs on earlier. And in fact, that's exactly what we've seen. Walmart is already raising their prices because of tariffs. We've seen the same thing from Best Buy, they've both publicly talked about it. And then Amazon has also been raising their prices, though of course they're not announcing that. They're trying to pretend that this has nothing to do with the tariffs. So many things happening here. But I guess what I would emphasize is you have a hit to your earnings, you have a hit to your bottom line. Management then assesses the impact and then we see the price increases later. So I think we're still going to see that with gm it'll probably be.
- [16:00]
Scott Galloway
A mix of the two. But at a very basic level, what you have with the tariffs in the automobile industry is that essentially you've transferred stakeholder value from General Motors to the government. But it's as if the government just said, okay, we're raising taxes on General Motors and you can either pass along those additional costs to consumers or you can either in terms of your earnings. And tariffs, generally speaking, are innovation killers because the government isn't great at when it's not systemic. If you need to raise taxes on companies across every company to make them equally, they all take the same hit. That increases competition. You need to have taxes, fine. But when you start punishing certain key industries unwittingly, the manufacturing industry, people would argue is important because they're generally good middle class jobs and they're labor intensive and we have a history of manufacturing. And also people say it's important that we have factories that we can, can convert to making tanks if need be, that we need to actually make stuff. But these tariffs, I mean, somebody has to pay. And right now what you would see is that the losers are GM shareholders. So far, consumers don't appear to be losing. Japanese companies in the next two quarters will announce market share gains at the cost of U.S. automakers. And then you would say, well, the government's winning, they're getting tariffs over the long haul. Almost every, every economic study is that the decrease in competitiveness and the destruction in economic activity means lower tax revenue over time because the economy shrinks.
- [17:40]
Ed Mylett
Show me GDP growth and a budget surplus and then we can have a conversation about the government's winning. We'll be right back after the break with a look at Oracle and OpenAI's new partnership. If you're enjoying the show so far, be sure to give Prof. G Markets a follow. Wherever you get your podcasts.
- [18:08]
Scott Galloway
Support for the show comes from DeleteMe. Your personal information is valuable. In fact, data brokers online make a whole business out of buying and selling it. But we have tools that help you do something about it. Tools like DeleteMe. When you sign up for Deleteme, their experts take care of removing you and your family's personal information from data broker websites. DeleteMe sends you regular personalized privacy reports showing what information they found, where they found it and what they removed. And it isn't just a one time service. DeleteMe keeps working behind the scenes, monitoring and removing the personal information you don't want online. My Pivot co host Kara swisher absolutely loves DeleteMe. She's almost talking about take control of your data and keep your private life private by signing up for Delete Me now. It's special discount for our listeners. Get 20% off your delete me plan when you go to JoinDeleteMe.com propg and use promo code propg at checkout. The only way to get 20% off is to go to JoinDeleteMe.com propg and enter code propg at checkout. That's JoinDeleteMe.com propg code Prof. G Support for the show comes from Adobe Express. As many of you know, property markets recently began airing episodes five days a week. That's a high powered jet, a fire hose if you will, of my voice into your ears. But more show means more content to promote. So how do we keep up? How do we do it? We're turning to the experts, specifically Adobe Express. Our team will set up pre approved propaganda markets brand templates to keep anyone from going off the rails. They have copyright friendly generative AI so no legal headaches there. They own their IP and it will let us collaborate in real time without triggering a slack meltdown. So keep an eye out for an upcoming video bringing you behind the scenes as we use Adobe Express to whip up a big batch of blinding creative brilliance and we hope that it convinces you to switch to Adobe Express, the quick and easy app to create on brand content. Learn more@adobe.com Go Express. This is a paid ad, but it also is true. We love Adobe products and we use them every day. Growing your e commerce business comes with plenty of hurdles, but shipping shouldn't be one of them. Well, here's some good news. Powerful e commerce shipping software called Ship.
- [20:21]
Ed Mylett
Excel from Pitney Bowes.
- [20:23]
Scott Galloway
With Ship Excel, you can generate discounted shipping labels for both online and offline orders. That saves time and money. With everything right at your fingertips, start your free trial of Ship Excel from Pitney Bowes. Today.
- [20:46]
Ed Mylett
We'Re back with property markets. Oracle and OpenAI are dramatically scaling up their AI infrastructure with an additional four and a half gigawatts of new data center capacity. The move builds on the Stargate initiative and which is a $500 billion project that they announced back in January. With the addition of this new capacity, OpenAI says it will soon operate more than 5 gigawatts total, powered by more than 2 million AI chips. For context, 1 gigawatt is enough to power roughly 750,000 homes in the U.S. so, Scott, I mean, the headline here is OpenAI has a contract with Oracle and they're going to pay Oracle $30 billion a year, which, by the way, is three times OpenAI's ARR. There are $10 billion in ARR per year. They're about to pay $30 billion a year. How are they going to pay for it? I mean, funding, but it's unbelievable. And that's going to give them four and a half gigawatts of capacity per year, which is the equivalent to two Hoover Dams. So just unbelievable capacity. That's the headline. The largest story here is just this mass acceleration and investment in data centers. We just saw the Google earnings last week. They just reported their earnings. They raised their CapEx guidance to $85 billion for the year. We also saw the same thing with Meta. When Meta previously reported their earnings, they raised their capex to 72 billion. We'll see if it goes even higher in the next earnings report. Also, Meta is now building a data center in Louisiana, which will be the size of Manhattan. And then if you combine the capex investment of Meta, Google, Microsoft and Amazon, it adds up to $340 billion this year, which is more than the GDP of Finland. So there was this story of big techs getting into data centers. They're starting to build these things out and they're starting to raise their capex. And what we're seeing now is like all of that is happening times 10. They're only scaling up even faster. And this is yet more proof of that between OpenAI and Oracle. Your reactions to that deal and what we're seeing with data centers in general.
- [23:08]
Scott Galloway
This is an arms race for the ages. And I mean there's a few things here. The first is Larry Ellison probably doesn't get the credit. He's sort of a first ballot hall of famer in business and that is he pivoted from a different capital strategy to the benefit of his shareholders. When he took the company public, I think he owned 27% of the company and now he owns 41. How did he do that? When Oracle became this database company that was mature and not growing that fast, but spending a lot of cash, they that is Larry, who I think controls the company, made the decision to use that cash flow to buy back shares and now he owns 41%. And then he saw AI and he decided, okay, it's time to pivot our CapEx strategy and go really hard and take profits way down and invest massively in the infrastructure. Because essentially what this deal is is Oracle is going to provide OpenAI the tools it needs to train and run its AI models faster. And that includes access to GPU storage, high speed networks and custom systems to manage all their data efficiently. And their Oracle's cloud infrastructure business is now 43% of their total revenue and grew by over 50% last quarter and is expected to accelerate to 70% this year. And as a result, Oracle, the Stock is up 45% year to date and trades at a PE ratio of 56x which is about the same as Nvidia, which is far above its 5 year average of 27x. And this is visionary. This is a company saying, all right, we used to be this mature company that returned money to shareholders. Fuck that, we're going all in on AI. It's worth. It was probably a couple pretty uncomfortable earnings calls where they said we're taking down our profits. And they said, okay, there needs to be more than one infrastructure company other than Nvidia training these LLMs and providing the back end. It also says that Sam Altman, who I think is brilliant, has said, okay, we want to focus on the white meat, the kind of the technology, the design and the front end and becoming like Kleenex or Xerox. We want to become the default term for AI searches. And so far it's working. Despite the brain drain and Mark Zuckerberg offering people hundreds of millions of dollars in a date with Lauren Sanchez if they come work at his firm. I don't know where I got that one. Anyways, essentially OpenAI is still every day seems to garner more and more market Share. It feels like right now they're running away with it. And Sam has said that the key to maintaining that leadership is focus, and he is going to outsource much of that backend infrastructure. And he is so confident in the acceleration in their revenues that they're willing to commit to a contract with one vendor that's equivalent to, as you pointed out, three times their current annual revenues. And also, I mean, there's just no getting around. People consistently ask me, living in London, what's the difference between London and the us I'm like, what tech company is nearly exciting enough that people are just going to throw hundreds of tens of billions of dollars at a prospective speculative investment around this company? So I think it's just super exciting that a not only are these companies executing so well, but America continues to be the place that's like, oh, we are not afraid to take enormous risks. So I I1 Ellison is a genius who is probably not mentioned enough in terms of how iconic a business person he is in the strategy. OpenAI is focusing on the front end and I think it's inspiring that America continues. Where the fuck else is anyone doing anything like this, Anything remotely like this?
- [26:50]
Ed Mylett
I agree. And by the way, because of this, Larry Ellison is now the second richest person in the world. He's worth $293 billion ahead of Mark Zuckerberg, who's at 251, ahead of Bezos, who's at 249, still behind Elon.
- [27:05]
Scott Galloway
You can bet Bezos is not going to introduce Lauren to to to Larry. He knows better. He knows better.
- [27:12]
Ed Mylett
But I want to take a quick victory lap for myself because this was one of my picks last year for exactly this reason that we're seeing. This was. Here's a clip.
- [27:25]
Scott Galloway
I love this. You're learning. Patting yourself on the back.
- [27:28]
Ed Mylett
You're learning.
- [27:29]
Scott Galloway
Ah, the student becomes the master.
- [27:31]
Ed Mylett
Here's a clip of me being right.
- [27:33]
Scott Galloway
There you go.
- [27:34]
Ed Mylett
Let's listen to it. Earlier this year I said I was bullish on Oracle. My thesis here was that Oracle is kind of the fourth musketeer when it comes to cloud computing. The options are basically Amazon, Google, Microsoft or Oracle. And my was that Oracle is a really attractive company for AI companies, especially AI startups, because Oracle is the only one that isn't actively developing its own LLM. So if you're an AI company and you want to compete with the likes of Microsoft, who's developing Copilot and working with OpenAI and ChatGPT, or Google with Gemini, you probably don't want to be also paying them to keep your lights on. You'd probably rather go with a compute provider who you ultimately won't be competing with. In this case, that would be Oracle. And so that was last year. Stock is up 45% year to date. It's up 75% in the past year. And since I first made the prediction about Oracle and its role and just my bullish position on its role in cloud computing, it's up more than 100%. What was interesting and that what we've seen is I wouldn't have expected that OpenAI would go to Oracle, but they are ultimately, I think, going to Oracle for the same reasons which I predicted, which is that OpenAI is now having issues with Microsoft and they kind of regret that they sort of signed their soul away to be owned by Microsoft and ultimately controlled by Microsoft. And now it's becoming this very tenuous and difficult relationship. We obviously saw OpenAI buying that company, Windsurf, and then they couldn't buy them in the end because Microsoft said they wanted to have all the rights to the ip, which didn't make sense because Windsurf was supposed to be a competitor to Copilot, et cetera, et cetera. We have this issue arising where OpenAI is realizing, oh, wow, we sold ourselves to someone who is a competitor, or at least who will be a competitor if we really want to play ball here. And so I think that is a big reason why they are switching over to Oracle, because they're realizing, okay, we need to kind of get away from this sort of adoptive parent relationship we have with this big tech company. Let's go to someone else who we don't want to compete with. Let's go to Oracle. And I think that's definitely the dynamic that is playing out for many other AI startups as well, which is why you're seeing this massive increase in Oracle's cloud revenue, as you said, up 50% year over year, their fastest growing business.
- [30:12]
Scott Galloway
So a couple of things. I asked Dan Shalon, our analyst, to pull together a brief explainer because I said I'm having trouble discerning between a data center and an AI data center. So data centers are giant computer warehouses that store, process and send information for all types of things, including cloud storage, apps and sites. AI data centers are specialized versions of these warehouses that contain GPUs to train and run artificial intelligence models. So they're focused on the specified or specific compute to train these models. They're much more, as it ends up energy intensive data Centers provide processing power referred to as compute. The more GPUs a data center has, the more compute it can deliver. And then at the very beginning are power plants that generate the electricity that keeps data centers running. AI data centers, as you can imagine, use huge amounts of energy. What's interesting about the infrastructure side and now Oracle basically wants to be, I would imagine, Larry Ellison. His dream is he wants to be on stage next to Jensen Huang, right? He wants to be, he wants to.
- [31:17]
Ed Mylett
Be.
- [31:20]
Scott Galloway
The John Oates, was it Daryl hall and John Oates of AI Compute Infrastructure, right? He wants to be the Ginger Rogers, right? Okay, fine, you can be Fred Astaire or I'll be Jerry Lewis and you can be Dean Martin. I'm trying to think of great duos, but I'm not doing a very good.
- [31:36]
Ed Mylett
Job here at Elson.
- [31:37]
Scott Galloway
There you go. No, but you're number one. He's willing to be Scottie Pippen to Jensen Huang's Michael Jordan. But if he can be the number two infrastructure player here, he's going to do really well because the infrastructure. If you look at Nvidia, Nvidia's top customers, their capex has grown one and a half times as fast as revenue. So their customer base is not only the customers or the companies that have the fastest growing top line revenues in the world, but they're spending 50% more than the revenue growth on, on infrastructure. And just let me go back to Oracle. When I moved to New York, when I thought I was going to be rich, I moved to New York and thought, okay, I'm going to be a professor. And I joined the faculty of nyu. And do you know what my first year salary was at NYU as an adjunct professor?
- [32:23]
Ed Mylett
I'm going to guess $30,000, $12,000.
- [32:29]
Scott Galloway
But anyways, how I got here and how this is relevant, the universities have exceptional benefits and they'll take up to, they'll match up to 10% of your salary in your retirement plan. And I picked two stocks. I picked Oracle and I picked Nike. And this is back in 2002. And I always put, and this is my advice to young people. The first thing you do when you get a job anywhere, anywhere, you go to HR and you say what tax advantage investment programs do you have here? And you max them out, max them out. And ideally it comes right out of your check so that money never floats through your hands. And the Nike investment has not paid off. I've owned Nike stock for 22 years. It was great for about 10 or 15 years. The stock is at kind of a 10 year low now and Oracle was a fairly mediocre performer. And then the last 10 years, it's just skyrocketed. Anyways, I have Nike and Oracle in my 401k, so thank you. Thank you, Larry Ellison.
- [33:28]
Ed Mylett
Just going back to what you said about what actually is a data center. I think it can be confusing to people because one thing that we've seen in the media and the way that this has been reported on this deal between OpenAI and Oracle is that a lot of people are calling it an AI power plant. People are thinking of it as this is literally a place where you generate power. And I think it is confusing because as I mentioned, they're going to rent out four and a half gigawatts of power, which makes you think Oracle is in the business of like building, I don't know, electricity generators or dams or nuclear power plants. That's not what's going on here. This is a data center. And just to sort of remind you of what is the AI supply chain? What happens when you type in a prompt on ChatGPT? What is the supply chain of events that leads to that prompt showing up on your screen? The first thing you've got is the power generation by the energy companies and a variety of energy companies. You use that power to power the chips that are made by Nvidia that are in the data centers. And the data centers, those are owned and operated by Oracle and by AWS and by Microsoft, et cetera. And their job is basically to manage all of the computing power in those chips and to turn it into a menu of options that is easy for OpenAI to basically plug in and say, we want to host our software services on your server. So that's sort of the difference. You've got the power being generated, the power goes into the data center. Oracle, Amazon, they operate those data centers, they operationalize, manage it it, scale it, and then they rent it out to people. And so that's what's really happening here. And so when we hear that term four and a half gigawatts, basically that's another way of saying Oracle is renting out 4 1/2 gigawatts worth of computing capacity to OpenAI. I just think it's a good reminder of what is actually happening in the AI world and what actually is a data center. Final point before we move on here, Trump last week announced his AI Action plan, which happened at an event that was hosted by the All In Podcast. Let's just go through what the plan is first off, he just got rid of Biden's AI executive orders. He said that was bad and he's issuing a new plan. Okay, what is he going to do? He said he's going to withhold funding from any states that impose any AI regulations. This was a big question. States wanted to get their act together on AI and he's saying, no, if you do that, you're not going to get any funding. So that's the first thing. And that actually is pretty substantive. He also said he's going to launch, quote, creative approaches to export control enforcement, which is basically like a non answer to the question of what are we going to do with these Nvidia chips which China wants. There's been all these questions, what are we going to do with all of these exports? Are we going to limit the export controls? He gave no clarity on that. So that was the other thing that happened. He denounced the US permitting process, saying that it is, quote, impossible to build data centers, which, by the way, is false. The US has more data centers than any other country, over 5,000. The second best is Germany, which has just 529. So we have a permanent problem in terms of housing. We don't have a permanent problem in terms of data centers. And I think Meta is proof. They're about to build a data center the size of Manhattan in Louisiana. So another sort of distraction. But the final. And I think this is what it's really all about. And I think this is really what he cares about. The final plan. Well, I'll let you guess. What do you think is the number one mission of the new AI plan under the Trump administration?
- [37:37]
Scott Galloway
To transfer wealth from Los Angeles, New York and the rest of the nation to his buddies in San Francisco by violating, having absolutely no guardrails or having kind of the Wild west in terms of their ability to crawl, pervert and monetize other people's ip.
- [37:52]
Ed Mylett
Yeah, I think that's probably the subtext. That's the reality of the plan. That's not the thing that I was thinking of.
- [38:00]
Scott Galloway
Go ahead. What is?
- [38:00]
Ed Mylett
It's to get rid of. Wokeness.
- [38:02]
Scott Galloway
Oh, God.
- [38:03]
Ed Mylett
So the plan is to, quote, revise the AI risk management framework to eliminate references to misinformation, diversity, equity and inclusion and climate change.
- [38:15]
Scott Galloway
So, you know, social. The definition of socialism is that when the government decides they should control the means of production outside of systemic regulations. So deciding you need a golden share because you know how to run a steel company or to decide what is woke or not woke, or decide if you know who Columbia should or should not be admitting this is all socialism, this is the government. This is so anti Republican that the government knows better than the private sector. By the way, we should call it not his AI policy, but his AI Epstein policy. All of this is a distraction from the real story that he's trying to distract from. But anyways, Rosie O. Epstein, the Epstein tariff policy, the Washington Epstein's, not the commanders. Anyways, the thing I take away from this is this is that moment in time when we passed 230 which at the time made sense but now no longer makes sense, where this effectively is a transfer of wealth from old media companies to AI because old media companies have to spend a lot of money putting Anderson Cooper on the ground in, you know, in Iran or wherever. They take huge risks. They spend a lot of money fact checking and making sure that Stephanie Rule has the right language and looks great and has a cool studio. In fact, I mean this shit's expensive. Traditional media, writing books, producing, producing music videos. It's really expensive and hard. And basically what they've opted here is they said you can just steal all of it, process it, figure out a way to make, slice it up and make, take a 1 pound block of cheese and turn it into 16 slices that are worth more and we don't mind. And now I'm of two minds on this. America has a tendency to be kind of ready, fire, aim and that is err on the side of a lack of regulation. And I do think there's a solid argument that America's economic growth could largely. One of the many factors could be that we let our horses run. And that's what they're doing here. They're saying don't get in the way of AI AI is driving the markets. 40% of the S&P S&P is 50% of the world. Equity markets let our thoroughbreds run. And I actually found this policy more thoughtful than a lot of the policies they've been put out. I think David Sacks or whoever's advising him has said, okay, let's at least touch on the key points and let's pretend we're good at governance and we've actually been thoughtful about this. I thought this was actually one of the more thoughtful releases from the company. But they have said effectively, like we did in 97 with section 230, we are opting for the new guys. Now the economic argument would be okay, if you fuck over Penguin Portfolio, Ramden House, Simon and Schuster, Warner Brothers, basically every traditional old media company. And we take money from Them, we take their $1, which they get 50 cents for, on the market, and we turn it into $6. But you're going to see a continued erosion in original IP and the creative, the people who want to go into journalism, people who want to go into the arts. It's a transfer of wealth from the creative community to the technology community in San Francisco.
- [41:11]
Ed Mylett
And just one final point on the wokeness. The market can decide what's too woke for itself. Like, if the people decide that the algorithms are too woke, then they will decide that and they'll go for the algorithms that are less woke. They'll go for Grok or they'll go for ChatGPT. So the idea that we're still going on about this woke thing and we need the president to come in and say we gotta end, and the wokeness in AI, it's just. I'm just getting so tired of this stuff. It's like wokeness was a thing half a decade ago. Like, do we really need to keep on rehashing this and hitting the nail on the head? And to your point, it's just, it's a fun talking point that he knows, kind of hits for people. It gets them annoyed and riled up against the annoying libs. Meanwhile, it sort of distracts from all of the other issues with the tariffs and with Epstein and with Epstein and with Epstein, and so that's why he's hitting on it. But again, it's just, it's. It's a waste of time is what I would say.
- [42:22]
Scott Galloway
Agreed.
- [42:24]
Ed Mylett
We'll be right back after the break with a look at a resurgence in meme stocks. If you're enjoying the show so far, hit follow and leave us a review on property markets. Race the rudders. Race the sails. Race the sails.
- [42:47]
Scott Galloway
Captain, an unidentified ship is approaching. Over. Roger, wait. Is that an enterprise sales solution?
- [42:54]
Ed Mylett
Reach sales professionals, not professional sales.
- [42:58]
Scott Galloway
With LinkedIn ads, you can target the.
- [43:00]
Ed Mylett
Right people by industry, job title and more.
- [43:03]
Scott Galloway
We'll even give you a $100 credit.
- [43:05]
Ed Mylett
On your next campaign. Get started today at LinkedIn.com results, terms and conditions apply.
- [43:12]
Scott Galloway
The Jack Welch Management Institute at Strayer University helps you go from I know the way to I've arrived with our top 10 ranked online MBA. Gain skills you can learn today and apply tomorrow. Get ready to go from make it happen to made it happen and keep striving. Visit strayer.edu Jack WelchMBA to learn more. Strayer University is certified to operate in Virginia by Chev and has many campuses, including at 2121 15th Street north in Arlington, Virginia. On WhatsApp, no one can see or hear your personal messages. Whether it's a voice call message or sending a password to WhatsApp, it's all just this. So whether you're sharing the streaming password in the family chat, or trading those late night voice messages that could basically become a podcast, your personal messages stay between you, your friends and your family. No one else, not even us. WhatsApp message privately with everyone.
- [44:18]
Ed Mylett
We're back with property markets. The meme stock craze has returned. Krispy Kreme, GoPro, Beyond Meat, and 1-800-Flowers all skyrocketed in volatile trading sessions last week, shares of Opendoor jumped as much as 121% and Coles stock more than doubled. None of these rallies were tied to earnings or to any actual news with the company. Instead, they were fueled by social media chatter, especially on Reddit's Wall Street Bets page. It's funny, just after this happened, you know, everyone was talking about the meme stock craze is back. And then suddenly American Eagle announces this new ad campaign with Sydney Sweeney. Everyone starts talking about it online, gets a ton of social media buzz, and then within a day, meme stock movement happens. Shares in American Eagle rise more than 20%, which was more than $200 million in market cap added to the company just because of this Sydney Sweeney ad. So basically what we have is meme stocks are back. Obviously, the Gamestop craze happened in 2021. That was a huge deal. There were sort of questions over is this a once in a lifetime thing? Is this a one off or are meme stocks here to stay? This is our proof Meme stocks are here to stay. This is just a systemic part of the market now, and we're seeing this resurgence that really hit kind of a boiling point this week. Scott, your initial reactions to what we saw in terms of meme stocks this week?
- [45:53]
Scott Galloway
I think it goes back to the financial crisis or the great financial recession. And that is up until, really up until Covid, we had this natural cycle in our economies where capital aggregates more and more power. And then there's an exogenous event, a war, famine, a recession. And there is a natural and healthy redistribution of capital back from the owners to the earners. What do I mean by that? There's a war, the factory gets bombed, the guy who owned the factory loses a shit ton of money, but that you still need people to build a factory. They have more margin, power, and there's a redistribution back in wealth when the 2008 recession, great financial recession happened. We bailed out the banks, but we didn't bail out the entire economy. And guys like me who were coming into the prime income earning years back then had a chance to buy Apple, Amazon, as I've said, and Netflix for eight, ten and twelve dollars a share. But since then, since COVID came along, we said no. We're not going to let the natural cycle of exogenous events take the incumbents wealth down and give entrants such as at Elson an opportunity to buy Brooklyn real estate for 1000 bucks a foot. Inst of 2000 bucks a foot or a chance to buy stocks at a PE of 12 instead of 30. We're going to use young people's credit cards to prop up the value of incumbents assets. And young people are smart. They said, you know what? Fuck this, I can't buy a home. Stocks are crazy expensive. So what am I going to do? I'm going to create my own asset classes and I'm going to create my own volatility and I'm also going to weaponize mediums such as Reddit to try and inspire huge spikes in stock prices such that I can make money. And you also collapse it with what I'll call this dopamon monster generation. And that is buying and holding a Vanguard fund. It just doesn't really get your generation excited. It this is a generation all hopped up on TikTok and snaps and streaks that is used to a media dopa. They carry around an arcade, a porn site, a casino in their pockets and they're used to on demand dopa. So a combination of one, they think the game is rigged. So they're not going to play the boomer's game of investing in the market or real estate because they can't afford to creating their own asset classes. And also, quite frankly, this is just straight up gambling. This is a huge dopa hit. And then the algorithms love shoving in your face 210 times a day a screenshot from some douchebag in Miami that has made a million dollars buying cumrocket. And also on the Democrat side, when Nancy Pelosi leaves Congress with a quarter of a billion dollars in wealth based on insider trading, young people naturally think the game is rigged. I'm not going to participate in your game.
- [48:37]
Ed Mylett
Yeah, I think that's exactly right. Just to go through the performances of these stocks in the past week, GoPro is up 99%, Kohl's is up 30%, Opendoor up 20%. But it's up over 390% in the past month. And then it came back down. So just an example of how these things can kind of go wrong. And Krispy Kreme up 40%. And I think it's definitely true that this is a young man's game. And I think that is exemplified in the fact that what's the meme stock that we saw RIP at the end of the week, it was the company that paired up with Sydney Sweeney, who has become just sort of like the icon of the kind of young male incel movement in a lot of ways. And so, yeah, she's driving hundreds of millions of dollars worth of value for this company within a day. And it's just unbelievable. And to your point, I think the reason that this is happening is because it's fun and it's, you know, it's a distraction and it involves social media and it's social, et cetera. But as you say, young people have such a small menu of legitimate investment options. I mean, as you say, you got the S and P trading at around 25 times earnings. When my parents were my age, it was trading at 11 times earnings. We just saw the home price data last week. Average price of a home hit another record high. $435,000 for the median home in America. And then also, we can't really invest in startups either, because as we've discussed a lot, these startups, these really successful startups like OpenAI, SpaceX, they're not going public. And so young people and retail investors are gated out. So you can barely even invest in AI. Or if you do want to invest in AI, you got to invest at these high PE multiples with these big tech companies that are sort of consuming AI. So, so to your point, we invent new asset classes, we invent crypto, and we invent meme stocks. And we have a lot of fun doing that. But I think the big warning that I would clarify, I feel like my generation has this feeling that these meme stocks and these crypto movements, that it's a very sort of us versus them mentality where we're taking on the big bad banks and we're taking on the big bad institutions. But what we're forgetting is another big part of the story, which is by definition, it is actually us versus us. Because when you're entering a casino, it is a gambling game and there's a loser on the other side. Because, remember, we're not investing in cash flows. We're not investing in real businesses. We're Playing a game of musical chairs where the only way you can get rich off of this is if you sell at the peak. And the thing you gotta remember, last year Meme stock investors lost $13 billion in one week. You look at GameStop, GameStop is down 70% since its peak during the Reddit saga. So the thing you gotta remember, okay, retail owned the institutions, they owned the banks, they owned Melvin Capital, they also owned themselves. A lot of people lost a lot of money here. And the same is true of crypto. And I think that's the part of the story that people kind of whisper. They love this dynamic of the young people taking on the old people. And it's really fun when the old people get screwed. But let's be very honest, a lot of young people are getting screwed too. It's just that you're not hearing those stories because they're less exciting to report on.
- [52:26]
Scott Galloway
We said, we said in the algebra of wealth, we know how to get you rich. That's the good news. The bad news is it's slowly and it's boring. And this notion that you can get rich quick, you're right. Anyone, this notion, this bullshit notion, stick it to the man, right? When anyone tells you to stick it to the man, that means you're about to get a spear in your chest. And the person telling you to stick it to the man is the man. So these things are fun. What I would say is I love to gamble if you get some dope ahead, but take at least 70, 80, 90% of your hard earned dollars that you work so hard to spend less than you make and save money and put it into the most boring low fee shit ever. And if you talk to people who are wealthy and economically secure and can focus on the relationships they got there through really boring means. And just keep in mind, if you're doing this, you're gambling. And not only is it the capital risk, it's the amount of time you're spending. I mean, it's just I'm still working on how much time I check my stocks. I'm like, okay, that is not a good use of my time.
- [53:37]
Ed Mylett
The final thing I would add on this, just in terms of the us versus them retail versus institutions dynamic. The other thing you have to keep in mind now is that a lot of institutions are in on the meme stock thing and a lot of institutions are actually spending money hiring these smart social media savvy young people to help them figure out how to make all these arbitrage plays on the meme stocks. And in fact, 40% of hedge funds are now using social sentiment analytics for their trading strategies in 2025, compared to three years ago when it was 10%. In other words, hedge funds see what's happening. Their job actually is to trade. And so they're investing in figuring out, okay, how do we take the money from these meme stock pops? They're hiring people who are tracking Google search and tracking Twitter and tracking Reddit voraciously. And that's now who you're up against. You might not have been up against that in 2021 when this first started happening, but now that this is part of the markets, this is just the way of the world now. Now, yeah, the quant trading firms, the hedge funds are now figuring out how to do this really, really well. So another way to sort of burst this bubble that you're one upping the institutions, it's probably not what's going to happen here.
- [54:59]
Scott Galloway
The happiest countries in the world are not a function of what they have, they're a function of what they don't have. Specifically, they have an absence from stress. When you find out in Norway that your wife has lung cancer, it doesn't mean you're also going bankrupt. You don't have to worry about your kids education. You know that good education is free and available. And one of the things you want to think about as a young person is you want to clear out opportunities for real downside, depression and anxiety. And when you sign up and you start spending any money other than what you could lose all of on something like a meme stock, you're setting yourself up for some really ugly moments that could trigger, you know, a fairly serious mental health episode. And that is, it's tempting when you're boring and you're bored and you don't have a lot going on and you get a little bit of money to think, okay, I'm going to believe Roaring Kitty or someone on Reddit and I'm going to go all in on GameStop and you might lose 70% of your money that you were planning to use to re enroll in junior college. And it's really mentally taxing, it's really upsetting. And the upside there, unfortunately, as a species, we don't get as much joy from the upside as pain we get from the downside. So what you want to do is find stocks that will or invest in the market, be diversified and let the economy and demographics take over and focus all of your energy on building unique skills and relationships and then wake up when you're my age and realize you're economically secure. You are setting yourself up when you play this game to have a mental health episode. It's really as someone who this has happened to a lot of times I have stupidly set myself up for months, not years, because I think I'm fairly resilient of real mental health episodes and anxiety and disliking myself and seeing the world through a dark colored lens because I decided, oh, I'm smarter than everybody, I'm going to borrow money against my Red Envelope stock because we're clearly going public. And then when it didn't happen, I'm really upset at myself and it's not worth it. And you think, well, well you could have been worth a lot of money if you'd gone all in. Yeah, but the upside, that potential upside was not worth the downside of that emotional hit to my well being. So if you want to have some fun, fine, have at it. But be clear. It's like when I go down to the casino, I expect to lose all of it and I only gamble the money, a maximum amount of money that if I lose all of it, doesn't matter, doesn't fucking matter. Let's hit, let's go to Cirque du Soleil and then the strip clubs or whatever and I'm fine, I don't remember it. I don't do either of those things anyways. But you really want to be thoughtful not only about the return on your investment and the loss of capital. You want to protect the downside of yourself emotionally because we're sentient beings and your emotions and how you feel every day are oftentimes more a function of your chemistry. But these things can trigger really dark depressive episodes. So I don't like these things. I think they're bad for the mental health of America. I think they undermine confidence in the markets and they're an externality and an indication of just how fed up your generation is with mine.
- [58:18]
Ed Mylett
Let's take a look at the week ahead. We'll see earnings from Spotify, Microsoft, Meta, Amazon and Apple. It's also a huge week for economic data. On Tuesday, we'll get a read on consumer confidence for July. On Wednesday we'll get the US GDP report for the second quarter. And the Federal Reserve will also meet for its next interest rate decision. A day later we'll see the Personal Consumption Expenditures Index for June. That is the Fed's preferred measure of inflation. And finally on Friday, we will see the US Employment report for July. Any predictions? Scott?
- [58:55]
Scott Galloway
Alphabet is going to outperform the market over the rest of the year. And if you look at its earnings, supposedly AI is this existential threat. A search was up 13%. YouTube was up, I believe 12%. It has five amazing distinct units that have over 100. This thing is just a juggernaut. And it continues to perform. Its cloud unit is growing like crazy and it trades at a P of 23 versus 26 for the broader market. And I always say that, let's take two average S and P companies and I always pick Dow and P and G, which are amazing companies. Would you rather own Dow or P and G? Would you rather have Tide or Waymo, the leading autonomous driving unit? So they've also increased their capex to billion, which is more than meta and just behind Amazon at 100 billion. Microsoft said 80 billion and Alphabet's going to be at 85. They're trading again. I just think they're relative to the S and P. This existential overhang of the threat of AI does not appear to be bearing out here. So look, I think this company, I think Alphabet for the rest of the year is going to outperform the rest of big tech.
- [60:13]
Ed Mylett
I totally agree. So undervalued. There's just no question. I would love for us to get maybe a Google Bear on the program because I don't understand what the market's view is on this. I mean, it seems so obvious to me and we've been saying it for so long and every time we keep seeing earnings and they keep on outperforming. I just don't understand. Who are all these Google Bears? Why do these earnings reports come out? They crush earnings and then the market shrugs. This has to end at some point. Point. And so I would. Yeah, violent agreement with you on that.
- [60:50]
Scott Galloway
Five separate businesses that do 30 billion or more in annual revenue. Google Search, their display ad network, YouTube subscriptions, and seven products and platforms with over 2 billion users. Search, Maps, Gmail, Android, Chrome, play store and YouTube. And Waymo, which is hands down the market leader that's logged over 100 million total miles.
- [61:12]
Ed Mylett
All those growth vehicles, you've got got AI leader in AI. You've got data centers, you've got cloud, you've got digital media, the most ascendant streaming platform and the biggest and somehow still growing. And then if you want to get into robo taxis too, you've got a monopoly on the US robotaxi market and.
- [61:31]
Scott Galloway
It'S cheaper than the S and P. I always say to people when you're talking about the upside to a stock. We spend 90% of our time talking about its potential. You need to spend 50% of your time talking about it relative to its valuation. And that's where Alphabet is the buy here, its valuation and it's trading at a lower multiple than the average S and P company.
- [61:52]
Ed Mylett
This episode was produced by Claire Miller and engineered by Benjamin Spencer. Our Associate producer is Alison Weiss. Mia Saverio is our Research lead. Our research associates are Isabella Kinsel and Dan Shalon. Drew Burrows is our Technical director and Catherine Dillon is our Executive producer. Thank you for listening to Property Markets from the Vox Media Podcast Podcast Network. Tune in tomorrow for a fresh take on the markets.
- [62:51]
Scott Galloway
Support for this podcast and the following message comes from America's Navy the Navy offers new graduates hands on training and experience in careers like computer science, aviation and medicine, plus education and sign on bonuses. Parents help your grads start their career today@navy.com youm say you'll never join the.
- [63:12]
Ed Mylett
Navy, never climb Mount Fuji on a port visit or break the sound barrier. Joining the Navy sounds crazy. Saying never actually is. Learn why@navy.com America's Navy forged by the sea.