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.
00:49:15 · Ed Elson
I I mean, I just don't see how the boom and bust cycle doesn't play out as it always does in this case, but none of those companies are gonna go bankrupt. They're not gonna go bust. They're gonna have their multiples reduced probably. I don't think it'll be dramatic, but I think I think it'll happen. The people who are gonna get screwed are the are the companies whose only business is data centers and AI, I. E, the neo clouds. And I think we're already starting to see that. Like, if there's an AI bubble, it's already popping for CoreWeave, for Iren, for Nebius, for all of these random data center names that people only started to to hear about over the past one, two, or three years. And we're already seeing that in the credit default swaps, which are skyrocketing, the stock prices, which are plummeting. So, I mean, I think those names are gonna get gonna get caught, especially as they become more and more reliant on sentiment in the capital markets because of their need to raise more capital. But it's it's a really interesting time to be a tech company.
00:50:19 · Scott Galloway, Ed Elson
[00:50:19] S0: If you try to distinguish between the winners and the losers in the markets right now or how the market is behaving in terms of parsing winners from losers, is the d word. It's discipline. We referenced Apple. They're like, fine. Have at it, guys. Kill each other. We'll come in, and we'll be the second mouse. We're a licensed... We'll pick a preferred AI provider, and we'll do what we did with search. Just get 98% gross margin licensing fee or whatever. The other company that's been rewarded lately is is Microsoft. Of the five hyperscalers, Microsoft is the only one that has remained cash flow positive. [00:50:51] S4: They're doing it right, I think. [00:50:53] S0: Yeah. Well, they've thread the needle. Right? Whereas whereas Google or Alphabet appears to be on the wrong side of the needle. But, basically, the markets have already priced in except an expectation of exceptional growth from these businesses, and they're all delivering against that exceptional growth. Where it's parsing the winners from the losers is is... Does there appear to be an adult with both hands on the CapEx wheel here or not driving down this highway all... At all? But the two companies right now that the market likes the most are the one that's not playing in traffic, has said, I'm out. And two, the other one that appears to... It's the only one that's CapEx was lower than projected. Right? The markets seem to like that right now. The markets need to say, we need to see the r on the eye here. And part of that is not only about top line growth, but managing cost discipline.
00:51:45 · Ed Elson
[00:51:45] S4: And I think on this one, the markets are right. Like, you know, I I always love when I think the markets are wrong because it means I can have a very hot contrarian take on things. But I think that they're... I mean, I don't think they're right about Apple personally, but with with Microsoft and the way that... The things that they're prioritizing about CapEx and about discipline, I think is I think is the right thing to be caring about. I think Microsoft is a good example of that. I think Microsoft has done a good job here, in terms of managing playing in the game, but also not betting the farm on this game. And I think investors are rewarding them for that, and I think that's what should be happening. I mean, what'll be interesting to see is how they respond to Anthropic because jury's still out on that one.
00:52:33 · Scott Galloway
[00:52:33] S0: I wanna put some numbers. The research team put together a great chart, we'll put it up here. The average annual infrastructure spending as a percentage of GDP for some other kind of transformative technologies, canals were a transformative technology, and point 7% of GDP was allocated to those... To that innovation over a five year period on average. Railroads is the one we always talk about, 1870 to 1890, twenty year period on average every year, 2.2% of GDP. Electrification, twenty year period, nineteen o five to 1925, a half a percent of GDP. Highways, from '56 to 73, 1.13%. Telecom and fiber, Latin for the Internet, from 1996 to 2003, 1.1%. AI, so far, the AI era, so to speak, 3.6% of GDP. So this just feels like It's big. I mean, the railroads did transform the world. They really did. But along the way, there was a ton of bankruptcies. Now the good news is... Or asking yourself what could go right. Are we in for a crash or what I'd call a measured decline that gives everyone... In other words, the v looks like a slope, not not a severe down. I mean, are we starting... Is some error in a healthy way starting to come out of the bubble a little bit as opposed to a pop?