Why Stocks Had Their Best Day Of The Year — Then Their Worst

Alphabet

Across the shows: 64 speakers in other episodes, 58 bullish and 42 bearish calls, past 30 days

• Scott Galloway · NYU Stern School of BusinessBullish

  Alphabet is a diversified AI play that holds up even if AI is overhyped, thanks to search and YouTube ads.

  Galloway says Alphabet and Microsoft are both AI plays, but if AI is vastly overhyped and ends up like the railroads, they would still be fine. People will keep buying Google search ads and YouTube ads regardless of AI. He presents big tech as a way to keep AI exposure with downside protection, relative to levered neocloud names.

  “Alphabet, Microsoft are both AI plays, but quite frankly, AI could end up being vastly overhyped and be like the railroads and they would still be fine.”at 21:25

Microsoft

Across the shows: 41 speakers in other episodes, 48 bullish and 7 bearish calls, past 30 days

• Scott Galloway · NYU Stern School of BusinessBullish

  Microsoft is a diversified AI play with downside protection; it would still be fine if AI is overhyped.

  Galloway groups Microsoft with Alphabet as an AI play that is diversified enough to survive a bust. If AI is vastly overhyped, Microsoft would still be fine because people keep buying its established products, which he illustrates with PowerPoint. He presents it as a way to play AI with some downside protection after the levered neocloud selloff.

  “Alphabet, Microsoft are both AI plays, but quite frankly, AI could end up being vastly overhyped and be like the railroads and they would still be fine.”at 21:25

Apple

Across the shows: 50 speakers in other episodes, 57 bullish and 34 bearish calls, past 30 days

• Scott Galloway · NYU Stern School of BusinessBullish

  Apple's choice to stay out of the AI race has made its stock outperform the Magnificent Seven this year.

  Scott argues that great CEOs are judged by what they don't do. He points to Apple's decision not to get into the AI race, and says its stock is up more than any of the Magnificent Seven this year. The implication is that avoiding the costly frontier AI race has been rewarded by investors.

  “Great CEOs. It's not about what they do. It's about what they don't do. We keep talking about Apple. Look what Apple decided not to do, not to get into the AI race. Their stock is up more than any of the Mag seven this year.”at 1:08:19

AI infrastructure & data centers

• Scott Galloway · NYU Stern School of Business

  Neocloud and compute-seller stocks are levered bets on AI, so they swing several times as hard as AI moves.

  Galloway's simple explanation for the post-election selloff is a rotation out of neocloud and compute names. He says these companies are basically levered trades on AI, so as AI goes, they move several times as far in either direction. Investors who want to keep AI exposure with less leverage rotated into big tech, which buys compute rather than sells it, and so held up better.

  “they're basically levered trades to AI. Right? I mean, as goes AI, that goes them times three or times negative three.”at 20:57

• Scott Galloway · NYU Stern School of Business

  Election-driven local data center backlash, led by new governors, threatens buildout; Galloway thinks slowing it is a mistake.

  Galloway says there were 41 local ballot measures on data centers and 40 lost. Ohio, Georgia and Texas account for more than 40% of planned data center capacity, and all three just elected Democratic governors who campaigned on stopping or slowing development. 71% of Americans oppose a data center in their area. He thinks this is a bad idea. He argues states like Minnesota are well suited for data centers given cold climate, energy and land, and that growth and tax revenue are needed. He also describes data centers as an empty vessel for income inequality anger, which OpenAI's rebranding to compute campuses won't fix. He thinks red states might have benefited economically from the buildout, but the market now sees the buildout as potentially blocked, and says the governors are the bigger threat than Congress.

  “And I wanna be clear. I think this is a bad idea [to slow data center development].”at 22:37

• Ed Elson · Prof G Media

  Data center opposition is emotionally driven, but its real downsides make it a negative for investors.

  Ed cites polling showing data centers are underwater and AI data centers are about 20 points further underwater, which suggests the policy is charged with emotion and people may not be fully rational about it. He acknowledges real downsides: higher electricity prices, noise, size, unsightliness, and few jobs (roughly a third of a Walmart's workforce on three times the space). He also acknowledges tax revenue upside. He sees the backlash as Americans finally having leverage over a billionaire class that needs their approval. He says it is not good for investors, though he is not upset about it.

  “And so what that tells you is that this is a piece of policy that has been injected with a huge amount of emotion.”at 27:09

• Scott Galloway · NYU Stern School of Business

  Democrats opposing data centers and AI spend would hurt growth; they should be friendlier to AI investment.

  Scott says Democrats need a growth agenda and should show they are more friendly to capital formation and AI spend and more pro-business. He calls a 'no data centers' message pandering to upper-middle-class progressives. His argument is that if the party shoots itself in the foot and lacks growth, it ends up like the UK, unable to fund its navy or social programs.

  “It's one thing to tickle the sensors of upper middle class progressives by saying, no data centers or let's tax the billionaires. Okay. Fine. But at the end of the day, if you shoot yourself in the foot and you don't have growth, you become like The UK.”at 39:34

• Ed Elson · Prof G Media

  Ohio's conditional data center moratorium is sensible regulation, not populist anti-tech politics.

  Ed argues that candidates on data centers are being mischaracterized. Using Amy Acton in Ohio as the example, he says a blanket anti-data-center stance would look populist, but she has backed a conditional moratorium that applies unless developers cover 100% of their utility costs. He calls that a framework that only allows data centers if they benefit the American people, and therefore sensible regulation rather than a socialist lurch.

  “She has backed a moratorium... the truth is she has backed a conditional moratorium unless the developers of the data centers cover a 100% of their utility costs. And that to me is sensible regulation.”at 40:50

• Ed Elson · Prof G Media

  Democrats won't ban data centers; expect thoughtful, sensible regulation with possible pauses, not a major hit.

  Elson argues that Democrats have been caricatured as AI abolitionists. He doesn't think a ban on data centers is coming. He expects thoughtful regulation of AI and data centers, with some pauses possible, which he calls a minor issue in the grand scheme of things. He concludes this will be an era of sensible AI regulation.

  “I think that the Democrats have been caricatured as these AI abolitionists. The data centers are over. They're gonna ban them. I don't think that's happening. I think we'll see some thoughtful regulation.”at 1:14:47

Tariffs & trade policy

• Ed Elson · Prof G Media

  Investors expected tariffs to be resolved sooner; lingering tariff uncertainty weighs on markets.

  Ed argues the market's post-election move assumed tariffs would wind down sooner. Tariffs hit consumers and corporations. Companies passed roughly 60% of tariff costs to consumers and absorbed about 40%, which they later got back as refunds. Ed says the remaining uncertainty is something investors dislike, and that they were expecting it to be resolved.

  “They bore about 40% of the costs, and they sent over the remaining 60 to the consumers. They, of course, got their 40% back in refunds, but still that is a level of uncertainty that investors don't like.”at 17:42

• Scott Galloway · NYU Stern School of Business

  The US should reverse tariffs and build a free trade zone with democracies, despite some industry pain.

  Scott argues that the US should go the other way on tariffs and create a free trade zone with democracies. He admits it would hurt some American industry, but says consumers would benefit from a more affordable local economy. He adds that shareholders would benefit from the country's comparative advantage in higher-margin IP-driven products.

  “We need to go the other way on tariffs. It will hurt some American industry, but say consumers need to benefit from a local economy. Shareholders need to benefit from our comparative advantage around higher margin IP driven products.”at 47:39

US elections & politics

• Ed Elson · Prof G Media

  Divided government is good for markets because it makes drastic policy moves harder.

  Ed says history shows some gridlock is good for markets. Before the election there was total Republican control. Now Democrats hold Congress while Trump holds the executive, which makes it harder to make drastic decisions. He says investors like that, and that this was one of the dynamics behind the post-election rally.

  “Gridlock means it's harder to make crazy decisions in government and investors like that.”at 18:47

• Scott Galloway · NYU Stern School of Business

  A national popular vote initiative could end the Electoral College soon, reshaping campaign spending.

  Scott says the state-level national popular vote initiative has passed in about 22 states and is at 220 electoral votes. Newly Democratic states could push it past 270, which would effectively end the Electoral College. He argues this would be an earthquake that reshapes where money is spent and how campaigns are run, since California and New York would stop being ignored.

  “That is an earthquake in electoral politics. It would reshape where money is spent. It would reshape how campaigns are run.”at 54:25

US stock market outlook

• Scott Galloway · NYU Stern School of Business

  The S&P 500 is effectively one AI bet, so index concentration leaves it exposed if AI sentiment breaks.

  Galloway cites JPMorgan's figure that 41 AI-linked names make up about 49% of the S&P 500, above the 1929 and 2000 peaks. He says the index of 500 stocks is basically one bet right now. With AI infrastructure spending expected to top a trillion dollars, he compares a break in AI sentiment to the music stopping, and he questions whether the market recovers once the pressure is gone. He sees the post-election selloff as the market reacting to this concentration risk.

  “So the S and P 500 is 500 stocks, but it's basically one bet right now.”at 31:37

• Scott Galloway · NYU Stern School of Business

  S&P 500 should beat its average returns over the next six months, given the historical pattern under Democratic Senate control.

  Galloway cites a Deutsche Bank analysis, relayed from Tom Lee, showing that whenever Democrats have taken control of the Senate, markets have rallied, regardless of politics or circumstances. Markets average roughly 8-9% a year, but in those periods they averaged about 12%. On that basis he predicts above-average S&P 500 returns over the next six months.

  “markets on average are up eight or 9% a year. Whenever this has happened, the markets are up 12% on average. So my prediction is we're gonna go 21 for '21. And in the next six months, we're gonna see an above... average returns in the S and P.”at 1:14:35

Wealth, inequality & billionaires

• Scott Galloway · NYU Stern School of Business

  Wage share of US GDP is at a record low while corporate profit share is at a record high.

  Scott cites the distribution of GDP to argue that capital is taking more of the economy than labor. As a share of GDP, wages have never been lower and corporate profits have never been higher. He concludes that policy needs to reverse the flow of capital and prosperity from owners to earners, the people who drive prosperity through their work and spending.

  “As a percentage of GDP, wages have never been lower. As a percentage of GDP, corporate profits have never been higher.”at 38:53

• Scott Galloway · NYU Stern School of Business

  Over-65s gained 62% in wealth since 2022 while under-25s lost 23%, a generational divide.

  Scott cites a striking statistic on wealth over the last four years. People over 65 increased their wealth by 62%, while people under 25 saw their wealth fall by 23%. He uses it to argue that Democrats must reinvest in the middle class and young people. He proposes funding this by undoing Trump-era tax cuts, refunding the IRS to close the tax gap, and adding a minimum tax on high earners and corporations.

  “in the last four years, people over the age 65 have increased their wealth by 62%. People under the age 25 have seen their wealth decrease by 23%.”at 1:04:19

US growth & recession risk

• Scott Galloway · NYU Stern School of Business

  Republican administrations have delivered lower growth and job growth with bigger deficits than Democratic ones.

  Galloway argues the GOP has rebranded as the pro-growth party but has moved from pro-business to pro-billionaire. He cites massive deficits and not reinvesting in the middle class. He says that across the last 12 presidential administrations, Republican administrations delivered lower growth and lower job growth with greater deficits, which he presents as a fact.

  “[Over the last] 12 presidential administrations, what you've seen is lower growth in Republican administrations, lower job growth with greater deficits. That's just a fact.”at 13:21

Market sentiment, positioning & volatility

• Scott Galloway · NYU Stern School of Business

  The post-election rally reflected relief that uncertainty had cleared, not endorsement of Democratic economic policy.

  Galloway said he would have liked the market to be endorsing Democratic economic policy, but thinks the rally was a relief rally. Markets dislike uncertainty and want to know what the next few years look like once an election is settled, even if they disagree with the result. He calls it an uncertainty or certainty relief rally.

  “But I think probably what it was given the check back today was a bit of a relief rally that the markets don't like uncertainty.”at 13:39

AI regulation & safety

• Scott Galloway · NYU Stern School of Business

  Democrats won't pass anti-AI legislation; clear AI guardrails are a growth catalyst, not a headwind.

  Galloway pushed back on the idea that a Democratic Congress would pass anti-AI and anti-growth legislation that hurts AI stocks. He argues regulation is key to market growth. He says the thing constraining AI companies is a lack of guardrails and clarity about what they can and cannot do, plus public certainty that models go through some form of review.

  “I don't think that's gonna happen. I think that regulation is actually key to a market's growth. And one of the thing that's been constraining AI companies is a lack of guardrails and clarity around how they operate”at 15:16

Middle East & Iran

• Ed Elson · Prof G Media

  Investors are betting the Iran war ends soon, a bet Ed thinks is wrong.

  Oil fell about 8% on the post-election rally and kept falling into the end of the week, which Ed reads as the market expecting the war to end soon. He points to JD Vance's anti-war remarks and Democratic control of Congress as pressure on the president. He notes Trump keeps veto power, so Congress cannot override him. He says he does not think the bet on a swift end is right.

  “And right now, investors are betting yes. Is that the right bet? I don't think so personally, but that's a debate we can have.”at 17:32

Healthcare system & insurers

• Scott Galloway · NYU Stern School of Business

  US healthcare spending will not fall to G7 levels of 7.5-8% of GDP; likely stays near 11-12%.

  Scott compares US healthcare spending, which he describes as 17% of GDP, with the rest of the G7 at about 7.5-8%. He argues the US will never reach that level and will probably land around 11-12%. He ties this to a case for universal health coverage as the way to bring costs down and make the economy work for the middle class.

  “How do we provide universal health coverage such that we can take the taxation and incredible spend on our healthcare from 17% to 15% to 13% to where it is in the rest of the G7 at 7.5 or 8%? It's never going get there. It'll probably be 11 or 12% here.”at 38:31

US jobs & labor market

• Scott Galloway · NYU Stern School of Business

  Recent US job growth has gone to female-dominated sectors, while manufacturing and transport, where young men work, lost jobs.

  Scott argues that young men are economically squeezed because the job growth is in sectors that are mostly women. He cites healthcare and education, which he says are about 80% women. He notes that young men over-index in manufacturing and transportation, the two industries that have seen some of the greatest job losses. He also points to men's greater driving, which makes them more exposed to gas prices.

  “And look what's happened to young men over the last couple of years. All of the job growth in America has gone to industries that are largely populated by women. Healthcare, education, 80% women”at 1:01:56

US tax & spending policy

• Ed Elson · Prof G Media

  Democrats need surgical tax reform to address boomers' wealth gains at young people's expense.

  Ed says the key issue is the wealth transfer from young people to old people. He wants Democrats to acknowledge the problem and propose a specific fix. Options he raises include tax reform such as equalizing income and capital gains taxes, and tough conversations about Social Security. He argues that a talking point without a solution would cost Democrats young voters.

  “I think what I'm gonna wanna see from the Democrats is a focus on the wealth transfer from young people to old people... Maybe it means looking at income tax versus capital gains tax, maybe trying to equalize them”at 1:08:48