The Prof G Pod with Scott Galloway
Prof G Markets: Blockbuster Week For Big Tech Earnings + Can the U.S. Fix Its Student Debt Crisis?
Mon, 05 May 2025
Scott and Ed discuss the latest U.S. GDP report, new data on China’s factory activity, and the launch of Amazon’s new internet satellites. Then they turn to Big Tech earnings, breaking down first quarter results from Apple, Amazon, Microsoft, and Meta. Finally, they examine the Trump administration’s decision to resume forced collections on defaulted student loans, discussing the broader implications and potential solutions for addressing student debt. Subscribe to the Prof G Markets newsletter Order "The Algebra of Wealth," out now Subscribe to No Mercy / No Malice Follow the podcast across socials @profgpod: Instagram Threads X Reddit Follow Scott on Instagram Follow Ed on Instagram and X Learn more about your ad choices. Visit podcastchoices.com/adchoices
Chapter 1: What are the key takeaways from the latest U.S. GDP report?
Well, by the way, Ed, I didn't say handsome. I said cute. Cute. Which could mean funny, charismatic. Yeah.
confident it's all about the way he says it that's a good point ed rolls up and dials up the english accent he's like i'm from princeton i'm from i went to princeton get to the headlines ed let's start with our weekly review of market vitals
The S&P 500 climbed, the dollar rose, Bitcoin jumped, and the yield on 10-year treasuries fell. Shifting to the headlines. US GDP shrank 0.3% in the first quarter, marking the economy's first contraction in three years. A surge in imports as companies raced to get ahead of tariffs led to a sharp drop in net exports. The major indices all fell in that news.
China's factory activity fell into its worst contraction in nearly two years. New export orders also dropped to their lowest level since December 2022. In response, Chinese officials have pledged support for affected businesses and workers. And finally, Amazon has launched its first internet satellites into orbit in a bid to compete with SpaceX's Starlink.
The company's plan, called Project Kuiper, should begin providing broadband service later this year and eventually will deploy a constellation of 3,200 satellites. So let's start here, Scott, with this GDP report. A lot of people are seeing this report and they're saying, look how bad this is, look at what Trump's done, look how bad this is for the economy, the economy is contracting, etc.
And I just want to point out, before we dig into it, that's not really what's going on here. I think the two things to note, one... This is a measurement of the economy before the tariffs went into effect. This is Q1, so we're not actually seeing the impact of the tariffs themselves. And two, the reason you're seeing this contraction is more of an accounting blip than anything.
And I just want to remind us of what GDP actually is, just some macro 101 here. GDP is... I mean, it's a measurement of our economic output, but the way we get to that number is an equation. And one of the elements in that equation is something called net exports, which is basically you take our total exports and you subtract our total imports.
And that's supposed to tell you how much stuff we actually made in America. And so... What that basically means, if you have a giant increase in imports into your country, that's going to mean that the net exports number goes down, which means that the GDP number will go down. And that's what happened last week, because everyone knew in Q1 that tariffs were coming.
And so everyone scrambled to ship as many products as they possibly could into the U.S. before the tariffs went into effect. And that's why we saw imports into America surge 41%, which ultimately had a negative impact on GDP. This isn't the big tariffs are bad report that you might think it is. It's the next GDP report that we will see in July.
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Chapter 2: How is China's factory activity affecting the global market?
If you just look at those incredible kind of heat maps of shipping lanes, there are all these ships in kind of Hong Kong Harbor that are just waiting to be loaded and aren't being loaded. And then the port of Los Angeles, which I believe is the biggest port in the Western Hemisphere, there's very little offloading taking place.
So at some point, and I don't know if the lag is two weeks or two months, you're just going to see an absence of inventory in stores.
And consumers have gotten to the point where if they can't get what they want, they're so used to such a robust supply chain, they're going to think, A, if they're not feeling good about the consumer economy, they don't want to as aggressively buy that new home gym or whatever, and B... If the products they want are available, they use that as an excuse just not to buy.
So I think winter is coming. And that is – I would imagine the next quarter there's going to be – you know, they'll find another reason to blame Hunter Biden or something. But this is – They get a pass on this one, right?
But the fact that there's, again, this massive surge in imports is because our economy is making asymmetric, irrational decisions based on an unpredictable administration and unpredictable economic policy.
That sort of reminds me of one of his latest, Trump's latest truths on Truth Social. I hate that we have to call them truths, but that's what they are. But he basically said, so when the stock market ripped after he was elected, he said, welcome to the Trump stock market. And today, I think last week, he posted this truth, this tweet that said, this is the Biden stock market that I inherited.
And it was sort of marking his first 100 days in office, which have been one of the worst stock market performances for the start of a presidency ever in America. And it is sort of a reminder of how basically his strategy to distract people from what is really going on.
You mentioned there that GDP is a lagging indicator, and we can't necessarily blame Donald Trump entirely on this contraction, or at least that's not the right argument to make. But when it comes to the stock market, which is not a lagging indicator... The stock market is live, real-time, forward-looking indicator. That's the thing to focus on.
And that's the part where you cannot say, this is the Biden stock market. The stock market is live. It's real-time. This is the Trump stock market. S&P down 4%. The NASDAQ down 8%. year to date. So that's the argument that you definitely cannot make, which of course he is making. Let's move on to this manufacturing data. China had its largest drop in manufacturing activity since 2023.
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Chapter 3: What is Amazon's Project Kuiper and how does it compare to Starlink?
When I started L2, when we got like employee 30, we opened an office in London. And then when we got to employees 60, we started pitching clients in China. And when you go over there as an American company, you're pretty well-received. and you understand the cultures and it's easy to do payments and the contracts, the business contracts were not that difficult. I think that's all about to change.
Let's talk about Project Kuiper. We've been hearing about this for a while now. This is Amazon's satellite internet project. It's basically Amazon's equivalent of Starlink. And last week they launched their very first satellites into orbit, 27 satellites to be exact. The plan is to eventually increase that number to 3,200.
So potentially a big moment for Amazon, also potentially a big moment for Starlink, but I think it's mainly just a reminder of how far ahead Starlink is in this satellite race right now. I mentioned those 27 satellites that Amazon launched. Starlink has 7,200 satellites in orbit right now. It makes up 62% of all of the active satellites that are currently orbiting the Earth.
So even if Amazon were to hit that target of 3,200 and who knows when they'll hit it, they would still be way behind Starlink. Starlink is the undisputed leader in satellite broadband. No one comes even close. So Scott, your reactions to Amazon trying to get in the game here and how they might compete with Starlink.
I think I'm more bullish on Amazon than you. And just to call balls and strikes, we had the internet go out here in London And Drew immediately scrambled the jets, and we had someone, this guy came over, and he went out and bought a Starlink, a portable, and he hooked it up. And it wasn't as good, but within four hours, we had pretty robust broadband. The product is exceptional.
And I just think it's strange and almost kind of weird that we would let one man control two-thirds of low-Earth satellites, low-Earth orbit satellites. That, to me, feels almost like a security risk.
Where I'm more bullish on Amazon is that I don't think Amazon needs to get to product parity because I think the vision here, if I were Jeff Bezos, I'd wait until I had a decent product, and then you know what I'd stitch it in with? The Kuiper offering? What? Amazon Prime. 82% of Americans have...
Amazon Prime, it's arguably the most successful and largest loyalty program in history and maybe the second largest recurring revenue product in history, maybe behind Netflix or, I guess, Microsoft Office. Their brand is so deep in terms of trust in a consumer offering. And I think that Musk is beginning to contaminate his brands. Bezos will close the gap. They have the gap capital.
To your point, I'm not sure they ever actually catch up, but they're talking about they want to have 3,200 satellites. But I think if they get there, say, to 80 or 90 percent of Starlink, it'll force Starlink's hand, and I think or SpaceX, and they'll have to go public for access to more cheap capital. But this is going to be a celebrity deathmatch.
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Chapter 4: How did Microsoft and Meta perform in their latest earnings report?
Call Amazon. Call Bezos and tell him to start acting like an American. All right, I'll take it up with him. But the moral of the story is it is so seamless to add and take things away from Amazon Prime. that the moment it pops up and it says, Scott, Amazon Prime Plus includes this blinding broadband. Wow. I would bet, God, I don't know.
I would bet by the end of 27, you could very easily see Kuiper have more penetration than Starlink.
You've certainly convinced me. I'm definitely more bullish today than I was yesterday. We'll be right back after the break with a look at big tech earnings. If you're enjoying the show so far, be sure to give the Profiteer Markets feed a follow wherever you get your podcasts.
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Chapter 5: What are the implications of Big Tech's financial results?
We're back with Property Markets. All right, let's get into big tech earnings. Microsoft, Meta, Apple, and Amazon all reported earnings last week. We're recording this a day later, hence why we're dressed differently so that we could react to these earnings. We'll start with a look at Microsoft and Meta, whose shares both rose pretty significantly after earnings here.
Microsoft posted record revenue and record profits, beat on the top and bottom lines. Shares rose 9%, which now makes Microsoft the most valuable company in the world ahead of Apple. Meta was also a beat, beat on the top and bottom lines. Revenue rose 16%, shares in Meta rose 6% after hours. Really great quarters for Meta and Microsoft. Scott, your reactions to these two earnings?
Well, daddy went deep in the paint last night. I'm not used to working on Friday. I'm used to long walks with the dog and trying to get this newsletter out. As you can tell by the way I'm dressed and my green juice. Most importantly, the door women from Chiltern did a pop-up last night at the Broadway Hotel, and it was pretty good. It was pretty good.
I spilled drinks on all my friends, which at the time was kind of a bummer, but it's brought me real joy today just thinking about that moment. I mean, literally, I went and got four drinks, and not an ounce of it was not on them within about 30 seconds. Anyways, okay. So, look, there's just no getting around it. All of these terms of...
have kind of gone from it's like good, better, best in terms of their earnings. Revenue up 13%, as you said. What was really impressive is their cloud unit revenue rose 33%. That's just incredible. And then net income up 18%. The CapEx was interesting. You highlighted the first thing I noticed, and that is CapEx declined for the first time. And I wonder how much of that is DeepSeek
has given them a little bit of pause saying, maybe we don't need to build nuclear power plants and we're not in an arms race, that maybe there is a fork in the road here or a plan B where our AI future may not require the CapEx we'd initially thought. So it feels like they're maybe taking a pause on that.
And then its stock is up 13% because people keep saying, all right, what is the defensive play? What is a recession-proof stock? And Microsoft brings you kind of the peanut butter of a tech company with pretty decent growth. with the chocolate of a defensive company, right?
Because it really is, it's pretty well diversified, it's global, and it's hard to see how, other than impact on the global economy, how it can, you know, it would be really hurt versus an Amazon by the tariffs. I think it gets about half its revenues from overseas, whereas Amazon gets two-thirds of its revenues here. So it has both this recurring revenue stream of the largest
corporate recurring revenue base in history with Microsoft Office that I think, you know, 5,000 of the corporate 5,000 companies use. And then it has the rocket fuel of a nice AI overlay. So it benefits from probably some of this insecurity because it's seen as quality in what is arguably right now a flight to quality. Your thoughts?
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