What OpenAI’s Restructuring Means for Microsoft, AGI — and a Future IPO

Summary

Prof G Markets: What OpenAI’s Restructuring Means for Microsoft, AGI — and a Future IPO

Date: October 29, 2025
Hosts: Ed Elson, Scott Galloway
Guest: Alex Heath (Author, "Sources" newsletter; Co-host, Access Podcast)

---

Episode Overview

This episode of Prof G Markets analyzes the highly anticipated structural changes at OpenAI and discusses their implications for Microsoft, AI development, and a potential IPO. The conversation features expert commentary from Alex Heath and unpacks high-stakes maneuvers among tech giants, including Microsoft’s deepened partnership with OpenAI, Amazon’s sweeping layoffs tied to AI investment, and Apple’s rise to a $4 trillion valuation.

---

Key Discussion Points

1. OpenAI’s Restructuring and the Path to IPO

[02:01–04:30]

• OpenAI’s shift from nonprofit to a dual-entity model:
  • OpenAI creates a for-profit "OpenAI Group" subsidiary, controlled by its nonprofit arm.
  • "Under the new setup, OpenAI's nonprofit arm legally controls OpenAI Group with a 26% equity stake valued at $130 billion." (Ed Elson, 02:36)
• IPO Preparations:
  • The restructuring is framed primarily as clearing a path toward a public offering.
  • "An IPO is definitely coming … I wouldn't be surprised if it happens next year." (Alex Heath, 04:30)
• Microsoft’s Stake and Expanded Partnership:
  • Microsoft now owns roughly 27% (down from 32.5%), employees/other investors the remaining 47%.
  • In exchange for a smaller equity share, Microsoft secures $250 billion in Azure cloud contracts and extended IP rights.
  • "Microsoft essentially traded upside in equity … for this massive Azure buy." (Alex Heath, 04:50)
• Exclusive Rights and Limits:
  • Microsoft loses its exclusive right of first refusal for OpenAI as a compute provider, giving OpenAI potential to use other cloud partners.
  • However, Microsoft keeps exclusive access to OpenAI's IP through at least 2030.

2. Governance, Values, and Skepticism

[06:04–11:58]

• Nonprofit retains control (in theory):
  • The nonprofit board can still appoint/dismiss leadership, showcased in Sam Altman’s historic ouster and return.
  • Many original board members replaced by Altman-friendly directors post-firing crisis.
• Public Benefit Claims vs. Commercial Reality:
  • "There does seem to be a lot of emphasis coming from OpenAI that, no, no, our values haven't changed. … I get my BS meter goes way up when I start hearing about this." (Ed Elson, 09:11)
  • Heath echoes skepticism: "My BS meter is very high on this as well." (Alex Heath, 10:11)
• Sam Altman’s Compensation Mystery:
  • Despite steering the organization, Altman holds no direct equity stake, raising suspicions about how value is ultimately distributed.
  • "You are not the face of the hottest company in the world and not owning direct equity in it, if you had any say in it. There's something weird going on with this that raises the Fishy meter for me." (Alex Heath, 10:20)

3. Microsoft-OpenAI Interdependence & AGI Clauses

[11:00–12:55]

• AGI (Artificial General Intelligence) Triggers:
  • Previously, if OpenAI declared AGI, Microsoft would instantly lose access to OpenAI’s new IP and some revenue rights.
  • New arrangement: Now, an independent panel will verify AGI milestones; Microsoft would only lose access to research after AGI, but still keep existing IP rights.
  • Raises questions about the meaning and governance of “AGI.”
  • "Maybe AGI isn't going to be as transformational as we all thought." (Alex Heath, 11:56)
• OpenAI’s Cloud Spending Promises:
  • OpenAI’s $250 billion Azure commitment is described as “pie in the sky … best case scenario.”
  • "These deals are very much handshake, like if it works right now." (Alex Heath, 13:46)

4. Amazon’s Historic Layoffs and AI Investment

[16:55–23:42]

• Layoffs as Strategic Restructuring:
  • Amazon to cut up to 30,000 corporate jobs (~10% of staff) to “operate like the world’s biggest startup” and fund AI development.
  • "It's good business practice to occasionally hit the pause button and reevaluate the size of the company." (Scott Galloway, 17:54)
• Comparative Context and Future Outlook:
  • Despite the layoffs’ scale, Amazon’s headcount is still elevated post-COVID boom.
  • Galloway predicts “a replay” of Meta’s historic earnings leap after similar staff reductions.
  • "I think Amazon is on the precipice of just an absolute monster quarter in terms of earnings." (Scott Galloway, 17:54)
  • Amazon’s productivity per employee had lagged Big Tech peers, a trend layoffs and AI investments are meant to address.
• AI’s Role in Efficiency:
  • The real transformative power of AI for Amazon might be “making automation more efficient and that much more productive and bringing down the cost of automation.”
  • "The ultimate application of AI might be robotics." (Scott Galloway, 19:58)
  • Predicts major retail margin improvements, making Amazon a top stock pick for 2026.

5. Apple’s $4 Trillion Milestone and Valuation Debate

[23:51–end]

• How Apple Broke $4T:
  • Driven by a third-party report of increased iPhone 17 sales—primarily more units of cheaper models.
• Cautious Perspective on Apple's Rally:
  • Elson disputes the narrative that Apple’s sales jump equates to a sustainable growth story.
  • He notes Apple is struggling with AI compared to peers (“Siri 2.0… still nowhere to be found”) and sales slowdowns in other product lines (Apple Watch, Vision Pro headset).
  • "It is being valued as if it were a growth company, but it isn’t a growth company. It’s a legacy company." (Ed Elson, 25:50)
  • Apple is now trading at 37x earnings, the highest multiple among Big Tech apart from Tesla, which the show considers “not justified.”

---

Notable Quotes & Memorable Moments

• On OpenAI’s Corporate Structure:
  • "An IPO is definitely coming. … I wouldn't be surprised if it happens next year. Honestly, I think they want to take advantage of the hype."
    — Alex Heath (04:32)
• On OpenAI’s Mixed Motives:
  • "There does seem to be… a lot of emphasis… that, no, no, our values haven't changed. … I get my BS meter goes way up."
    — Ed Elson (09:11)
  • "My BS meter is very high on this as well."
    — Alex Heath (10:11)
• On Sam Altman's Stake (or lack thereof):
  • "You are not the face of the hottest company in the world and not owning direct equity in it… There's something weird going on with this that raises the Fishy meter for me."
    — Alex Heath (10:20)
• On AGI Governance:
  • "Now… there's going to be this independent panel that verifies if AGI has been reached. … Lot of questions there."
    — Alex Heath (11:45)
• On Amazon’s Layoffs and Tech Labor Trends:
  • "It's not… a dramatic headline number… but the reality is when you're growing as fast as these companies, it's good business practice to … reevaluate the size of the company."
    — Scott Galloway (17:54)
  • "The ultimate application of AI might be robotics. … Amazon has been making these huge investments early and often and I think they're on the verge of recognizing the return."
    — Scott Galloway (19:58)
• On Apple’s Position:
  • "It is being valued as if it were a growth company, but it isn’t a growth company. It’s a legacy company."
    — Ed Elson (25:50)

---

Timestamps for Key Segments

• OpenAI Restructuring Overview: 02:01–04:30
• Deep Dive on OpenAI's Corporate History: 06:04–08:28
• Skepticism on Objectives & Governance: 09:11–11:58
• AGI Clauses & Microsoft Relationship: 11:00–12:55
• Amazon Layoffs & AI Automation: 16:55–23:42
• Apple’s $4 Trillion Evaluation & Market Analysis: 23:51–end

---

Conclusion

In this episode, the Prof G Markets team provides no-holds-barred analysis on some of the tech world’s most consequential recent events: OpenAI’s complex transition paving the way to IPO—while raising governance and motive questions; Microsoft’s strategic, if diluted, buy-in; Amazon’s dramatic job cuts in pursuit of AI-driven efficiencies; and Apple’s inflation to a historic valuation despite uncertain growth prospects. With skepticism and sharp insights, the hosts and guests equip listeners with a critical lens for navigating capital markets in the AI era.

Transcript

[Strawberry Me Career Coach]

Support for this show comes from Strawberry Me. Be honest. Are you happy with your job or are you stuck in one you've outgrown or never wanted in the first place? Sure, you can probably list the reasons for staying, but are they actually just excuses for not leaving? Let a career coach from Strawberry Me help you get unstuck. Discover the benefits of having a dedicated career coach in your corner. Go to Strawberry Me Unstuck to claim.

[Thumbtack Advertiser]

A special offer 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 what are you hoping for.

[Scott Galloway]

Today in the founders?

[Ed Elson]

Scrappy, traction oriented grinders and hustlers who.

[Scott Galloway]

Will blow through every brick wall in.

[Ed Elson]

This building to get to where they need to be.

[Pitch Podcast Host]

Welcome to the Pitch Season 14 where startup founders raise millions and listeners can invest on this season of the show. 10 VCs, 7 startups with one shot to build the company of their dreams.

[Thumbtack Advertiser]

Oh my God, we built the entirely wrong product.

[Pitch Podcast Host]

Two shots to build the company of their dreams with that intro.

[Ed Elson]

Let's go.

[Pitch Podcast Host]

Season 14 is available now wherever you listen to podcasts, so subscribe to the Pitch so you don't miss it. This season is presented by Adobe.

[Ed Elson]

Today's number 40. That's how many miles per hour dolphins can swim, one of the fastest animals in the world. We initially wrote this joke without a punchline, but we later realized that would defeat the porpoise.

[Alex Heath]

Money market matter.

[Ed Elson]

If money is evil, then that building.

[Public.com Advertiser]

Is hell goes on.

[Alex Heath]

Sell.

[Ed Elson]

Sell. Welcome to Prof. G Markets. I'm Ed Elson. We are kicking it off with one of our worst jokes in history, but we love it. It is October 29th. Let's check in on yesterday's market vitals. The major indices closed at record highs driven by new AI deals and strong third quarter earnings. Nvidia led the gains up 5% after making several announcements at its GTC conference, including a partnership with Nokia. Microsoft rose 2% and rejoined the $4 trillion club. So did Apple. More on that in a second. Gold fell to a three week low as investors maintained optimism for a US China trade deal. And all eyes were on the Fed as they kicked off their two day policy meeting. Investors are expecting a 25 basis point cut today. Okay, what else is happening? OpenAI is officially going corporate. The company announced that it has completed its long awaited restructuring and has established its for profit entity, OpenAI Group. This shift gives OpenAI the flexibility to raise billions in new funding and crucially, it clears the path towards a potential IPO. Under the new setup, OpenAI's non profit arm legally controls OpenAI Group with a 26% equity stake valued at 130 billion doll. The nonprofit also has the power to appoint the company's board. Meanwhile, Microsoft, which first invested in OpenAI in 2019, they own roughly 27%. The remaining 47% is split among the employees and other investors. The deal solidifies Microsoft's role as a major partner. It expands Microsoft's rights to use OpenAI's models. It also means OpenAI will purchase $250 billion worth of Azure services over time. There is a caveat though, that is that Microsoft will no longer have a right of first refusal to serve as OpenAI as a compute provider. That will give OpenAI the freedom to work with other cloud partners a lot there. Here to unpack what this restructuring really means, we are speaking with Alex Heath, author of the Sources newsletter and co host of the Access podcast. Alex, good to see you.

[Alex Heath]

Good to see you, Ed.

[Ed Elson]

We want to get your reactions to this OpenAI restructuring or at least the announcement of the restructuring. It's a little complicated, but that's the nature of OpenAI. Give us your read on what this actually means and what we're seeing here.

[Alex Heath]

Yeah, a few things. I mean for OpenAI top level, it means an IPO is definitely coming. Yeah, I wouldn't be surprised if it happens next year. Honestly, I think they want to take advantage of the hype and if they didn't have this nonprofit structure, they would have probably gone out this year is my guess, just given the momentum that they have. So that's, that's the OpenAI top level. The Microsoft top level is that Microsoft is essentially traded upside in equity. I mean, they still own a significant portion, but they're actually diluting their ownership stake From I think 32.5 ish percent to 27%. But they extracted 250 billion in Azure contract commitments from OpenAI in return. So basically accepting that dilution and, and upside on equity for this massive Azure buy. So you can read into that how you will. And then OpenAI gets a little more flexibility, but not a ton. Honestly. They didn't get a ton of concessions from Microsoft on exclusivity they can use different cloud vendors, which they already were, but Microsoft still has exclusive rights to the IP through at least 2030. And I guess lastly, that would be the other top line is we are definitely going to get OpenAI calling AGI by 2030, because a key line in this is that basically by then they'll have the ability to back out of parts of the exclusivity arrangement with Microsoft if AGI is achieved.

[Ed Elson]

I have more questions on that, just on the restructuring. Nonprofit versus for profit. I think most people know OpenAI is, was a nonprofit, but it's not totally clear to people. Could you just give us the history of is this a nonprofit or is it not? And what does the history look like?

[Alex Heath]

Well, the reason this has taken so long for them to do this restructuring and why attorney generals have been looking into it, there's been lawsuits about it, Elon has been suing about it, is that OpenAI has been this whole time, even the last few years, legally a nonprofit in California. And what they've been trying to do is create this public benefit corporation subsidiary, which they finally are now saying they have done, to be able to offer equity like a normal company and for people to understand. I mean, the last time we were really reminded of OpenAI being a nonprofit was when Sam Altman was suddenly fired for a weekend a few years ago. And it was because the nonprofit board had the ability to do that and they surprised him and did that. Technically that can still happen under this. So the nonprofit that was a key thing in the deliberations with the attorneys general in Delaware and California is that the nonprofit board is still, from a governance perspective, in control of the for profit subsidiary. So that hasn't really changed. What's changed is that the people on that nonprofit board, I would say, are more friendly to Sam Altman than they were a few years ago. And obviously OpenAI was in a very different phase. But that's the curious part of this, is like the governance isn't really changing, but for some reason this is okay with regulators. I mean, the nonprofit is getting a massive stake in OpenAI. 26 ish percent stake, worth a lot of money. It's the most technically valuable, valuable nonprofit in the country by far. But I'll be waiting to see how empowered this nonprofit actually is. Is that fund. Are, are those funds going to be liquid at all? Are they going to be something they actually use for social good, use cases, whatever? I think all that very much remains to be seen. And then another just random part of this, that is Sam Altman still does not own any direct equity in OpenAI, even after this restructuring. I think some people were expecting him to get like maybe 5, 10% of the company as the face. And he still has no direct equity as far as we know, which is very unusual.

[Ed Elson]

Just want to read you from the press release. OpenAI was founded in 2015 as a nonprofit. Its mission is to ensure artificial general intelligence benefits all of humanity. Today, OpenAI remains a nonprofit dedicated to that same mission. So they're still a nonprofit, but they own the. There's a subsidiary that is a for profit which they own a stake of. But there does seem to be a lot of emphasis coming from OpenAI that, no, no, our values haven't changed. We're still a nonprofit. We're still interested in benefiting humanity. The for profit entity is a public benefit corporation. It's a B corp. So it's kind of about helping people. I get my BS meter goes way up when I start hearing about this. Okay, so I'm glad you agree. We hear about the governance and you mentioned that, you know, the board still has, you know, some control. But I think what is so interesting is that's what they said last time they kicked out Sam Altman. When it was tested whether or not this was really about benefiting humanity versus making profits, the board said, no, he's. He's flouting safety precautions and we're going to kick him out. And then they got Sam Alton back in. They got rid of all of the board directors who didn't like him, and now they have a bunch of board directors who do like him, who are business leaders and pro AI. To me, it all smells a little bit like bs. They say it's nonprofit. They say it's cap profit. Ultimately, this is just a company and they're going to make money. And Sam Altman may not have some equity, but he's going to make money somehow. Your reactions.

[Alex Heath]

I think you're right. My BS meter is very high on this as well. I know he's already a billionaire. I know he makes fun of people who ask him this question about, why don't you have equities? I don't need the money. There's that famous clip of him talking to senators where he's like, I do this because I love it. Right. I get all that. At the same time, you are not the face of the hottest company in the world and not owning direct equity in it, if you had any say in it. There's something weird going on with this that raises the Fishy meter for me and I assume will come out at some point. But I think the big picture here, because this is very confusing, as we're saying, like it's still a nonprofit. What's really changing the headline for me this week was the Microsoft relationship changing and how going to declare AGI, which was very contentious before. Basically, before, if OpenAI said, hey, we've got AGI now, then all of a sudden Microsoft would lose access IP rights to all of OpenAI's products and it would also stop getting 20% of its revenue, which is something that's going to continue. Microsoft is going to continue to be entitled to 20% of OpenAI's revenue. And now what's basically happened is there's going to be this independent panel that verifies if AGI has been reached. We don't know who's going to be on that panel, how that governance will work. Lot of questions there. And then after they say that AGI has achieved this panel, Microsoft would only then lose access to the research that OpenAI does, so basically research into future models, but Microsoft will continue to have access to the IP. So I guess this post AGI IP is not so important for OpenAI to fight for and have on its own as it was before. They're willing to let that also be used by Microsoft. So maybe AGI isn't going to be as transformational as we all thought.

[Ed Elson]

It sounds like we're going to see an absolute storm of lawsuits down the road. I mean, when we achieve AGI, who's to say what that actually means? I think of this as we just see OpenAI is going to purchase $250 billion worth of compute from Azure from Microsoft. That's in addition to the trillion dollars in spending that they are promising to spend over the next several years. I don't know if you saw this Financial Times report, but they basically learned that a lot of the deals that OpenAI is making, they're not even getting legal counsel on these deals. In fact, he's giving it to Greg Brockman, who's like the technologist and letting him hash out these deals. This looks like the same thing. So I just want to get your reactions to how buttoned up are these deals really that $250 billion number? Do you believe that's actually going to happen?

[Alex Heath]

Do I believe that's going to happen? I mean, do I believe that I'm going to make millions and millions of dollars next year? Like, yes, I believe it. Will it happen? Who knows? I hope so. That would Be awesome. I think these numbers, including this 250 billion Azure thing is like if everything goes according to plan, that's the number then that you should anchor to. I would actually say that for all these deals, the Nvidia one, the AMD one, all these like these big trillion plus numbers are. That is what will happen if everything works. I think that's like the pie in the sky best case scenario. So no, I would be shocked if OpenAI actually spends an additional 250 billion with Azure. Maybe they do. Maybe I'll eat my words there. But yeah, these deals are very much handshake, like if it works right now.

[Ed Elson]

All right, Alex Heath, author of the Sources newsletter, co host of the Access podcast and you've got your launch party next week, which I am very excited for.

[Alex Heath]

Yeah, you're going to be there, right?

[Ed Elson]

I will be. I'm very excited. It'll be great. Thanks for joining us.

[Alex Heath]

Thanks for having me.

[Ed Elson]

After the break, a look at Amazon's layoffs. If you're enjoying the show, give Profg Markets a follow.

[Public.com Advertiser]

Support for the show comes from public.com you're thoughtful about where your money goes. You've got your core holdings, some high conviction picks, maybe even a few strategic option plays on the side. The point is you've engaged with your investments and Public gets that. That's why they built an investing platform for those who take it seriously. On public you can put together a multi asset portfolio for the long haul. Stocks, bonds, options, it's all there. Plus an industry leading 3.8% APY high yield cash account. Switch to the platform built for those who take investing seriously. Go to public.comprofg and earn an uncapped 1% bonus when you transfer your portfolio. That's public.comprofg 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 and SIPC. Complete disclosure [e-mail] disclosures.

[Pivot Podcast Host]

Scott, we're hitting the road, bringing Pivot live to the people seven cities. Toronto, Boston, New York, dc, Chicago, San Francisco and la.

[Public.com Advertiser]

Of course you went to Oasis, you went to Beyonce, you saw the remake of wizard of Oz and the Sphere. All those suck compared to the Pivot tour. This is, this is the biggest tour. Same people that are organizing our tour, that organized Taylor Swift's tour, they are much more excited about our tour.

[Pivot Podcast Host]

All right, that's enough. Grandpa. It's gonna be so good and we're bringing our brand of whatever we do to the people and we're excited to meet our fans. We love our fans. For Tickets, head to PivotTour.com See you there.

[Explain It To Me Podcast Host]

If it seems like AI is touching just about every part of your life these days, you aren't imagining things. It's all up in your streaming services. It's all up in your job search, and now it's even in your doctor's office.

[Medical AI Expert]

It can perform exceptionally well, kind of almost in a superhuman way on these specific, very challenging, complex clinical cases.

[Explain It To Me Podcast Host]

This week on Explain it to Me When AI Meets medicine.

[Medical AI Expert]

And I think it can be potentially revolutionary and transformative for people if they use it in the right way and when it doesn't compute to the 1 in 5. Around 20% of Americans said that they had turned to a chatbot for advice that later turned out to be incorrect.

[Explain It To Me Podcast Host]

New episodes Sundays. Wherever you get your podcasts.

[Ed Elson]

We're back with profty markets. Amazon just announced its largest layoff in company history. The company plans to cut as many as 30,000 white collar workers in total, or about 10% of its corporate staff. The first wave of layoffs started yesterday with an initial 14,000 firings. Amazon says that the goal is to run leaner in order to fund its AI efforts. Ultimately, they hope to, quote, operate like the world's biggest startup. For more on this and Amazon's approach to cutting jobs, we're going to give Scott a call. Scott, good to see you.

[Scott Galloway]

Good to see you, Ed.

[Ed Elson]

We want to get your reactions to this Amazon news. They are cutting as many as 30,000 white collar jobs, 10% of the corporate staff. This is one of the biggest layoffs we've ever seen, certainly the biggest layoffs we've seen in the history of Amazon. Your reactions to the news?

[Scott Galloway]

Well, I think it's important to just set some context. I think hiring is up more than 50% since COVID So while this is definitely a huge layoff and I don't want to diminish the impact on the people who are getting layoffs, what does this take them back 12 or 24 months? I mean, it's not, this isn't, you know, it's a dramatic top line or a headline number. But the reality is when you're growing as fast as these companies, it's good business practice to occasionally hit the pause button and reevaluate the size of the company. I mean, Alphabet has done this a bunch of times since they went public 20 years ago. And the thing that sort of blows me away here is that I think that Amazon is on the precipice of just an absolute monster quarter in terms of earnings. I don't think it'll happen in their next earnings call because they'll have to expense a lot of the severance costs and they'll still effectively be paying most of these people. But say the earnings call after the holiday season. I think what we're going to see is a replay of what I think is one of the most seminal earnings calls in history. And that's when Meta announced that they had grown their revenue 23% with 20% fewer headcount, taking the earnings up 70%. And it just sent the stock skyrocketing. I think that's what Amazon is setting up to do. And the other thing to keep in mind is this was coming because if you look at what's happened over the last several years at Meta, Alphabet, and I don't know if it's Apple at Meta and Alphabet, their revenue per employee is up between 30 and 60%. The revenue per employee at Amazon is off or has declined 25%. And I believe that while everyone's talking about AI, the killer application of AI may not be, you know, getting therapy or trying to figure out, you know, how to power an Uber without the driver in front. It might be making automation more efficient and that much more productive and bringing down the cost of automation. So the ultimate application of AI might be robotics. And Amazon has been making these huge investments early and often and I think they're on the verge of recognizing the return on that. And it's also kind of an interesting evolution of the company because the thing that has driven margin expansion for Amazon has been AWS and Amazon Media Group, which is basically forcing third party retailers to buy ads on their platform, which as you can imagine, has extraordinary margins. But I now believe they're turning their focus back on their biggest business by gross dollar revenue. And that's their retail business. And they're about to show remarkable efficiencies at the hands of automation. So the net net is last year. Every year we do a prediction stack. Last year we predicted and we like to pick our big tech stock of the year. Last year we picked Alphabet because it was trading at a P of 17 versus the average of 24 at the S&P stock is up 60%. Amazon's a relative underperformer, only up 20%, which is not that amazing given the kind of the acceleration in the broader market. But I think our pick this year for 26 is going to Be Amazon. I think Amazon is about to in two earnings calls, announce a meta like earnings call from last year.

[Ed Elson]

Yeah. Meanwhile trading at its lowest multiple in many years. The layoffs, is it AI? I mean, you mentioned that there's the bloat that we saw after Covid. A lot of these companies are hiring now. They're going to get rid of 30,000 jobs. Is that AI replacing them, you think?

[Scott Galloway]

Yeah, I think it's essentially productivity. I mean, if you look at Europe, Europe was at $45 per employee in 1995 and the US was at $45 per employee. As we sit here today, on an inflation adjusted basis, the US is at $70 and Europe is at $45. And it's because American workers are working harder. No, it's because they are armed with technology to make them more productive. So the remaining Amazon employees, which is still an enormous employee base, I think they're now the largest employer outside of the ARM services. I think they're the largest employer in America, is about to get much more productive. And I think to your point, I think Amazon trades at its five year average. PE is like 60 and it's down to 30 or 33. So it looks relatively cheap for a company that's the second biggest retailer in the world. Growing faster than any other, growing faster than Walmart with the number one cloud unit and also throw in rocket launch capabilities, it might end up being a big growth vehicle. But I think Amazon is poised to catch up, if you will, and recognize some of that monster growth. The existential threat that has taken their PE from whatever it is 60 to 33 has been that their dominant position in the cloud feels threatened because the AI component or the AI capabilities of their cloud offering are reportedly substandard to say a Gemini or what Microsoft Azure is offering. But I think Andy Jassy doesn't get the credit he deserves as an operator. I would describe kind of Bezos as a Jobs like visionary and Jassy is a Tim Cook like operator. I think he's just very focused on the blocking and tackling. But I think this, I, I think they're setting themselves up for an absolute explosion in earnings.

[Ed Elson]

All right, thank you, Scott. Appreciate your time.

[Scott Galloway]

All right, brother, Good night.

[Ed Elson]

Nearly 50 years after its founding, Apple is officially a $4 trillion company. The iPhone maker reached that milestone yesterday. For the first time ever, it joins Microsoft and Nvidia as the only companies in history to hit $4 trillion in market cap. Now what pushed it to $4 trillion yesterday? Actually, not much. The stock rose only 0.1%. It was already teetering at $4 trillion. The real rally actually happened last week when a company called Counterpoint Research published a research report on iPhone sales. A report that Wall street was quite happy about. The report basically found that in the 10 days after the release of the new iPhone 17, sales were up 14% compared to the release of the previous iPhone, the iPhone 16. And basically that news restored investors faith not just in the iPhone, but also in Apple itself. The long term potential of Apple, the iPhone is the engine of the company and it appears sales are going up. So that's what drove the stock up. The market was very excited about this report and what it says about Apple's future. Fair enough. We, however, take a different view. We were actually less impressed by this report in which we learned that it's actually sales volume that is up 14%. That is they're selling more devices but not necessarily generating more dollars. And the reason that is important is because the main driver of that growth was volume sales of the cheaper model. In other words, many consumers of the iPhone appear to be downgrading. So the questions you have to ask here are one, will this translate to a meaningful increase in revenue? Not totally clear. And two, how much does a third party report on the first 10 days of sales actually tell you about the long term trajectory of the business? And does it warrant this valuation? And does it warrant $4 trillion in market cap? We're not so sure. So yes, Apple hit 4 trillion and yes, investors are optimistic. But we think the company is still overvalued and we don't think this justifies a higher multiple than every other big tech company. Why? Well, there are still some major question marks for Apple. For one, there's AI. Apple is behind on AI, not just in terms of spending. They've spent 12 billion. The others have spent nearly 400 billion, but also in terms of performance. Siri 2.0, which was supposed to be the future of AI at Apple, that is still nowhere to be found. Meanwhile, they are losing talent. Several executives working on Apple's AI, they have been poached by Meta, including the leader of the foundational model team. And this is important because Apple's growth opportunities are quite slim. The iPhone has basically hit critical mass. In fact, their share of global phone shipments is actually lower than it was in the 2010s. Meanwhile, their watch sales have been falling down 20% last year. And the growth engine that they pitched us, that is the Vision Pro headset, the VR AR headset, that has been a Total flop. An estimated half a million units have been sold. That is essentially a rounding error for Apple. And the plans for the Apple Vision Pro 2 have actually been abandoned. Now, this isn't to say that Apple isn't one of the most impressive and dominant companies in the world and in history, really. And this isn't to take away from that $4 trillion milestone. It is incredible. But we do want to be clear about where we stand right now. The company is now trading at 37 times earnings. It's trading at a higher multiple than any of the Mag 7 stocks apart from Tesla. It is being valued as if it were a growth company, but it isn't a growth company. It's a legacy company. And this research report, promising as it is, doesn't do much to dispute that central point. The company will report earnings this week. Perhaps they'll tell us something new. Perhaps they'll tell us something very impressive that will change our minds. But for now, our position remains the same. We are not very bullish on Apple. Not at 4 trillion. If we had to invest in a Mag 7 stock, the last on our list would be Tesla. But second to last would be Apple. Okay, that's it for today. This episode was produced by Claire Miller, edited by Joel Patterson and engineered by Benjamin Spencer. Our associate producer is Alison Weiss. Our research team is Dan Shalon, Isabella Kinsel, Kristen o' Donoghue and Mia Silverio. And our technical director is Drew Burrows. Thank you for listening to Profg Markets from Profg Media. If you liked what you heard, give us a follow. I'm Ed Elson. I will see you tomorrow.