The Prof G Pod with Scott Galloway
Prof G Markets: Is Breaking Up Intel The Right Move? + The New Gold Rush
Mon, 24 Feb 2025
Follow Prof G Markets: Apple Podcasts Spotify Ed and Josh Brown, co-founder and CEO of Ritholtz Wealth Management, open the show by discussing January’s housing starts data, X’s latest funding round, and the growing wave of companies emulating MicroStrategy’s approach to bitcoin. Then Josh unpacks the potential breakup of Intel. He breaks down how Intel’s leadership struggles led to its decline and explains why having a true visionary at the helm is crucial for a chip company. Josh and Ed also break down gold’s record-breaking surge and explain why banks are rushing to fly the commodity into the U.S. Ed questions whether gold is really a smart investment, while Josh explains why owning it outright might not be as valuable as people think. Subscribe to the Prof G Markets newsletter Join us for a live recording at SXSW Order "The Algebra of Wealth," out now 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: Who is the special guest on this episode?
Welcome to Prof G Markets. So Scott is still away. He's still on the slopes. We're beginning to think he's quite quitting, but we're not too worried about that because today we have one of our favorite guests on the show. You've heard him before. We have in the studio, the one and only downtown Josh Brown. Josh, thank you so much for joining me.
I will be doing my best Scott impression. You'll tell me after how it went.
I can't wait to see it. Where are you? You're not in your usual studio.
I am in Naples, Florida, which is Chicago's version of, I guess, Southeastern Florida. So this is Gulf Coast. Western Florida, and I love it here. I've never been before. We're seeing wealth management clients and colleagues, and we're doing a live version of our podcast tonight in town. So it's exciting.
Chapter 2: What are the key takeaways from January's housing starts data?
Very exciting. And we should plug your podcast, The Compound. I know you don't like doing a promotion. Last time I asked you where our fans could go follow you, and you said, don't follow me. So I'm just going to tell the fans straight up, go check out The Compound. Let's just get into The show, we've got a lot to get through. So let's start off with the market vitals.
The S&P 500 hit a record high. The dollar declined, Bitcoin was flat, and the yield on 10-year treasuries fell. Shifting to the headlines. U.S. housing starts slowed in January, with new residential construction falling 9.8%. Builders scaled back construction due to harsh winter weather, while also grappling with challenges from high mortgage rates, tariffs, and inventory shortages.
Elon Musk's X is in talks for a funding round at a $44 billion valuation. That's the same price Musk paid for it over two years ago. The funds would be used to support new initiatives, including video products, and to help pay down some of the company's debt. And finally, Michael Saylor's move to transform MicroStrategy into a Bitcoin treasury company has inspired a string of copycats.
At least 78 public companies have followed suit, including a meal delivery service and a coal mining firm. Also, GameStop shares jumped 20% after revealing it was considering a Bitcoin investment. housing starts data. I will say right off the bat, this is extremely disappointing to me.
Just given all of the conversations we've had around the cost of housing in America, the median home price today is $420,000 in America. The median age of a home buyer is 56. And Scott and I have talked about this before. Our view is pretty simple. The way we solve this is we build more homes. And so I see this data housing construction actually going down.
And just as a young person who at some point would like to buy a home, I hope, it makes me a little depressed. So let's just get your reactions to this housing starts data, perhaps any thoughts on why this is happening.
I think the obvious answer in this case is the right answer. You had freezing temperatures affecting residential construction. And if you've got companies in that environment that want to pause or delay a groundbreaking by a week or two, I don't think it's if you actually seasonally adjust that number, January was really down 8.4%, which again is not great, but not as bad as the nominal headline.
And I'd like to share with you that home building was actually up 24.9% in the Western region of America, which obviously is not being affected by freezes. And so it's, The headline sounds worse than the reality. And I think the bigger issue that we have is the cost of labor.
to build new homes is high and rising and not necessarily in step with the disinflation that we've had in other parts of the economy. And it's sticky and it'll be stickier still as the ice raids and some of the things that are gonna happen with immigration become more and more front of mind. So if you're worried about anything, That's really the thing that you should be most worried about.
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Chapter 3: Why is Intel considering a breakup?
due to Elon's association with Trump, maybe having that connection makes people more excited and more bullish on the company. Maybe it also has to do with XAI, Elon's new AI startup, which is reportedly raising in a $75 billion valuation. Maybe they think that X, the social media platform, can capture some of the value of the AI company. Or...
Maybe they've just quadrupled their revenues overnight, but I highly doubt that. So what do you think, Josh? What do you think these investors in this potential round for X are seeing that the guys over at Fidelity two months ago didn't see?
I think it's the halo effect of Elon Musk. He has a ton of momentum in terms of the zeitgeist of the country moving in the direction of what he's done with free speech on the platform. And you could absolutely hate the stuff that you come across on the platform, and that's fine. But a lot of people just like the fact that it exists.
And they see Meta kind of following Elon into this, which is, when was the last time Meta or Facebook ever followed Twitter into anything? So they kind of see that, you know, the vibe shift in the country, especially amongst young people, but really in places that surprised people among African-American voters, among voters living in border towns in Texas.
Like none of these people were supposed to have had heard that rhetoric from Trump and Elon Musk and had that resonate with them, and yet they did. And so I think advertisers feel a little bit more emboldened about being willing to place ads on the X platform where six months ago they would not have. I think some of that is being reflected in the valuation.
I also think the valuation is made up to begin with. The $44 billion is what he paid for it. So this is him saying, hey, I didn't destroy any value here. Things are better than ever. So there's some of that. I also think there are people willing to buy a stake in this just because it gets them, you know, in the room. It's like, yeah, I invested in your X platform.
Now allow me to talk to you about this other aspect of my business. And so a really cheap way for a big investor to buy in, so to speak, is to buy some equity at X and rub elbows with the people that are perceived to have a lot of momentum.
Yeah, absolutely. I mean, we certainly saw all of these blue chip advertisers fleeing the platform. And it feels like what might be happening now is they're starting to come back, especially after the election. Do you think we might see that swing back?
Yeah, because it's not just happening on X. Google is pulling out all these, you know, Black History Month and Women's History Month. They're pulling all that stuff off the calendars. You are not gonna see the Pride Month displays at Target and elsewhere that you've seen in previous years. All that stuff's gonna be downplayed.
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Chapter 4: What is the significance of Elon's new funding round for X?
If you want to demonstrate that you're about profits and making money and satisfying the customer. A really easy way to do that is to be back in business with Elon and with X. And just to say like, look, here's where our customers are. This is where they are emotionally and spiritually and where they're to. It's a really easy signal flare to fire in the air.
And you're going to see, I think you're going to see advertisers back.
Let's move on to MicroStrategy. Multiple companies now copying the playbook where you just basically buy up a bunch of Bitcoin. I look at these companies and the common thread I see among all of them is that they're all shitty companies, is what I would say. And I think back to what Michael Saylor said on this podcast, which is that before he got into Bitcoin, MicroStrategy was struggling too.
So I'm seeing this Bitcoin strategy. It kind of looks like the get out of jail free card for shitty, struggling businesses. Do I have that wrong or do you think that's sort of what's happening here?
No, you nailed it. And we've seen versions of this before in 2017. there was a wave of small and micro cap companies adding the word blockchain to their official corporate name, like literally changing the corporate name to something blockchain and immediately getting a boost in their valuation because Bitcoin rallied up to 18,000 that year from like 9,000. And it just became...
the zeitgeist and dead ends companies that didn't have much going on. It was like an overnight way to add market cap. Of course, it failed spectacularly in 2018 when the price of Bitcoin crashed. So none of this is surprising. And I think the interesting thing that happens here In the short term, it actually bolsters strategy because you have a lot more entities that are buying up Bitcoin.
And, you know, as the scarcity of Bitcoin becomes more of a widespread idea, obviously companies that own a lot of Bitcoin will benefit. Over the longer term, though, or the intermediate term, if this continues and grows, I think you'll lose the premium that strategy has had to its value of Bitcoin.
So right now it trades at a premium to the amount of Bitcoin it owns because people believe in not just the value of the Bitcoins, but the strategy of accumulating more. So it's selling at a premium to, if this were a closed end fund, we would say a premium to NAV or net asset value. The premium will shrink if there are five of these companies.
if there were 10 of them, that attain any kind of size. So that's one interesting thing that could happen where all of a sudden the company's strategy starts to trade at closer to just the value of its Bitcoin because it loses that scarcity premium because there are so many imitators out there in the market.
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Chapter 5: How are companies emulating MicroStrategy's Bitcoin strategy?
We'll be right back after the break with a look at Intel. If you're enjoying the show so far, be sure to give Profiteer Markets a follow wherever you get your podcasts.
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We're back with ProfgMarkets. Intel could be headed for a breakup with the help of TSMC and Broadcom. TSMC is exploring taking control of Intel's US factories, while Broadcom is in talks to acquire Intel's chip design and marketing business. Intel stock surged 16% on that news, marking its biggest rally since 2020. So, Josh, this feels quite important symbolically.
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Chapter 6: Why are banks rushing to fly gold into the U.S.?
separate out the chip design from the foundry business, have somebody else take those things over and say goodbye to Intel. And maybe that might be the better outcome for current shareholders than trying to continue to slog it out given the market realities of today where Intel is in no man's land.
Just going back to the decision to get into Foundry, and just to clarify for our listeners, Foundry is basically getting into the actual manufacturing of these chips. Most of the big companies we're talking about, NVIDIA, NVIDIA is probably the best example, Broadcom, they're designing chips, which is just a better business, and then they pay someone else to produce it for them.
And Intel decided they wanted to try to get into the business of actually producing these chips for other companies like Qualcomm. This is the business that TSMC is in. And so they made that decision to go into Foundry. And I think everyone would agree with you, that was a bad decision. They got caught completely flat-footed.
This AI boom took off, and then suddenly everyone has these GPUs and Intel's operating with a kind of shitty CPU business. And then also they're investing huge amounts of capital into building out this Foundry business. I guess from sort of like a management perspective, what could they have done differently? Should they just not have invested in Foundry to begin with?
Should they have invested more maybe in R&D, trying to predict AI? I mean, I feel it feels very easy to say, oh, what a terrible decision.
It's the wrong people running the company in this day and age. If you're going to be at the helm of a chip giant, you have to have a visionary streak that enables you to see around corners and predict. You cannot be a bean counter. You cannot be just like an operations guru, but not have a vision of where the tech is going.
I mean, you can get away with that for a few years, but ultimately it catches up to you. It's not a surprise that Broadcom got to a trillion dollar valuation. It's run by Hock Tan, who is a visionary entrepreneur. Thank you. Thank you. Thank you. Thank you. Thank you. Thank you. Thank you.
Thank you. Thank you. Thank you.
Thank you. Thank you. Thank you. Thank you.
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