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- [00:01]
Scott Galloway
Support for the show comes from public.com if you're serious about investing, you need to know about public.com that's where you can invest in everything. Stocks, options, bonds and more and even earn a 6% or higher yield that you can lock in with a bond account. Visit public.comproPG and get up to $10,000 when you transfer your old portfolio. That's public.com Prof. G paid for by Public Investing. All investing involves the risk of loss, including loss of principal. Private 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 disclosures available@public.com disclosures I should also disclose I am an investor in Public Fellas, you know Degree Cool Rush deodorant, right?
- [00:49]
Ed Mylett
Well, last year they changed the formula.
- [00:51]
Scott Galloway
And guys were mad about it.
- [00:52]
Ed Mylett
One dude even started a petition. So guess what?
- [00:55]
Scott Galloway
Degree heard us, admitted they messed up.
- [00:57]
Ed Mylett
And brought the original Cool Rush scent.
- [00:59]
Scott Galloway
Back exactly how it was.
- [01:01]
Ed Mylett
And it's in Walmart, Target and other.
- [01:02]
Scott Galloway
Stores now for under $4. So grab some and remember why its.
- [01:06]
Ed Mylett
Cool, crisp and fresh scent made it the number one men's antiperspirant for the last decade. Degree Cool Rush is back and it.
- [01:12]
Scott Galloway
Smells like victory for all of us.
- [01:15]
Ed Mylett
At Capella University, you can learn at.
- [01:17]
Scott Galloway
Your own pace with our Flexpath learning format. Take one or two courses at a.
- [01:22]
Ed Mylett
Time and complete as many as you can in a 12 week billing session.
- [01:26]
Mark Mahaney
With Flexpath, you can even finish the.
- [01:28]
Scott Galloway
Bachelor'S degree you started in 22 months for $20,000.
- [01:32]
Ed Mylett
A different future is closer than you think with Capella University. Learn more at capella.edu. fastest 25% of students.
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Scott Galloway
Cost varies by pace. Transfer credits and other factors.
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Ed Mylett
Fees apply.
- [01:45]
Scott Galloway
Today's number, 50%. That's how much more often British people apologize than Americans do. So I'd like to apologize, apologize to all our listeners that I have not yet offended. It's coming. It's coming, Ed. True story. When I started a Morgan Stanley, I was consistently late and I thought of an interesting apology in the all Hands meeting said I want to apologize for being late. I was at home not being miserable. Yeah, it's not very good, is it? I gotta come up with something better. All right, you talk. I'll find something better.
- [02:29]
Mark Mahaney
What do you want me to talk about?
- [02:31]
Scott Galloway
I apologize for slapping you twice, but I needed to slap both faces. Get it? Two face. Yeah. This is going nowhere, Ed. This is going nowhere.
- [02:39]
Mark Mahaney
Keep throwing. See if anything sticks.
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Scott Galloway
I promise to Do a better job at hiding how much you annoy me.
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Mark Mahaney
Ed, finally some truth.
- [02:47]
Scott Galloway
I like Don Rickles minus the talent right now.
- [02:50]
Mark Mahaney
I do love that statistic. I think it's very true. We apologize way too much.
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Scott Galloway
You think?
- [02:54]
Mark Mahaney
In fact, just before we recorded. Yeah, I went to the bathroom, and then I came back into the recording session. I was like, sorry, and everyone laughed at me. I shouldn't be apologizing for going to the bathroom.
- [03:06]
Scott Galloway
No, they were laughing because as soon as you said, I want to go to the bathroom, I'm like. I said to our technical director, can you make the mic more sensitive? I'd like to hear his stream, because I bet it's like a fucking Niagara after a big rain. I'm telling you, Ed, you should literally, like, hold it and then go into the bathroom and let the good, like, literally let that flow run wild, my brother. Make it like the Amazon river. Because I'll tell you, get to my age and it's like a baby bottle dribbling. It's just so upsetting.
- [03:38]
Mark Mahaney
Okay, I'll send you a recording next time. How's that?
- [03:40]
Scott Galloway
I'd appreciate that. I'd appreciate that. But before we do that, let's get to the headlines.
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Mark Mahaney
Finally, banter is over.
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Scott Galloway
You have permission to do what we're.
- [03:53]
Ed Mylett
Paid to do here. Now is the time to buy.
- [04:01]
Scott Galloway
I hope you have plenty of the wherewithal.
- [04:05]
Mark Mahaney
Huawei is preparing to test a new AI processor designed to rival Nvidia's H100 chip. This move comes after China's President Xi Jinping pledged to make self reliance a top priority as China ramps up its AI development. Apple plans to source all US iPhones from India by the end of 2026. The move will double its production output in the country as Trump's tariffs drive Apple out of China. And finally, Spotify's monthly active users rose 10% to 678 million in the first quarter. However, the stock fell 7% after its user forecast for the current quarter missed expectations. CEO Daniel Ek warned that broader economic uncertainty could bring some, quote, noise in the short term. So let's start here with this Huawei news. Huawei, which is the Chinese company, they are building a new chip that will supposedly rival Nvidia's best chip, which is the H100. And Nvidia stock fell more than 2% after that was announced. I just want to point out we should probably take this with a grain of salt, because Huawei has made these kinds of claims in the past, and so far, none of them have really panned out. They had the 910C chip for example, which was supposed to be as good as the H100 as well. And then people started using it and they started saying, no, actually it isn't. So here we are again. They're making similar claims. We'll only know if it's true once the chip is actually out. But I think what is more important to focus on were those statements by Xi Jinping where he stated publicly and officially he said that self sufficiency in AI is now a national priority. And this is new. You know, it might have been true before, but it was never publicly stated like this. So I think this is kind of a defining moment in the AI race where it's been sort of like a cold war between the US and China. We kind of knew we were in a race, but never really acknowledged it. Now it's acknowledged the US is shutting down all chip shipments into China. And now you have China which is publicly coming out and saying we are going to be a self sufficient and self reliant AI nation. So the AI race is officially on now. Nvidia versus Huawei, AMD versus smic, you name it. It's the US versus China. Scott, your reactions to this new Huawei chip and what this means for America.
- [06:29]
Scott Galloway
Your analogy is the right one and that is a Cold War analogy. First it was a nuclear arms race, then it was a space race. My favorite thing about the space race is they put the Russians, it was such a brilliant propaganda move. They put up something the size of a basketball. But what they did was they made the frequency of which it was communicating back to earth such that anyone, you know, radio ham operators could hear the beep, beep. It was sort of basically the most elegant and rudimentary way of saying we're better than you, we're better than you, you should fear us. And people were just totally freaked out by the prospect that a space borne vehicle could, could be over their houses. Everyone was so freaked out. The interesting thing here is that it kind of lends credence to the fact that free trade, that when you restrict trade or free flow of trade, it's not always good for you. You sometimes just create incentives for them to develop workarounds. And I think that might be true here also. The technology is obviously very important and I believe Nvidia is going to have the edge from a technology standpoint for a long time. Unless that is, they can get a bunch of Chinese nationals who are in business schools across the nation to go to work at Nvidia and then start transmitting or engaging in espionage and IP theft. What people don't realize is that the majority of espionage now is not about James Bond, spy versus spy, kill people. It's a lady who's a very, you know, I don't know, normal, pedestrian looking person who's the assistant to somebody who just happens to get plans for the latest Nvidia chip and somehow it gets transmitted to Beijing. And we did the same thing to British textile manufacturers in the 19th century. And any economy growing faster than 6 or 8% a year has usually got very, very strong IP theft as part of its core competence. And China's always been really good at that. The thing that will, I think, make Huawei potentially an outperformer here relative to Nvidia is one. Nvidia's got an extraordinary market cap right now. But also, I think the worm has turned in terms of people's receptivity or favoritism that was biased towards the US and that is the deepest pocketed companies and countries in the world. Now, I wouldn't say unbeknownst to us, but it was taken for granted or we didn't realize how much goodwill we had. I think you're going to see a lot of European companies take meetings with Huawei and say we're less freaked out or we're no less freaked out about Chinese espionage or them having access to our data. But we're much more freaked out about Americans having our data now. And we don't feel nearly the allegiance to maintain US prosperity, given that they're no longer guaranteeing our military umbrella, that they appear to be declaring war on us economically. So I think Huawei has the wind at their back right now. But I'd love to know the relative valuations because I would think that Huawei is going to get a lot more meetings with Latin American, Asian and European companies to discuss their AI and their chips.
- [09:43]
Mark Mahaney
This is not a public company, so it's hard to know. But I just want to highlight some statistics that sort of illustrate what we're up against here. China produces 3.6 million STEM graduates every year, and that is more than four times the number that we produce in America. They also have produced 13,000 granted patents in AI so far, and we have produced less than 9,000. They're also beating us in terms of public investment into AI. They allocated $142 billion to semiconductor manufacturing last year. Compare that to the US where we were at $75 billion. There are a lot of places where China is Actually very strong. I don't think you could make the case that right now China is beating us. I mean, we have the best chips in the world. We also have the best models in the world. We're also leading by far in terms of private investment into AI, 12 times higher by dollar value than China last year. So I think we're. If we're in a race, and I believe we are, I think we're ahead. But this will be really interesting to keep track of because you just look at what the, what they're doing in terms of investing in their research institutions, in terms of the innovation that we're seeing in the patent world. They're clearly laser focused on being the world leader in AI. And this is the thing that could easily define the next generation of technology.
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Scott Galloway
What I think is going to do real structural harm to America's competitiveness on an economic level are some of the things you're talking about. And that is if you look at the number of. And Frieza Khari did a great segment on this. If you look at the number of universities in the top 500 in the last 10 or 20 years, China has grown the number of universities that top universities, they have by 50% and in the US declined. And then all of this nonsense around sequestering or cauterizing the investment in innovation through universities, which has been this, arguably the best investment in history, is this private public partnership we've had with universities where the National Institute of Health and different Defense Departments fund different universities to come up with just amazing technology. The most amazing supply chain probably is probably the Apple supply chain in China. But arguably the best or the most important was the supply chain that was developed to get to splitting the atom. Right? And since then we've been doing that around everything from diabetes drugs to chips to LED panels, all of these things have flowed through incredible capital through university and our ability to attract unbelievable talent. And essentially, I think, and now the Chinese are going on a charm offensive and saying to the best human capital in the world, the best researchers in the world, the best PhD students in the world come to China. We have great universities, they're well funded. You may not like us, but you can count on us, we're consistent. So we're experiencing. I believe you could argue that the biggest structural impact economically on the United States is a gutting of the most successful partnership, economic partnership in history, and that's the private public partnership between universities and the government. And the weird thing is we won't even know the specific damage it'll just be. And it is. Right now, China is now responsible for about 50% of the patents that are being filed, per your comments. So this is just. We are in a room of prosperity, but we've decided to open the windows and leak all of the oxygen out to our competitors.
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Ed Mylett
Yeah.
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Mark Mahaney
If you believe that prosperity and economic growth is mostly a function of technological innovation, which it sounds like both of us agree on this, that it is, then the best forward looking indicator of your economy is the quality and the strength of your research institutions. I mean, that's the best way we can see into the future. How good are our PhDs? How good are our researchers? I still think we're better than China. But again, our conclusion here is that the trend is not looking amazing. The fact that this other country is actively, our enemy is actively investing into their research institutions, meanwhile, we appear to be detracting from them. It's just not a great sign when you're trying to model this country out and the economy out 10, 20, 30 years in the future. We should probably move on to Apple, though. I mean, they've already been moving their production out of China into India. But this is a new report from the Financial Times and it clarifies that the plan is to move all of the iPhone manufacturing out of China and into India. And the plan is to get that done by the end of next year. So this is like a big deal on multiple levels. It's a big deal for China, where Apple makes 90% of its iPhones. It's also a big deal for India, which is going to inherit a huge business making these products, making these iPhones. But I think most of all, it's probably the biggest deal for America where we were told that the purpose of these tariffs was to reshore jobs out of China and back into the US and instead what we're seeing, at least in the case of Apple, the jobs are leaving China and they're going to India, they're staying in Asia, and this is going to create 150,000 jobs in India. It's probably going to add some significant percentage of GDP to their economy. So essentially, America is getting no benefit from this. And in fact we get punished because the manufacturing costs in India are 10% higher than they are in China. So sure, the jobs get reshored somewhere else and prices go up.
- [15:29]
Scott Galloway
It was never realistic that we were going to build a $3,500 iPhone, which is what it would cost to produce it in the United States. And so we've gone from kind of one, not Even low cost, but an incredible supply chain, innovative culture, which is China to India. Well done, Donald Trump. You have taken, you've gotten your pound of flesh from China and you've given it to India. Was that the point? And more generally, geopolitically, I think India and the kingdom are going to thrive over the next 10 years because they're now the swing votes. If you think about team A is the US And Europe, although we seem to be alienating Europe, the US and the West. And then team B, if you will, or blue jerseys, is North Korea, China and Russia and maybe Iran. The swing votes, the really powerful nations that can play each side off of each other are the Kingdom of Saudi Arabia and India. And I think they're going to benefit. And India is already appears to be benefiting.
- [16:28]
Mark Mahaney
I think the other big macro question is that this news implies is like, who is going to be America's next China? Who's going to be the country that adopts this $440 billion per year business that is making cheap products and sending them to America? This news would imply maybe it'll be India, but maybe it could be someone else. Maybe it could be Mexico. And we talked with Ryan Peterson last week. He was very bullish on Vietnam. Maybe it could be Vietnam.
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Scott Galloway
He was great. And something I just never thought of was that the internal river network in Vietnam ends up being this cheap natural infrastructure.
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Mark Mahaney
And he said that India was a nightmare to do business with. He said that logistically their supply chains are a mess, which was quite interesting.
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Scott Galloway
The other potentially sleeping giant here, or stirring giant, is Indonesia. And they're gaining share in EV battery materials, especially nickel and cobalt in India. India commands over 20% of global nickel reserves. And companies ranging from Tesla and Ford have signed sourcing deals with Indonesian firms. So there might be sort of a new. The problem is they need an acronym such that they can market themselves better for investors. You know, it's sort of like Indonesia and Vietnam, Mexico and India, like MIV or something. They need something such that people, they get on people's radar screens. But I think you're going to see a dissemination of market cap. And we've talked about this away from the US And I wonder if some of the tail of the whip and some of the bigger upsides might be in places like Vietnam and Indonesia.
- [18:01]
Mark Mahaney
Let's move on to Spotify, which reported earnings the stock dropped 7%. They missed on profits. Operating income came in at 509 million euro. Wall street expected 548 million. They also gave guidance that Wall street considered quite soft. So I think that's certainly part of why you saw this drawdown. But I think this is really just a function of. Of these massive expectations. It's still up 20% year to date. I mean, it's one of the best performing stocks in the tech sector. But I look at the company and the fundamentals are still really strong. I mean, you got active users up 10%, you got revenue up 15%. My takeaway here is the market was a little too excited. It's correcting. But net net, I look at Spotify, to me, the company's still crushing it.
- [18:51]
Scott Galloway
Yeah, there's company performance and there's expectations. And the stock is a function of expectations. You talked about year to date. In the last 12 months, the stock's up 103% even after its decline.
- [19:04]
Mark Mahaney
That's insane.
- [19:04]
Scott Galloway
And it trades at a price earnings multiple of 93. So this company's crushing it. Yeah, it's just that the investors. You said something that struck me a few months ago. You said the expectation now is that every company will blow away expectations. The stock price has just gotten out too far over its skis is the bottom line. And it'll probably rationalize a bit. My guess is it'll go flat for a while and then it'll maybe down and then it'll reignite its growth again. Because this company, there's nothing here that would indicate anything other than Spotify is now benefiting from what Uber benefited from and some of the big magnificent Seven have benefited from. And that is it has made the jump to lightspeed. And that is it has so much scale and so much capital to reinvest into innovation that slowly but surely. And also it benefits from focus. It's pulling away from Apple and Amazon and the other music streamers. And I can't think of another company that was able to take an entire medium and distill it down to one searchable icon on your iPhone. I mean, even YouTube, as much as we talk about YouTube, there's just certain things, a lot of things I cannot find on YouTube. I can find pretty much everything in terms of music and podcasts on Spotify. I think they've been really innovative around the commenting and the video. They're trying to create it into a social platform. I love the branding.
- [20:30]
Mark Mahaney
It's basically the best managed company in tech in my view. I mean, every. There have been so many forks in the road for this company and you look back and they've made every. Every decision has been the right one. And I think One of their biggest decisions, which we're now seeing reflected, was their decision to get into podcasting. Now we can make, you know, we can have a conversation about did they do it the right way. But what is very clear is that this is now a big leader in the podcasting space. That was a decision they decided to go with. And now we're seeing a lot of emphasis on podcasting, on the earnings calls and in the earnings reports. And one thing that's so interesting, we're seeing it play out in our business. The biggest platform for this show, profit markets in the audio at least, was Apple Podcast. This week, Spotify actually overtook Apple as our top audio platform for profit markets. Our growth on Spotify is way outpacing our growth on Apple. And I've been trying to think about why that is, and it's two main things for me. One, I think Spotify is just attracting a younger audience. And I think a lot of that has to do with many of the things you mentioned. Now, I think their marketing is great. They're leaning into video. They're trying to really focus on engagement by implementing these new comments features. They're doing a lot of stuff that resonates with young people. And you look at this program, this is a largely young audience out of the Prof. G Media portfolio. Prof. G Markets is the youngest. 36% of our audience is under the age of 34. If you look at Raging Moderates for comparison, that number is 24%. And so that would explain why Raging Moderates, as an example, has 86% more followers on Apple Podcasts versus Spotify. And then you look at this program where Spotify is actually leading. So I think that's one explanation there. It's just, it's attracting a young base. And the second thing is the recommendation algorithm. I think a lot of people are finding this show because Spotify is recommending it. At least that's what I've heard anecdotally from people who listen to the podcast. And this is the real differentiator between Spotify and Apple as an audio platform. And the reason it's pulling ahead the way you find a new podcast on Apple, you kind of just have to find it on the top 10 list. It's basically an entirely editorial recommendation system. It's the same way that traditional media works or, you know, like, you look at books, how do you sell books? You kind of just have to get onto the New York Times bestsellers list. Spotify is really leaning into having an algorithmic recommendation system, not an editorial one. Where they're investing in AI, they're learning what you like and then they're giving you more of it. And I think that's a big reason why this podcast is doing well on that platform is it's simply allowing people to discover it. I think that's so important in this business and it's so important for growth. You need to figure out a way to attract new podcasts that have a real incentive to move onto your platform and that have a chance of competing with the biggest shows.
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Scott Galloway
So the core demo that everybody wants is people under the age of 44 basically kind of 23 to 44 year olds spend money on stupid products. They buy fancy cars, watches, coffee, shoes. They buy high margin stuff because people are young and in their mating years and want to signal their worth, their potential worth as a mate to other people. So they make irrational decisions. They're having babies, they're spending a lot of money, they're high value consumers. And the reason why cable news is just struggling so heavily is the average age of an MSNBC viewer is 70. That's the average.
- [24:25]
Mark Mahaney
That stat always fucking blows me away.
- [24:27]
Scott Galloway
Well, think about this. You just turned 26, is that right?
- [24:31]
Mark Mahaney
Yeah.
- [24:31]
Scott Galloway
That means if you turn on, get this, MSNBC, that means someone else who's 114 is watching. I mean, think about that. And what do 70 year olds buy? They buy health insurance, life alert, grifter insurance products because they just sit around worried that they're not, that someone's going to take their title and own their home. You know, some, some criminal game from Albania. They just, you know, sit around in fear waiting for the ass cancer. Is that too much?
- [24:59]
Mark Mahaney
Never.
- [24:59]
Scott Galloway
Whereas young people like yourself are, you know, coming into their prime income earning years, starting to figure out, you know, they love alcohol, they love all these great high margin products. So the core demo, called a core demo, is under the age of 44 for markets that for us is about 72%. Three quarters of our demo is under the age of 44 as a core demo, whereas raging moderates, it's about 54%. We're just going to get higher CPMs because everyone is chasing the younger person who's irrational, which translates a higher margin. And also sets the tone culturally. If you want anyone wearing your product or using your product, you want it to be a 25 year old, not a 70 year old. And the kind of the great white rhino of media is the young American male. Because the young American male especially has become totally numb to advertising and is playing video games, watching Netflix and listening to Spotify. So they have basically extricated themselves from the entire advertising ecosystem. So if you can find those people anywhere, they're gold. And the reason why podcasting is garnering more and more revenue, even relative to its listenership, is that it is finding the people that you can't find on cable news any longer. And it's kind of heartening when you think about it. I like the fact that younger people seem more drawn to financial and markets content than political content. I think that's a good forward looking indicator actually.
- [26:30]
Mark Mahaney
It's very exciting.
- [26:31]
Scott Galloway
You sound excited, you sound enthralled.
- [26:35]
Mark Mahaney
It's so exciting, it's intoxicating. We'll be right back after the break for our conversation with Mark Mahaney. If you're enjoying the show so far, be sure to give the Prof. G Markets feed a follow wherever you get your podcasts.
- [26:57]
Scott Galloway
Support for the show comes from public.com all right. If you're serious about investing, you need to know about public.com that's where you can invest in everything. Stocks, options, bonds and more. They even offer some of the highest yields in the industry, including the bond account 6% or higher yield that remains locked in even if the Fed cuts rates. With Public, you can get the tools you need to make informed investment decisions. Their built in AI tools called Alpha doesn't just tell you if an asset is moving, it tells you why the asset is moving so you can actually understand what's driving your portfolio performance. Public is a FINRA registered SIPC insured US based company with a customer support team that actually cares. Bottom line, your investments deserve a platform that takes them as seriously as you do. Fund your account in five minutes or less at public.com profg and get up to $10,000 when you transfer your old portfolio. That's public.com profguide 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 disclosures available@public.com disclosures I should also disclose I am an investor in Public. Support for the show comes from Groons. If you've ever gone down the rabbit hole of trying different nutrition solutions, you've likely had the thought, Surely there's a way to improve my skin, gut, health, immun and brain fog without offending my taste buds. Well, there is. It's called Grunds. Grunds are a convenient comprehensive formula packed into eight delicious gummies.
- [28:30]
Ed Mylett
A day.
- [28:31]
Scott Galloway
It's not a multivitamin, a greens gummy or a prebiotic. It's all of those things and then some at a fraction of the price. In a Gruens daily snack pack you get more than 20 vitamins and minerals plus more than 60 whole food ingredients, all of which help you out in different ways. For example, Grunds has six times the gut health ingredients compared compared to the lean green powders like biotin and niacinamide which help with thicker hair, nails and skin health. They also contain mushrooms which can help with brain function. And of course you're probably familiar with vitamin C and how it's great for your immune system. On top of it all, Groons are vegan and free of nuts, dairy and gluten. Get up to 45% off when you go to Gruns Co and use the code Prof. G that's G r u n s.co using code Prof. G for for 45% off. As a contractor, I don't pay for.
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Ed Mylett
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Scott Galloway
Want and I only pay for what.
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Ed Mylett
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- [29:55]
Mark Mahaney
Welcome back. Here is our conversation with Mark Mahaney, senior Managing Director and head of Internet Research at Evercore. Mark, thank you for joining us again on property markets.
- [30:05]
Ed Mylett
Thanks for having me back.
- [30:10]
Mark Mahaney
So you have just for those who don't know, you've covered Internet stocks for almost 25 years, widely known as one of the top Internet stock analysts in the world. So we wanted to have you on to discuss Internet stocks, especially with these tech earnings coming out. And you and I were emailing last night and I asked you what your top picks are in terms of Internet stocks right now and you said Amazon and you said meta. Now we've got Amazon earnings coming out this week, also meta earnings. Unfortunately those earnings will come out just before this episode airs, but I would like to start with Amazon. Why is Amazon your top pick right now and what do you think we can expect in this upcoming earnings report?
- [30:54]
Ed Mylett
Well, both of them fall under what I call DHQ Camp. So dislocated, high quality camp or whatever, they're great DHQ opportunities. So I look for the highest quality assets in the space and that would have to include Amazon, Meta, probably Google. Although I'll go a little further out on the, on the, on the risk limb. I'd probably include Dash, Uber, Booking, Shopify, Spotify, Netflix. You know, there's, there's about 10 of these that I think are really high quality. And then the question is, when do they get dislocated? Look, we began this year with multiples that were relatively high. I thought there was only really 1D HQ at the beginning of the year, that, that was Uber. But given the market sell off, you've got a chance here to buy some of the highest quality assets that kind of, they're not fire sale prices but they're on sale. And Amazon is one of those. It's trading at one of its lowest PE multiples ever, 23, 24 times earnings. And I know that there's a lot of near term issues and we'll talk through those. They face the same ones that a lot of other companies face. They just have a very good execution track record. So my guess is that they'll handle them better than others. And my same pitch would go with, with Meta, which is the stock with the trade off is trading at one of the. It's not as bad as it was in 2022, but it's one of the more attractive multiple shots you've had in, I'd say the last two years. And I think the fundamental story is very much intact. So that's why Amazon and Meta would be two of my top picks.
- [32:19]
Mark Mahaney
You mentioned the things that are kind of in the way for Amazon. I assume we're talking about tariffs. We also just had this kind of insane turnaround that happened recently where Amazon said, or at least it was reported, that Amazon was going to report the tariff cost on each of their products. The Trump administration then said that it was a hostile and political act. And then next thing you know they announced, no, we're not gonna put the tariff cost on the website. So just give us your reactions to what happened there and also what these tariffs mean for Amazon. I assume that's what you're talking about when you say Amazon has some struggles ahead. Possibly.
- [33:00]
Ed Mylett
I think last week the CEOs of Home Depot, Walmart and Target went into the White House to express their concerns over what the tariffs would mean for their businesses. I'm actually a little surprised that Amazon wasn't in that list. They're actually bigger than all three of them in terms of retail volume or they're similar in size to Walmart, but I think they may be modestly bigger. But whatever. If you're a major retailer, yeah, you walk around the Walmart store, turn over anything in there. It's all made in China pretty much. And so it's an issue for all of these major retailers. So yeah, that's a kind of an issue across the board. And these companies are going to have to make a decision, are they going to eat price, are they going to eat market share? You know, you got to do something because your, your, your input prices are going up. So how are you going to handle that? Are you going to defend market margins? Are you going to defend market share? And so there's an economic issue here for, for Amazon and then there's the follow on impact which is if you have, you know, pretty material price increases coming through the system that is going to dent consumer demand. And, and so there's kind of a long term economic issue or maybe even a medium or near term economic issue for Amazon and then other things. You know, there's competition, very intense competition in the cloud business for Amazon and maybe some regulatory challenges too. So I throw it all together. I don't think Amazon was going to, there was no act. I don't think Amazon was going to show tariff prices next to their regular prices. That's what they said. But I also just think Amazon's management team has been pretty darn apolitical, I would argue over the last 10, 20 years. And this is a place that's extremely hard working environment. And the executives that I've tracked over the many years, I mean they've been almost entirely profit focused. So I've seen very little political activity really coming out of that them for good or for bad. It's just that's what I've sensed. So I doubt that there was really going to be some broad based showing of what the tariff impact on prices were going to be. But it is real, it is a material impact.
- [34:59]
Mark Mahaney
Your other top pick there was Meta. Just tell us a bit about Meta and what you think we can expect from these earnings this week.
- [35:06]
Ed Mylett
So if there's a drawdown in advertising spend, Meta will be impacted. I just think it's going to be one of the last, least impacted of the major ad platforms. I may be wrong on this but look, it's largely performance marketing. It's also got highly fungible inventory. So the obvious comparison is with Google. If you're you know, people are searching for Hawaiian golf, package vacations. That's a very specific search item. And there's a very specific type of ad you can put against that if you're in your Facebook newsfeed, Instagram newsfeed reels, stories, whatever. That that inventory that they could add, inventory they can put against you is very fungible, depending on what your personal interests are, but it's very fungible. And so I just think that they're more resilient in an ad slowdown. None of them are recession proof, but they're more resilient. And I think Meta would be one of the last places to get cut. And frankly our channel checks so far have shown that advertiser demand has kind of held up for Meta. I'd be surprised if it hadn't given what Google just reported last week. So I just think Medics sort of holds up a little bit better in this environment. Valuation's pretty reasonable and it looks like they're starting to finally kind of cut down the investment spend at Reality Labs based on reports. If that's true, that's great. I don't think any of these companies are going to slow down their AI capex spend, but I think if they start cutting off some of these extraneous areas where they've been spending a lot and Reality Labs is one that hasn't really shown much return yet, I think the market would respond positively to that.
- [36:40]
Scott Galloway
Marco, it's good to see you. It feels like picking which company will outperform the other amongst these is trying to pick who's going to score more points, LeBron or Kobe here. These companies continue to all just be such well managed, outstanding companies. It strikes me that Meta may be the unsung hero of AI. Hero is the wrong word that has the most unrealized potential around AI and that is that the second largest purchaser of GPUs from Nvidia. And at the same time they collect more data than any company. 4 out of 5 users outside of China are on or people are on Meta. So they've got the GPUs, they've got the data. It feels like this is the AI company that people aren't talking about. Your thoughts?
- [37:27]
Ed Mylett
I think they've used AI to dramatically improve the user experience. You know, your newsfeed has got a lot more. It's become more personalized, more interesting. I think that's true. And it shows up in more and more time spent on Facebook, Instagram over the last two to three years. I think they also used AI to rebuild almost completely their ad tech stack post the Apple privacy changes two or three years ago. So I think they've already been deploying it and you're right, they have one huge advantage which they've got first party data which nobody else Google will have to but those two companies, you know, Facebook is one of the very few that has that kind of level of data. So yeah, I think they're, because they don't have a separate cloud business that people have wondered whether they're a real AI play. I absolutely agree with you, Scott. I think they are an AI play. They're, they're a play at the AI application layer which we don't really have many examples of but they're sitting right in front of us. I think they're a wonderful example of AI.
- [38:22]
Scott Galloway
When I look at the price earnings ratio, the the least expensive is Alphabet and my sense is that I'm beginning, you know, I pinged back and forth and but now just looking at the Alphabet earnings, I now think that Alphabet is the most undervalued of the bunch because 353 times the number of queries is OpenAI which is a lot of people think is an existential threat and I wonder if that's suppressing or unnaturally or unfairly suppressing the stock price. YouTube continues to grow like crazy and the average, I think the S&P 500 trades at a P of 25 or 26. And here's Alphabet at 16 which to me is just so far superior than the average S and P company and has five different businesses of $30 billion plus. It feels to me like the most robust of the four and the cheapest. And I'll layer on a second thing. I think the most overvalued is Apple at a P of 34 and isn't growing. Your thoughts?
- [39:23]
Ed Mylett
Google is the cheapest stock I've thought about two or three overhangs on a stock which explain why it's the cheapest stock. It's got a DOJ overhang. It's going to be DOJ roadkill. It's got an AI overhang. Are they going to be Genai roadkill is, you know, are we all moving towards ChatGPT or significant enough of us moving a significant enough of our queries over to ChatGPT perplexity and maybe some other entrance. So those are the two overhangs. And then when Google prints up a quarter like they did last week, but then they disclosed that their paid Click growth grew 2% year over year, it kind of Feeds into this thesis that you know, this company is going to go negative in terms of unit growth soon. They talk about how AI AI overviews AIO is really boosting their search queries. But if that's true, why is your paid click growth only growing 2% year over year?
- [40:18]
Mark Mahaney
Could you explain what exactly paid click growth is? Because we look at the Google's business and when I look at the earnings report I see search up 10%. So what is that paid click growth and why does it matter?
- [40:31]
Ed Mylett
So in their quarterly filings they disclosed two metrics behind search. Paid click growth and then price per search CPM. And so this last quarter they did 9 to 10% search revenue growth. And what they disclosed in the queue is that they got there through 2% query growth and you know, 7% ish pricing growth. And generally what investors want growth. Investors want is they want more growth to come from units than from pricing. And I know there's a lot of things that go into those metrics and there, there's a lot of noise behind there but still that, that unit growth has been slowing for a couple of years and they're concerned that, you know, it could go negative. Why would it go negative? Because it's a very mature business, not, not saturated, but it's, it's clearly mature. But the second thing is they may well be losing query share to, you know, to perplexity, but particularly the ChatGPT. That's the, that's the overhang concern. I still like Google as a stock because I think this risk is more than priced in and I think they're doing a lot of great innovations to make the search product better. But that explains why the stock is so cheap.
- [41:38]
Mark Mahaney
Yeah, it's a really interesting point and important. You can't just, you can't grow just by raising prices. It's not enough. You need to actually grow the unit economics. One thing they do have going really well for them, Google this is, is Waymo, which they are a majority shareholder in. Waymo is doing a quarter of a million rides a week, up 5x from a year ago. I've talked about how bullish I am on Waymo because they have 100% market share in the robo taxi business. I mean people talk about Tesla and they talk about Amazon is getting into it with this thing called Zoox. But I sort of look at, you know, the revenue, who's making money. It seems to be only Waymo. Do you think that Waymo could be a significant growth vehicle for Google? Is that an important thing? To consider when you're evaluating the stock?
- [42:27]
Ed Mylett
Absolutely, it is as part of the option value in the name. I'm here in Waymo Central. I can look out my window here in San Francisco and see Waymo circling around the financial district. By the way, I can see Uber circling around too. It's just they're not marked so it's not as obvious. But yeah, you know, I've watched Waymo, I've written reports on Waymo. I mean I've just, I mean huge fanboy, fan, person of, of Wayo. But it's still so early stage. This is going to take years before it's truly mass market. But they're seeing great adoption in some of their newer cities. And I think that there's a chance here for Google to own the AVOs, the autonomous vehicle operating system. And there was a company 30 years ago that made minted a fortune creating the operating system for computers. And, and now the open question, I think there's going to be a company that's going to mint a fortune creating the operating system, autonomous vehicle operating system for all vehicles. I think that's where Google's going to go with Waymo, whether they win that or not. And my guess is that they probably will, they'll probably beat Tesla just because Tesla is just. Tesla's going to be focused on one vehicle, whereas I think what Waymo is going to do is develop this technology and then be willing to sell it to all OEMs. And so every car gets bought and sold. You know, my guess is starting 10 years from now there's going to be, somebody's going to make money off the AV functionality in that and right now the leading player to do that is Waymo. So it's absolutely interesting for an investor who's thinking the next year or two, however, you got a first deal with doj, you got a first deal with this, this AI, you know, this potential disruption before you can get paid on wh, that's the challenge you have. But I, you know, I love Waymo as part of the option value and I don't know of another tech company, I'm sure there are some that have have a Waymo. You know, Meta doesn't have a Waymo. But the most interesting one out there, the most interesting option value I see in techland that I look at is Waymo with Google.
- [44:25]
Mark Mahaney
You mentioned there that you thought, or at least Uber was your top pick at the beginning of the year. High quality company that was also dislocated. Now there's been some More dislocation post tariffs. But I think you've been highlighting Uber for a long time now. I think you've said that it's underrated for at least several months. Give us your thoughts on Uber and also the potential for Uber to get involved in robo taxi land.
- [44:54]
Ed Mylett
Well, the biggest overhang on Uber stock, this is not really a tariff issue. I mean, it's got economic whatever, it's a cyclical stock. But it's also got interesting countercyclical hedges too. In an economic slowdown, there's just gonna be more people needing a side hustle. There'll be more couriers, more drivers. So there's actually a little bit of a countercyclical hedge to Uber's business model that I don't see in any of the other models I look at. But the real issue here is robo taxis. And you know, there's a lot of debate on this and some of it I think is a little bit noisy and unnecessary. Here's your simple action question. I mean, do you think that Uber is going to have robo taxis as part of its network in the future, five and ten years down the road? I think they will, in part because I think consumers are going to want them, but in part because I think they're going to be multiple AV vendors. That's a risky assumption because we only really have one now, but you know, that one that's really commercially been tested, but I think you give me five years, I think we're going to have multiple AV vendors and then Uber sits there as the perfect partner. There's this wonderful blog that put out by one of the Andreessen Horowitz partners two weeks ago on they're an investor in Waymo and they showed this chart about how well Waymo has launched in Austin. Now they've launched solely, exclusively on Uber's network. And the expression that the investor used was that Uber helped Waymo Turbocharge into that market because Uber can go to an AV vendor, autonomous vehicle vendor and say, we'll reduce your financial risk, we'll reduce your operational risk, you'll get the profitability faster because these things are expensive. Work with us. And I think that pitch is going to become stronger and stronger. So I think Uber is going to be a long term winner. That's my, that's my thesis. And if I'm right on that, I think there's a ton of upside in an Uber stock here. So I'm going to stay very patient and be a bull on the stock. It's up 30% or whatever year to date. It's actually the best performing large cap Internet stock. But that's because it began this year dislocated over these robo taxi concerns. But I think the data points are coming in that shows that there will be robo taxis on Uber's network in the future. And if that's true, you want to buy Uber.
- [47:04]
Mark Mahaney
We'll be right back. If you're enjoying the show so far, hit follow and leave us a review on the Prof. G Markets feed.
- [47:19]
Ed Mylett
I think you're on mute. Workday starting to sound the same. I think you're on mute.
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Scott Galloway
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Ed Mylett
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Scott Galloway
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Mark Mahaney
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Scott Galloway
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- [48:52]
Mark Mahaney
We'Re back with Prof. G Markets. I saw a talk you gave at Money show in February and you made this point which I thought was spot on, which was that because the valuations are so rich in tech and in the Internet sector at large, the only way you're going to get real growth is not going to be from multiple expansion. I mean, maybe we'll see a little bit now that we've seen this dislocation as a result of the tariffs, but that if you want to get 20% growth, you're not going to get a 20% increase in the multiple. You need 20% earnings growth. You need top and bottom lines to rise and I look at the Internet companies we've talked about thus far, it seems as if Uber has the highest probability of a 20 plus percent earnings growth expansion over the next, let's call it five years. Something along those lines. Do you see it the same way? And if not, who has the highest earnings growth potential out of all the, all the stocks that you cover?
- [49:56]
Ed Mylett
So Ed, I like the way you set it up. I'll just, I'll tell you what I'm, I'm trying to do is be greedy. I want to find a situation where I can find a stock that gives me premium earnings growth. You know, 20% to 20 to 30% earnings growth. That's hard to find. I want to find that and a multiple that can go higher, that can re rate. I call that kind of a double barreled approach to making money. You make the most money when the multiple goes up and the earnings growth.
- [50:20]
Mark Mahaney
Is, is premium both and yeah, love it.
- [50:22]
Ed Mylett
And actually I think Uber is there now. I just, my comment was referring to most of the other companies. You know, Netflix at 35 times earnings. I just don't think it re rates much higher than that. I mean maybe it goes to 37 or something like that, but there's not a, there's not a huge swing up in the multiple. Same thing with Spotify. 35, 40 times earnings. I like the businesses, but they're going to, the stocks will go 20% higher because their earnings growth is 20% higher. But I give you Uber, where I think the earnings growth could be 20 to 30% and I think the multiple could go up, you know, multiple turns from here. Like it's trading at 15 times cash flow. This thing could go to 20, 25 times cash flow. You compound those and that's a lot of stock upside. So that's what I really love to see. And that's why when, when that's why I love these dislocated high quality companies. High quality companies give you premium earnings growth, but they're, they all sell off at some point or another. Just be patient. And when they sell off, then you can get the earnings growth plus you can get a little bit of multiple rerating and boom. That's your big upside. Hey, I made plenty of stock mistakes, but that's what I look for and that's my approach to picking stocks.
- [51:25]
Mark Mahaney
You mentioned Netflix there. It's pretty remarkable what's happened to the stock so far this year. One of the best performing in tech, if we call it tech. I always think that's a little bit debatable but I think most people would consider IT tech up 25% year to date. And then we saw these Netflix earnings a couple weeks ago. They had this huge beat. Revenue up 13%, ripped even more. Tell us about Netflix and specifically what is going so right at Netflix. What is the market so excited about that to your point, they don't seem to be that excited about when we look at all these other Internet companies.
- [52:04]
Ed Mylett
Well, Spotify and Netflix both share something this year which is in an environment where there are rising recessionary risks. Like. Like what's recession? There's nothing recessionary proof. But what's recession? Resilient. What's recessionary? Resilient. And arguably Spotify and Netflix are Spotify 799 for a month's worth of access to the biggest content entertainment collection out there on the planet. That sounds like a great deal to me and I think it sounds like a great deal to most everybody. And the business has been pressured, it's been tested through economic cycles. So I just think that they're recessionary resistant. And then there's something else that's happening. Industry's gone through consolidation. 20, 19, 18 and 19 were. Everybody was entering into the streaming wars. And then we peaked when Disney's fired its CEO for running up streaming losses too high. And ever since then we've had nothing but consolidation. And everybody wants to sell. Well, I'm exaggerating, but everybody wants to sell their content to Netflix now. And Netflix at the end of the day is sort of taking share in this market. And then there's something else. They're proving that they have pricing power. Like if you have a media company with pricing power, you know, you don't get too many of those. Spotify has it. They're going to come up with a superfan plan. They got 269 million paid subscribers around the world who pay them. I Forget it's like 13amonth or something like that. You and I both know, we all three know that we can probably name ten of our friends who are really passionate about music and would spend 25 bucks a month for some really nicely curated, you know, early release version of Spotify. They're just passionate. They have all their playlists and their party lists, etc. So I just think that there's. And that's. Yeah, I think Spotify has the pricing power. Netflix does too. And Netflix is gonna. I think Scott will appreciate this. Netflix is gonna recreate the bundle. That's their strategy. You remember how much you paid for your cable bundle. I forget 40, 50, 70, 80 bucks a month. And Netflix has got all of that, you know, high end production content, but they're gonna bring in more and more live events, more fights, more sports, and eventually you're going to get real big league sports on there because they're going to have the ability to outbid almost anybody for them. So I just think they're going to recreate the bundle. So the top price on Netflix today is I think 24.99. I bet a dollar, big bet for me that within 10 years, that top price on Netflix for that big bundle that they've got with all this live entertainment, that's going to go to 30, it's going to go to 35 bucks and people will pay for it because they're going to recreate the bundle for you. So I think that's why Netflix and Spotify today have been outperforming. Not just year to date, but the last 18 months. The stocks have done well. Recessionary resistance, that's the most recent thing. Expanding market share, industry consolidation, and then their profit ramps, they both have showed this really nice improvement in margins.
- [54:58]
Mark Mahaney
I found it so interesting how unanimous the market's reaction has been to this Netflix is recession resistant point. And to me I think of it as more of a question. A recession is coming. Will people cancel their Netflix subscriptions? To me that's an open ended question. The market believes wholeheartedly no, they will not cancel their subscriptions or if they do, they'll downgrade to the ad supported tier. The market is not concerned about people canceling. And I'm just wondering, is that a new phenomenon? Do you think that maybe three, four, five years ago, had a recession been on the table, do you think that Netflix stock would have reacted in this way? Or are we in a new environment where Netflix is so systemic, the content is so important to people that it's just recession resistant now.
- [56:00]
Ed Mylett
Well, Ed, what's implied in your question is a really useful and helpful warning, which is that these are deep consensus longs Netflix is, and everybody's cyclical at some point or another. So I'm sure if we had a severe recession, I'm sure that Netflix would be impacted. It does seem like entertainment spending holds up relatively well. I think it's true that filmed entertainment spend actually rose nicely during the Great Depression. I've always heard that. Maybe I saw that on the Internet somewhere, so it must be true. But anyway, Netflix has been tested. I mean, it's gone through economic cycles. This one, unlike Spotify, has been public for 25 years. So we've seen what's happened to it now. It's much more mature now, much bigger than it was in the past. And so the one scenario that you mentioned, which is what I would watch out for, which is are you going to see people stick with Netflix but trade down, I think that's a real, I think that's a very plausible outcome. I do think it's deep consensus thinking, so that could be dangerous, that it's recessionary resistant.
- [57:06]
Scott Galloway
I'm curious, Mark, do you cover or do you have any, generally any thoughts about Reddit? My sense is Reddit might be. I'm always trying to think who's the next who joins the Magnificent Seven. And I've always thought you're just giving it just sheer scale of traffic, that Reddit is a candidate. Your thoughts?
- [57:23]
Ed Mylett
My biggest concern on Reddit is I think they've got this great growth, but at the end of the day, you know, the revenue comes. Maybe they haven't rolled out any sort of subscription revenue yet. I think, I mean, I would want to watch that, but it's a, it's a mid tier ad platform and I've never really seen a mid tier ad platform break through, whether it was Snap, Pinterest, Twitter, none of them have ever done it. Because at the end of the day, you got to go to marketers and you got to say, yeah, spend some of your money, shift some bucks away from Linear or break it away from Meta or Google and spend it on my platform. And the marketer is going to say, because your targeting is better or your reach is better, your frequency is better. Why? Other than just simple diversification. And I don't think that a mid tier ad platform has ever really been able to effectively answer that question. And that's why, unless you were something really out of the blue like TikTok, I just haven't seen anybody really break through and generate $10 billion of ad revenue. I hope I'm surprised one day, but that would be my biggest concern with Reddit. But you know, everything I've seen so far is very intriguing.
- [58:28]
Scott Galloway
My thesis is that Meta could put Pinterest or Snap out of business in about 12 months and decides not to. So they can claim to the ofTC and the DOJ, they have actual competition and these guys have just, it feels like they've just gone sideways for the last five years and they're always kind of the little engine that could but doesn't. Do you think that the same is true or I'm curious, you have so much expertise and insight around Uber. What happens to Lyft? It strikes me that it's overvalued because people believe someone's going to come in and acquire it and it doesn't happen. Where does Lyft go from here?
- [59:06]
Ed Mylett
I don't know. I'm pretty cautious on Lyft just because it's the distant number two in the US Market. Now they're trying to expand internationally. They just acquired an asset in London, I think, like a taxi service. I forgot the name of it. And so geographic expansion is a good thing. But you know, the problem with being a distant number two is that, that your economics aren't in your own hands. And so in the December quarter, Lyft stock traded off aggressively on their print because they had a surprise price action that occurred late in the quarter. Uber came in and lowered prices aggressively and it, it caused Lyft to, you know, miss its numbers. And well, that, to me, that's, that's why you want to be careful about buying second tier assets. And so, so I'm on the sidelines on the stock. I sort of view it as maybe more of a trading asset than an investing asset for really nimble traders that want to move in and out of the stock when the valuation gap widens particularly wide and jump in and sell it when it narrows. Okay, I understand that. And that's a very valid way to make a living. It's not what I would suggest for retail investors.
- [60:19]
Mark Mahaney
A few months ago you said that there were three big wild cards for tech and for Internet stocks in 2025, and they were regulation, tariffs and M and A. A lot has happened since then. Today, what would be your three wild cards? Or perhaps they're the same?
- [60:37]
Ed Mylett
Well, there'd be a fourth one, which is recession. That wasn't in my forecast three months ago. Not that I make recession forecasts, but tariffs. Yeah, I mean the tariff wildcard became in a lot wilder than I, wilder than I would have thought and the market as a whole would have thought regulation. I don't know. We still haven't had any, anything that's meaningful yet to tech. I haven't seen any material deregulation yet. Maybe I missed it, but still. So I'm sort of watching for that. We've had the tariff wildcard get played and it's going to get played for a while. And then what's the third one? Oh, M and A. Yeah, it does seem like there's more M and A that's being allowed now. Google buying wizard security software company. There's smaller acquisitions out there, so I just think that that's kind of more allowed now. But of those three wildcards at the beginning of the year, the one that came through in spades, if I'm not ruining the analogy, is tariffs. And actually it turns out the market does have a good hand because the one thing that's really changed administration policy has been a market that said, no, Moss, we disagree. We're going to tank the markets. The bond market seems to the king or queen.
- [61:50]
Mark Mahaney
Mark Mahoney is a senior Managing Director and head of Evercore's Internet research team. Mark has covered Internet stocks for over 25 years and has been consistently recognized by institutional investor for his research, including 17 years as a top three ranked analyst and five years as a number one ranked analyst. I want to have that stat. I'm jealous. Thank you Mark for coming on. It's always good to hear your perspective.
- [62:13]
Ed Mylett
Thanks. Thanks Scott.
- [62:14]
Scott Galloway
Thank you, Marco. It's good to see you.
- [62:17]
Mark Mahaney
This episode was produced by Claire Miller and engineered by Benjamin Spencer. Our associate producer is Alison Weiss. Mia Silverio is our research lead, Isabella Kinsel is our research associate, Dan Shalon is our intern, Drew Burrows is our technical director and Kathryn Dillon is our Executive producer. Thank you for listening to Profit you Markets from the Vox Media Podcast Network. If you liked what you heard, give us a follow and join us for a fresh take on markets on Monday.
- [62:40]
Scott Galloway
Lifetime. You had kind reunion as the Water and the.