Scott Galloway · 57:57
Meta is an amazing company. Four years ago in 2022, it lost 72% of its value. These companies, the natural curve of these companies is very volatile. And the technology and these companies will survive, and they will be great companies. Or can they go down 90% in value? The answer is yes.
Kara Swisher · 58:18
Yeah. I agree.
Scott Galloway · 58:19
This feels... It it just feels so 99 to me. It's like I
Kara Swisher · 58:23
was government meddling makes it worse. The government
Scott Galloway · 58:25
Oh, yeah. Propping them up. Because Trump is like, my entire administration is... America is a giant bet, whether it's the the GDP growth, CapEx spending, earnings growth, and the S and P is all a big bet on AI.
Kara Swisher · 58:38
His political money.
Scott Galloway · 58:39
If these guys go down Oh, no. It's gonna be really rough for me. I am telling you a bailout is coming.
Kara Swisher · 58:44
Yeah. One would assume. Yeah. Because there's a feud for America. Yeah. You're right. 100%. Alright. Scott, one more quick break. We'll be back for predictions.
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— Predictions segment begins —
Kara Swisher · 1:00:56
Okay, Scott. Before we get into this week's predictions, I wanna play a prediction you made last week at Cannes.
Scott Galloway · 1:01:03
My prediction is the biggest IPO in terms of First Day Pop is gonna be a European, the Berkshire Hathaway, I've forgotten Internet brands, and that's this company called Bending Spoons that I had not heard of until two weeks ago. I'm kinda fascinated with it.
Kara Swisher · 1:01:16
Well, Scott, take a victory lap. Bending Spoons surged 40% after the company's IPO this week. What's next before you get to your prediction?
Scott Galloway · 1:01:26
Well, so first off, the company was up... So SpaceX was up, I think, 22 or 23%. We predicted it'd be up 20. Benning Spoons was up close, up I think 42% yesterday.
Kara Swisher · 1:01:35
Up 40. Yeah.
Scott Galloway · 1:01:36
They're gonna have to show that they can scale a model of buying stuff at, you know, ex EBITDA and then Orphans. These orphans and then substantially reducing costs, which is Latin for hire younger people and replace the expensive 40 year olds. And to their credit, they have some of the highest revenue per employee of any digital company right now or any Internet company. But they're gonna have to show that they can consistently make these accretive acquisitions. What this really is is like Martin Searle kind of pioneered this model. He went and bought all the big agencies. I don't even remember them now. Ogilvy Mather. He could go in and buy these companies at seven times EBITDA or eight, and they'd immediately... He'd take their earnings, and the market reward him... Would reward him with 12 times. They're gonna have to show that they can... That this model, this private equity like model of acquiring companies, they don't get them cheap. They get them for a good price, you would argue, that their ability to reduce costs, continue to see growth, add some growth organic, and then the market will give them a markup, they're gonna have to show they can continue
Kara Swisher · 1:02:42
to do down right now today. They're going down today.
Scott Galloway · 1:02:45
Well, to be clear, valuation last year was about $7,000,000,000 It came out at $19,000,000,000 It's trading at about 23 now. The stock's not expensive, but you would argue that they're going to have to show sooner rather than later their ability to continue to scale these types of accretive acquisitions. But I thought when I talked to when I looked around and I said, Okay, all of the oxygen had been sucked out of the air for SpaceX. And when these guys came out at seven or eight times earnings and all of those brands and the fact they were only raising a billion and $0.5, I thought this thing's gonna get... I mean, this is the sad part about IPOs. This is what I believe JPMorgan and Goldman Sachs are doing, and that is they use AI and their incredible market insight and their incredible marketing machine. They are the new engineers. They engineer a 20 plus percent pop on day one because the reality is that is the ultimate branding event. Everywhere in the news today is that bending... Italian company bending spoons is up is up 20%. And personally, I wanted to see the company go up, and the reason I brought some sunlight to it was because I am so sick of talking about American AI companies. I love the idea of a European company that's not AI.
Kara Swisher · 1:04:00
And also Cleanup, a Cleanup company. You know what's interesting is that... I'm just looking at the meta thing. They're they're at 20... The PE ratio is 20, which seems healthy. And and and that SpaceX is more... Is valued at $500,000,000 more than them is insane.
Scott Galloway · 1:04:18
That makes no sense.
Kara Swisher · 1:04:19
I don't care how good they are at robots. It's just nutty. Though, what he'll do is he'll fold Tesla into this, but as I've said many times
Scott Galloway · 1:04:26
Which is another anchor. Two anchors.
Kara Swisher · 1:04:28
Yeah. Two anchors going But to each it is... There are some real values here. Right? Like, Meta seems to be. I mean, I don't usually make
Scott Galloway · 1:04:37
Meta on a price earnings basis, I don't think has ever been this cheap. And the cheapest of them all, it was my big tech stock pick for '26. Amazon has never had a price earnings ratio this low.
Kara Swisher · 1:04:47
Yeah. What is theirs? Wow. You know, Google... Alphabet is 27. Meta is 21. Amazon, you're right, is low, 29.
Scott Galloway · 1:04:56
Yeah. And it's usually... Its average over the last twenty years has been 55. And, anyways, industrialized robots all gone forever. But... So my prediction is that essentially... And I said this. We're starting to see cracks in the wall around evidence. And I think it's nuanced, not definitive. It's not cracking because AI doesn't work. It's cracking because investors are starting to ask much more pointed questions specifically. Can we actually earn a return on the trillions of dollars being spent here? And the evidence... There's evidence that the narrative around AI is changing, and that is CapEx is outrunning monetization. The largest cloud companies are on pace to spend 6 to 700,000,000,000 on AI infrastructure just this year, yet many enterprise customers are struggling to demonstrate measurable ROI. And that is the narratives move from can AI work to can AI pay. And it used to be spend more money. This is the future infinite demand. And it's like, woah. Hold on. CFOs are starting to tap the brakes here. And the market is splitting. JPMorgan noted the divergence. AI infrastructure suppliers continue to outperform, and the companies writing the biggest AI checks, the hyperscalers, have begun to lag. And that's reminiscent again of late stage infrastructure booms where the suppliers prosper before the customers earn adequate returns. And also Wall Street, as it does, eventually focuses on ROI. And the debate has shifted from twelve months ago, the debate was who can build the biggest model. Now it's who can make money.
Kara Swisher · 1:06:44
Right.
Scott Galloway · 1:06:44
Yeah. And one of my role models here are this fantastic chief economist who, the way, has, I think, a much better sense of humor than certain chief investment officers at other big banks, Apollos Torsten Slock.
Kara Swisher · 1:06:57
Does he like a dick joke?
Scott Galloway · 1:06:59
I think Torsten loves a good dick joke, but I'm not gonna speak for him. I'm not gonna speak for him. But he puts out he puts out these fantastic emails every day with a chart, and he argues that the markets may be pricing and productivity gains that will take years, not quarters, to materialize. We're starting to see central bankers issue warnings.
Kara Swisher · 1:07:18
Yeah. They are. They're all over the place.
Scott Galloway · 1:07:20
And here's the thing, Kara, if the AI trade unwinds, the most vulnerable names are generally the ones whose valuations depend most valuable on continued AI infrastructure spending. The number... The tier one risk level is NVIDIA, Astera Labs, and Marvel Technology. These companies are extraordinary businesses. Don't get me wrong. But they're the most exposed with slowdown in GPU and networking demand.
Kara Swisher · 1:07:43
They're the Cisco. Nvidia's the Cisco.
Scott Galloway · 1:07:45
And then the tier two, Vertiv, super microcomputer, CoreWeave. Mhmm. These are effectively picks and shovels for the AI Gold Rush. And then and then you go to the third level, the Microsofts, the Alphabets, the Amazons, and Meta. There will be nowhere there would be nowhere to hide here, and that is the technology story is intact. It's just that the valuation story is beginning to get stress tested, and I don't think it's gonna survive that stress test. So what's the prediction? All eight or 10 of those companies, a basket of them, down 20 to 40% in the next twelve months. And by the way, still great companies. The technology will survive. I believe that the the better AI players are gonna be juggernauts in five to ten years, but we are entering... These guys are just way out in front of their skis.
Kara Swisher · 1:08:36
Yep. I would agree. I'm gonna make a short prediction too. The thing that we'd started beginning with the Trumps. I just noticed this New York Post on Trump family corruption, which was interesting. I think it's not Trump that's gonna pay for this because I think he's gonna die before we can get to him, but I think his children and the children of the Lutnicks and the rest are gonna get it. I do think they're gonna
Scott Galloway · 1:08:56
Gonna get it. You mean be prosecuted?
Kara Swisher · 1:08:57
Yes. Here's why. This is the New York Post. The Trump sons, meanwhile, are part owners or investors in companies neck deep in key defense contracts to mine tungsten reserves in Central Asia. It stinks to high heaven. If the president's family making bank from obscure resource companies in the former Soviet Union sound familiar, maybe it's because Hunter Biden's lucrative connection in Burisma, Ukrainian gas company, was a major scandal in the twenty twenty election and beyond. Republicans, including Donald Trump, were justifiably outraged at the obvious influence peddling. These kids are gonna pay a price. That's my prediction years from now.
Scott Galloway · 1:09:32
You don't think they'll get pardons?
Kara Swisher · 1:09:33
I think he'll try, but I think there's state... There's all manner of ways to get get to them. I just think they're in for a I think they're, in for a lot. That's my prediction anyway. But I
— Predictions segment ends —
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Kara Swisher · 1:09:44
the same thing, like you're talking about. We cannot save these Internet companies. We cannot keep intervening for friends of Donald Trump or family members. Anyway, it's gross. It's it's... Socialism is really what it is. Communism, really. Anyway, we wanna hear from you. Send us your questions about business tech or whatever's on your mind. Go to nymag.com/pivot. Submit a question for the show or call 85551 Okay. That's the show. Thanks for listening to pivot. Be sure to like and subscribe to our YouTube channel, and please beg the head chief investment officer of of that bank to to forgive Scott so we can start telling dick jokes again. We'll be back next week.
Scott Galloway · 1:10:22
But at least the dick jokes. Today's show is produced by Lara Niemann, Zoe, Marcus Taylor Griffin, and Todd Wiseman. Additional assistance from Kate Gallagher and Brad Sylvester. Ernie and Todd engineered this episode. Thanks also to Drew Brozme, Asavarian, and Dan Shalon. Nishat Kurua is Vox Media's executive producer of podcasts. Make sure to follow Pivot on your favorite podcast platform. Thank you for listening to Pivot from Vox Media. We'll be back next week for another breakdown of all things tech and business.
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Scott Galloway · 1:12:53
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