00:40:54 · Ed Elson, Scott Galloway
[00:40:54] S4: One thing that I would just point out about the PE is that now that now that Alphabet has invested all this money in Anthropic, those markups on its on its private stakes are being reflected in their income. So you have to take those PEs with a grain of salt. [00:41:11] S0: That's a great point.
00:41:12 · Ed Elson
[00:41:12] S4: But still, it has... It... I mean, I... After the adjustment, my expectation is that it would be maybe, like, in line with with the S and P, which still isn't expensive. So I think that I'm I'm not fully sold. I'd wanna look more into into Google as a buying opportunity at these prices, but I I don't think it's a sell. Like, I I don't think that the way that the the market is treating it, especially when it comes to the search revenue, is necessarily warranted. But, like, you make a important point about big tech stocks and the hyperscalers right now, which is like these stocks, despite being systemic to the economy, have been unbelievably volatile this year. And, you know, as I've told you before, as we've talked about on on the show, like, I bought Meta this year and I bought Microsoft this year, and both of those, investments have done extremely well. But if you were to look at those stocks on over the past year, they look kind of lackluster. And it's because they've been going up and down so erratically throughout the course of the year because the reality is that there is so much uncertainty when it comes to tech right now because of the amount that they're spending on the AI data centers that, like, investors are completely polarized as to what the actual reality is. And that wasn't the case for a very long time. It used to be that you could have a pretty strong understanding of what these businesses would look like this year and the next year and even five years out. And that's what Wall Street loved about it, is it was so reliable. It was so dependable. You knew exactly what the businesses are. But those days are over. And what that means now is that the most valuable companies in the world are incredibly volatile, which means that if you are invested heavily in these companies, which you are because everyone is because they're systemic to to the S and P. You're riding out quite a lot of volatility specifically in those names. But it also means that if you wanna be a bit of a trader and get out there and get active and start doing some stock picking, there are some serious opportunities. Like, you can go in and buy these dips, and you can get paid really handsomely for doing so. And that that... Which is exactly what happened for me with those two names, Meta and Microsoft. Could be... I mean, Meta's down this week.
00:43:36 · Ed Elson
Investors are very worried about that equity sale, which I think is completely reasonable. The fact that they need to keep on raising more money is concerning. You would think that because they're the most... One of the most profitable businesses ever that they don't have to do that, but they do now. But these are really... These are jumpy names. Investors do not feel confident. There is very, very low levels of conviction. And when that happens, that usually means that there is both great opportunity to lose a lot of money, but also to make a lot of money too. So I think it's a good time to be a stock picker of tech names is what I would say, or at least it's a fun time to be a stock picker.
00:44:19 · Scott Galloway, Ed Elson
[00:44:19] S0: I've spent a lot of time on boards. And, basically, you kinda have two jobs on a board. I mean, three. If you're on the audit committee, just make sure there's not fraud. So let's assume you're able to do that. But the two primary roles of a director are one, if and when to sell the company. But most importantly, your job is to make sure you have the right guy or gal. And I always said there's always two board meetings. There's the actual board meeting, and then there's a board meeting in the parking lot when you're worried about the CEO and the two or three most powerful people on the board, which is usually the largest shareholder, and two voices that everyone kind of nods because they've been on the board or they're very smart. And those people meet in the parking lot and say, I'm worried about Bob. And should we be talking about if Bob is the right guy and if we need to make a change? And I've spent a lot of time trying to suss out what are the attributes and behaviors of great CEOs. And one of the most underrated attributes, and I think core to a great CEO and a great leadership team is the following. It's not only what they decide to do. It's what they decide not to do. Do they have the discipline to say, this is a great idea. It's a great market. It's not the right idea, the right market for us at this moment. And of the max seven, to this point, of the max seven, who has decided not to engage in the AI arms race? [00:45:36] S4: Apple. [00:45:37] S0: And who has the strongest year to date stock performance? [00:45:40] S4: I think it's Apple.
00:45:40 · Ed Elson, Scott Galloway
[00:45:40] S4: I think it's Apple. [00:45:42] S0: Ding. Ding. Ding. Ding. Apple has significantly outperformed the other six that are either the arms race or engaging in the arms race. And Apple does not get enough credit. They're constantly second guessed. Why don't you have a cheaper computer? Why aren't you in AI? Why aren't you in search? They have more discipline around what not to do than any company of that size. They didn't... They put one chip down on VR. I think they spent a billion dollars on it. Meta spent 60 on it. They are better at saying no. They pulled the plug on the car. I wanted them to have the car. I'm like, you gotta grove. Do the car. And they're like, you know what? This isn't working out. We don't like the numbers here. We don't like the shit. Pull... Kill it. The only mag seven company that has not decided to play in traffic in the AI arms race is significantly outperforming the others who are in this AI arms race. [00:46:40] S4: In any other world, I would be instinctively agreeing with you on this because I'm such a sucker for discipline, you know, risk management, but I I I still think they've got this one wrong. [00:46:53] S0: You think staying out of this race was a bad idea for Apple?
00:46:56 · Ed Elson
[00:46:56] S4: I do. Because... And as I've said about Apple, then then what? What are you pursuing instead? That's what I wanna see from that company. How is it that you're go... Because to be clear, they've been they've been very handsomely rewarded for their decision not to go into this, which... And I like that investors are rewarding them for that. I like that investors are saying, like, you know, let's let's not all become, like, too too swept up in the hype and and too deluded about this AI future. Let's be reasonable. And investors are rewarding them for that. But the thing that I wanna see from Apple is like, okay. You're not taking that money to do the AI thing. What are you doing instead? And when it was the headset, I'm like, that's a dud, which it was. And the next thing appears to be the iPhone Duo. And I don't know if you've seen some of these reports, but those Duos are breaking left and right. And not just because people are doing these breaking tests, but, like, a lot of customers are reporting trying to open up that iPhone Duo and the screen just immediately cracks, and they go to the Apple Store and they say, hey. Can you replace this? And Apple says, sorry, no, because our inventory currently is zero. So I'd wanna see Apple saying, here's what we're gonna do instead. But to me, I don't see that vision from them. Maybe John Ternus will turn it around, and and he'll come up with an amazing product. And to be clear, he hasn't had nearly enough time to come up with a new strategy. But that is what I wanna see from Apple because I also... I mean, there's risks in everything. There's risks in deciding to do something and also deciding not to do something. And I do think that there is some significant downside risk in not participating in AI if AI turns out to be a huge revolution that that creates huge amounts of profits for these companies. So, you know, it's... The the futures are so uncertain, for all of these companies. The thing that they have on their side is the fact that each of them have unbelievably good existing businesses. They all... I mean, Meta's got the ad business. Google's got search. Apple's got the iPhone. I mean, all of these companies are in a really, really strong position. And I think if we're trying to pick out, like, winners versus losers, I could see a correction coming.