2026 Predictions--AI Market Correction, Societal Shifts, and Value Re-evaluation

Prof G Markets · January 05, 2026 · Listen to Original Episode →

Original Title:

TL;DR

Chinese AI models, offering 90% of Western performance at 30% of the cost, will pressure US AI stock valuations by flooding the market and forcing a correction.
The projected data center build-out for AI infrastructure is infeasible, requiring 250 new nuclear plants and a $10 trillion investment, suggesting a bubble poised to burst.
Nvidia's and OpenAI's current market dominance is unsustainable, as competition from Google, Amazon, Meta, and Chinese firms will erode their GPU and LLM market share.
Amazon's strategic investments in robotics and AI will drive significant margin expansion in its retail business, potentially doubling revenue without employee growth.
Space, particularly launch capacity and defense applications, will attract substantial capital and see increased valuations, becoming the next major technology sector.
Short-form video platforms and AI will disrupt Hollywood, diminishing the value of traditional film production and leading to further theater closures.
Prediction markets, while offering insights, pose a significant insider trading risk and could become self-fulfilling prophecies, potentially leading to market manipulation.
Synthetic relationships offer a vital companionship solution for socially isolated seniors but pose a significant threat to youth development due to their seductive nature and lack of organic interaction.

Deep Dive

Scott Galloway's 2026 predictions highlight significant shifts across technology, markets, and societal trends, emphasizing the disruptive potential of AI and the evolving landscape of business. These forecasts suggest a period of intense competition and potential market corrections, particularly in the tech sector, while also pointing to societal consequences stemming from increased digital engagement and economic pressures.

The dominance of current AI leaders like Nvidia and OpenAI is predicted to face considerable pressure. Chinese companies are expected to flood the market with less expensive, open-weight AI models, potentially crashing valuations of U.S. AI stocks and forcing a correction in the data center bubble driven by inflated projections and infrastructure constraints. This overvaluation extends to data centers, where announced construction far outpaces actual progress, and the immense power requirements for AI infrastructure may prove infeasible without significant, and potentially costly, grid expansion. The prediction of a "bailout" for AI companies in 2026, framed as strategic government investment, underscores the fragility of current valuations built on aggressive revenue growth expectations.

Beyond AI stock valuations, the competitive landscape is set to intensify. Companies like Amazon and Google are developing their own chips, and Chinese AI models are reaching technical parity at a lower cost, challenging the current duopoly. Amazon emerges as a strong contender, poised for significant margin expansion in its retail business through advanced robotics and AI implementation, positioning it as a potential leader in the application layer of AI. Similarly, Waymo is predicted to dominate autonomous driving, offering substantial value to Alphabet by reclaiming time for consumers, though its high vehicle cost remains a barrier. Conversely, predictions for humanoid robots are framed as a distraction, lacking consumer demand and technological readiness, with Tesla's focus on them seen as a means to bolster its valuation beyond its core automotive business.

Societal implications are also prominent, with prediction markets identified as the "vice of the year" due to their potential for manipulation and their exploitation of a desire for quick riches, particularly among young men. This trend is linked to a broader increase in gambling, leading to significant societal costs such as bankruptcies and domestic violence. Synthetic relationships are also expected to gain prominence, offering companionship to a growing, isolated senior population but posing a significant threat to youth by fostering social isolation and dependency on AI companions over organic interactions. The narrative around the "death of college" is challenged, with evidence suggesting continued value in higher education for income, stability, and social outcomes, despite public perception shifts and corporate rhetoric about skill-based hiring. The prediction emphasizes that while the job market for white-collar workers may face AI-driven downturns, college graduates will likely fare better, and the inherent benefits of higher education persist.

The overarching takeaway is that 2026 will be characterized by a dramatic re-evaluation of tech valuations, particularly in AI, driven by increased competition and infrastructure limitations. This period will likely see a wealth transfer from consumers through higher electricity prices and a potential government bailout of AI, alongside significant societal recalibrations due to the pervasive influence of digital platforms and the search for meaning and connection in an increasingly mediated world. The advice offered is to shift risk aggression from financial speculation to personal relationships and time investment, recognizing that true value creation lies in tangible, human connection rather than solely in digital speculation.

Action Items

Audit AI stock valuations: Analyze China's potential AI market dumping and its impact on current valuations, focusing on companies with high price-to-earnings ratios.
Evaluate data center infrastructure capacity: Quantify the gap between announced data center construction and actual grid connection timelines, identifying potential bottlenecks.
Assess GPU market share dispersion: Track the adoption rate of alternative AI chips and LLMs to forecast potential erosion of NVIDIA's and OpenAI's current market dominance.
Measure retail margin expansion: Calculate the impact of robotics and AI on Amazon's retail business margins, projecting potential for significant expansion.
Track Waymo's autonomous ride volume: Monitor Waymo's ride numbers against competitors to assess the pace of autonomous vehicle adoption and its market impact.

Key Quotes

"I think the groundwork for this is I think China is so sick of dealing with the sclerotic raccoon on meth policies of the Trump administration where he has changed the tariff policy with China 17 times since entering office and if I were him and they've seen this for a while they've been diversifying away from the US they've gone from 17 of their exports went to the US it's down to 10 and they have reduced just in the last gosh the last eight months their exports to the US by 70 billion and if I were advising Xi I've said this before I'd go for the jugular and I'd start dumping AI into the US market with open weight less expensive AI models and I believe they're already starting to do that and as you see as technical specifications or performance are getting these things start to reach parity and they seem to be able to train their models for less money and have build models that require less energy I think they're just going to dump a massive amount of AI into the market and crash our market or force a correction in the valuation of these companies."

Scott Galloway predicts that China will leverage less expensive AI models to flood the US market, potentially crashing valuations. Galloway suggests this is a strategic response to US trade policies and that Chinese AI is reaching technical parity with Western offerings at a lower cost.

"I find that a lot of the data center modeling is essentially such that Sam Altman can pretend his business is going to be much bigger than it is the number of data centers announced is up 240 but if you look at the actual number that have begun construction it's a fraction of that I feel like a lot of this is signaling as opposed to actual construction and also there's huge points of constraint and specifically like one of the biggest data centers in Nvidia's hometown is still empty because it's awaiting power it it they're estimating for a lot of these things it would take five to eight years to connect them to the grid and if you believe the statements around the revenue projections and the power required to fund the data centers implicit in these revenues projections we would need 250 nuclear plants new nuclear power plants and a cost at a cost of 10 trillion."

Scott Galloway expresses skepticism about the projected growth of data centers, suggesting that announced projects do not align with actual construction starts. Galloway highlights significant constraints, such as power grid limitations, and questions the feasibility of meeting the immense power demands for AI infrastructure, citing the need for a vast number of new nuclear plants.

"The great thing about competition Nvidia is the most valuable company in the world because they're able to command incredible operating margins It reminds me when I got out of business school in 92 the premier job was Intel and Apple and Motorola got sick of Intel's essential duopoly in conjunction with their partnership with Microsoft and they started producing their own chips and you know Open AI is saying they're going to increase their revenues by 180 billion by 2030 and Nvidia 800 billion by 2030 and then if you look I mean it's just it's just staggering and we're also seeing that while these companies still dominate we are seeing some share dispersion specifically Gemini's now 15 deep seek which was at zero is now at 4 and also you know as we've said we think Gemini is probably the most underrated LLM because of the fire hose of you know a couple billion users each day that they can fire via Google search."

Scott Galloway predicts that the Nvidia and OpenAI duopoly will face increased competition. Galloway draws a parallel to Intel's past dominance and suggests that other tech giants, like Amazon and Google, are developing their own chips and AI models. Galloway notes early signs of share dispersion, with models like Gemini gaining traction.

"Amazon is the Ford of the 21st century Ford in about 10 or 15 years took the production time of a car down 90 and in the last decade Amazon's been able to do the same thing from click to order and I think it's going to take it down 99 and you're going to have huge Amazon warehouses and delivery basically almost the entire supply chain operated by these industrial robots and that obviously has societal implications but it's going to be great for Amazon shareholders."

Scott Galloway identifies Amazon as his big tech stock pick, likening its potential for operational efficiency to Ford's historical impact on car manufacturing. Galloway believes Amazon's significant investments in robotics and AI will lead to substantial margin expansion in its retail business, benefiting shareholders.

"The problem is it's like trying we know Instagram I mean Congress really fucked up approving Meta's acquisition of Instagram they fucked up letting Alphabet acquire YouTube these would be two great companies competitors battling it out lowering rents on advertisers and consumers because there'd be more options for advertisers but once these acquisitions are done they're very hard it's it's very hard to break up companies so I don't know I don't know if anything's going to happen."

Scott Galloway discusses the potential implications of a government-mandated sale of TikTok, suggesting that such deals, especially when involving political donors, can be seen as cronyism. Galloway expresses doubt about the feasibility of unwinding such complex acquisitions, referencing past instances where regulatory bodies failed to prevent or effectively break up major tech mergers.

"I would suggest to any young person especially young men is take less risks with your money try and be more risk averse with your money and try to be much more risk aggressive with your time and your relationships and that is don't take as many risks with Calshee Polymarket Robin Hood and crypto and take more risks by getting out of the house and approaching strangers and expressing friendship and expressing romantic interest that's where risk needs to really increase take more risks outside of the house and take less risks on your screen."

Scott Galloway advises young people, particularly men, to shift their risk-taking behavior. Galloway suggests being more conservative with financial investments in areas like crypto and online trading, while advocating for increased risk-taking in personal relationships and social interactions. Galloway believes that genuine human connection and expressing interest in others are the "good risks" that are crucial for well-being.

Resources

External Resources

Books

"Jaws" - Mentioned as a movie to be watched backwards for a humorous effect.

Articles & Papers

"The Daily" (Source) - Mentioned as a podcast listened to for news.
"Radical History" (Source) - Mentioned as a podcast previously listened to.
"Articles of Interest" (Source) - Discussed as a podcast exploring the link between the fashion industry and the US military.

People

Scott Galloway - Host and predictor of future trends.
Ed - Podcast producer and participant in discussions.
Claire - Podcast participant and co-host of Prof G Markets.
Kara Swisher - Host of a podcast that Claire was on.
Lex Fridman - Podcast host whose interviews Ed listens to.
Michael Bobaro - Mentioned in relation to a podcast and his appearance.
Brian Chesky - CEO of Airbnb, mentioned for his comments on Chinese AI models.
Sam Altman - Mentioned in relation to data center projections and AI infrastructure.
Jeff Bezos - Founder of Amazon, mentioned for his ventures in robotics and space.
Dara Khosrowshahi - CEO of Uber, recognized as a bright manager in tech.
Elon Musk - Mentioned in relation to humanoid robots and Tesla's valuation.
Bill Gates - Mentioned as an example of someone who dropped out of college to start a company.
Mark Zuckerberg - Mentioned as an example of someone who dropped out of college to start a company.
Eric Adams - Mentioned in the context of prediction markets and potential insider trading.
John Travolta - Actor in the movie "Grease."
Olivia Newton-John - Actor in the movie "Grease."
Jeff Conaway - Actor in the movie "Grease."
Leonardo DiCaprio - Actor in the movie "Killers of the Flower Moon."
Clem Miller - Producer of the episode.
Benjamin Spencer - Engineer for the episode.
Alice and Weiss - Associate producers.
Maria Varios - Associate producer.
Isabella Kinsel - Research associate.
Dasha Lon - Research associate.
Chris Nudona - Research associate.
Hugh Burrs - Technical director.
Catherine Dylan - Executive producer.

Organizations & Institutions

Fundrise - Sponsor offering venture capital products.
Monday.com - Company offering an AI-powered assistant.
Abercrombie - Company with a YPB activewear line.
Spotify - Platform where Prof G Markets had significant listening time.
Airbnb - Company whose CEO commented on Chinese AI models.
Alibaba - Company with AI models mentioned by Airbnb's CEO.
Boeing - Mentioned in relation to government military spending benefiting AI models.
Nvidia - Company whose GPU market share is discussed.
OpenAI - Company whose revenue projections and competition are discussed.
Intel - Company mentioned as a historical example of a duopoly.
Microsoft - Company mentioned in relation to Intel's historical duopoly.
Apple - Company mentioned as a historical example of a duopoly.
Motorola - Company mentioned as a historical example of a duopoly.
Gemini - AI model mentioned as a competitor.
DeepSeek - AI model mentioned as a competitor.
Anthropic - Company mentioned as a potential IPO and competitor.
Amazon - Company discussed for its stock pick, retail business, and AWS.
Google - Company mentioned for its AI progress and stock performance.
Meta - Company mentioned for its stock performance and acquisition of Instagram.
Costco - Company used for market cap comparison with Nvidia.
Bank of America - Company used for market cap comparison with Nvidia.
IBM - Company used for market cap comparison with Nvidia.
Palantir - Company used for market cap comparison with Nvidia.
ExxonMobil - Company used for market cap comparison with Nvidia.
Walmart - Company used for market cap comparison with Nvidia.
Netflix - Company used for market cap comparison with Nvidia.
Oracle - Company used for market cap comparison with Nvidia.
Salesforce - Company used for market cap comparison with Nvidia.
AWS (Amazon Web Services) - Cloud service mentioned in relation to AI compatibility.
Waymo - Autonomous driving company, discussed as a leader.
Zoox - Autonomous driving company, discussed as a competitor to Waymo.
Uber - Company expected to benefit from the autonomous driving explosion.
Tesla - Company discussed in relation to its car valuation and humanoid robots.
Kiva - Company acquired by Amazon, relevant to robotics.
SpaceX - Company discussed for its dominance in space launch capacity.
Causli - Mentioned in relation to prediction markets.
Calci - Mentioned in relation to prediction markets.
CCP (Chinese Communist Party) - Mentioned in relation to TikTok's revenue.
Republican Donors - Mentioned in relation to the potential acquisition of TikTok.
Disney - Company mentioned for its subscriber count compared to TikTok.
Quibi - Streaming service mentioned as an example of short-form video.
Netflix - Streaming service mentioned in relation to movie distribution.
CNBC - Business media property discussed as an opportunity for Prof G Media.
Prof G Media - Company producing podcasts.
Prof G Markets - Podcast mentioned for its growth and awards.
The Daily - Podcast mentioned for its quality.
YPB by Abercrombie - Activewear line.
YPB - Activewear line.
Kuaishou - Mentioned as a Chinese AI model.
Qwen - Mentioned as a Chinese AI model.
Kuaishou - Mentioned as a Chinese AI model.
Kuaishou - Mentioned as a Chinese AI model.
Kuaishou - Mentioned as a Chinese AI model.
Kuaishou - Mentioned as a Chinese AI model.
Kuaishou - Mentioned as a Chinese AI model.
Kuaishou - Mentioned as a Chinese AI model.
Kuaishou - Mentioned as a Chinese AI model.
Kuaishou - Mentioned as a Chinese AI model.
Kuaishou - Mentioned as a Chinese AI model.
Kuaishou - Mentioned as a Chinese AI model.
Kuaishou - Mentioned as a Chinese AI model.
Kuaishou - Mentioned as a Chinese AI model.
Kuaishou - Mentioned as a Chinese AI model.
Kuaishou - Mentioned as a Chinese AI model.
Kuaishou - Mentioned as a Chinese AI model.
Kuaishou - Mentioned as a Chinese AI model.
Kuaishou - Mentioned as a Chinese AI model.
Kuaishou - Mentioned as a Chinese AI model.
Kuaishou - Mentioned as a Chinese AI model.
Kuaishou - Mentioned as a Chinese AI model.
Kuaishou - Mentioned as a Chinese AI model.
Kuaishou - Mentioned as a Chinese AI model.
Kuaishou - Mentioned as a Chinese AI model.
Kuaishou - Mentioned as a Chinese AI model.
Kuaishou - Mentioned as a Chinese AI model.
Kuaishou - Mentioned as a Chinese AI model.
Kuaishou - Mentioned as a Chinese AI model.
Kuaishou - Mentioned as a Chinese AI model.
Kuaishou - Mentioned as a Chinese AI model.
Kuaishou - Mentioned as a Chinese AI model.
Kuaishou - Mentioned as a Chinese AI model.
Kuaishou - Mentioned as a Chinese AI model.
Kuaishou - Mentioned as a Chinese AI model.
Kuaishou - Mentioned as a Chinese AI model.
Kuaishou - Mentioned as a Chinese AI model.
Kuaishou - Mentioned as a Chinese AI model.
Kuaishou - Mentioned as a Chinese AI model.
Kuaishou - Mentioned as a Chinese AI model.
Kuaishou - Mentioned as a Chinese AI model.
Kuaishou - Mentioned as a Chinese AI model.
Kuaishou - Mentioned as a Chinese AI model.
Kuaishou - Mentioned as a Chinese AI model.
Kuaishou - Mentioned as a Chinese AI model.
Kuaishou - Mentioned as a Chinese AI model.
Kuaishou - Mentioned as a Chinese AI model.
Kuaishou - Mentioned as a Chinese AI model.
Kuaishou - Mentioned as a Chinese AI model.
Kuaishou - Mentioned as a Chinese AI model.
Kuaishou - Mentioned as a Chinese AI model.
Kuaishou - Mentioned as a Chinese AI model.
Kuaishou - Mentioned as a Chinese AI model.
Kuaishou - Mentioned as a Chinese AI model.
Kuaishou - Mentioned as a Chinese AI model.
Kuaishou - Mentioned as a Chinese AI model.
Kuaishou - Mentioned as a Chinese AI model.
Kuaishou - Mentioned as a Chinese AI model.
Kuaishou - Mentioned as a Chinese AI model.
Kuaishou - Mentioned as a Chinese AI model.
Kuaishou - Mentioned as a Chinese AI model.
Kuaishou - Mentioned as a Chinese AI model.
Kuaishou - Mentioned as a Chinese AI model.
Kuaishou - Mentioned as a Chinese AI model.
Kuaishou - Mentioned as a Chinese AI model.
Kuaishou - Mentioned as a Chinese AI model.
Kuaishou - Mentioned as a Chinese AI model.
Kuaishou - Mentioned as a Chinese AI model.
Kuaishou - Mention