China's AI Dumping and Infrastructure Bottlenecks Threaten US Tech Dominance

The Prof G Pod with Scott Galloway · December 20, 2025 · Listen to Original Episode →

Original Title: No Mercy / No Malice: 2026 Predictions

TL;DR

China's AI dumping strategy, flooding the market with cheaper models, will pressure U.S. AI margins and pricing power, potentially triggering a global recession by devaluing concentrated S&P 500 tech stocks.
The assumption of sufficient grid and power capacity for AI infrastructure is a significant hallucination, as OpenAI alone requires 20% of U.S. electric capacity, facing multi-year data center connection waits.
Amazon's strategic investment in robotics, reducing click-to-ship time by 78%, positions it to leverage bits to move atoms faster and cheaper, a market advantage not yet fully priced in.
Prediction markets, by gamifying gambling on outcomes and events, are disrupting the gaming business and creating significant insider trading opportunities, potentially corrupting civic life.
Synthetic AI companions, while potentially alleviating loneliness for the elderly, pose an "opioid crisis" risk for young people, evidenced by extensive engagement and concerning conversation patterns.
The "college is dead" narrative is largely false, as degree holders still earn over twice as much and experience better non-financial outcomes, despite rising tuition costs.

Deep Dive

The year 2026 will see significant disruptions driven by AI's impact on markets, the data center industry, and employment, alongside geopolitical shifts and the maturation of autonomous systems. These predictions are designed not to be infallibly correct, but to stimulate discussion and the development of better solutions in response to these evolving trends.

The AI stock market is poised for a correction, not due to a lack of innovation, but the potential for a catalyst like increased tariffs on China. Trump's tariff policies, despite their intent, have rerouted global supply chains and are not spurring domestic manufacturing. Instead, China's strategy of "AI dumping," offering competitive, less expensive AI models built on open-source Chinese foundations, will pressure margins for U.S. AI leaders. This influx of cheaper AI could threaten the valuations of major tech companies and potentially trigger a global recession. Furthermore, the infrastructure required for AI, particularly electricity, presents a significant bottleneck. OpenAI alone requires 20% of current U.S. electric capacity; the massive investment and long wait times for grid connections suggest the current data center build-out is unsustainable. China, with its greater energy capacity, is better positioned to capitalize on this demand. The projected job creation from AI is also being oversold, with data centers employing few individuals, and the concentration of power in Nvidia and OpenAI duopolies is facing increasing competition from Chinese models, Anthropic, and Alphabet's resurgent Gemini. Amazon, however, is uniquely positioned to benefit from the intersection of AI and robotics, leveraging automation to expand its retail margins without adding human workers, a move not yet fully reflected in its market valuation.

The cost reduction in AI technology is mirroring historical patterns seen with personal computers and the internet, driving significant global investment and innovation. This trend is also evident in the space industry, where decreasing launch costs have led to a surge in private investment, with SpaceX dominating U.S. launches. Its market position, controlling the infrastructure for the future of commerce and connectivity, positions it as a dominant player in an expanding addressable market. In contrast, TikTok's success highlights a consumer preference for curated, engaging content over overwhelming choice, a model that has significant implications for news consumption and marketing. The potential forced sale of TikTok raises questions about U.S. economic policy, which appears both corrupt and inefficient, potentially undermining market confidence. Similarly, Hollywood faces disruption from short-form video and AI, mirroring the impact of podcasting on traditional television by enabling cheaper content creation with smaller teams, despite potential outrage from creatives. Autonomous driving technology, exemplified by Waymo, is demonstrating significant safety improvements and rapid adoption, logging vastly more autonomous miles than competitors and suggesting a future where human-driven vehicles become obsolete. While Elon Musk's humanoid robot ventures draw attention, the true potential lies in robots augmenting industrial processes rather than mimicking humans, a distinction often lost in the hype. Prediction markets, amplified by news integrations, are commoditizing gambling and disrupting the gaming industry, with significant societal costs including addiction and financial instability. Finally, the rise of synthetic relationships, while offering a potential solution for social isolation among the elderly, poses a significant risk to younger generations, who may struggle to develop essential interpersonal skills, echoing concerns about past technological dependencies like opioids.

The narrative that college is obsolete is largely unfounded. Despite some employers de-emphasizing degrees, the economic and non-financial benefits for graduates remain substantial, including higher median incomes and improved health and social outcomes. The core issue is not the value of a degree, but its exorbitant and artificially inflated cost, driven by industry practices that limit supply to increase tuition faster than inflation. This creates a system where educational institutions prioritize exclusivity over accessibility.

Action Items

Audit AI infrastructure: Assess current US electric capacity and projected needs for AI development, identifying potential grid bottlenecks (ref: 10 trillion cost estimate).
Track AI model pricing: Monitor Chinese AI models' market entry and pricing strategies against US LLM leaders to forecast margin pressure.
Measure autonomous vehicle safety: Analyze Wemo's crash data (96% fewer vehicle-to-vehicle crashes) against human-driven vehicles to inform future safety standards.
Evaluate synthetic relationship impact: Track search volume for "how to make friends" and social isolation rates in young adults to assess AI companion risks.
Analyze prediction market externalities: Quantify the increase in personal bankruptcy filings and addiction rates in states that legalized sports betting.

Key Quotes

"The past is immutable; the future is the most mutable thing. What will happen? None of us know. But that doesn't stop us. Our 2026 predictions are meant to inspire a dialogue that helps craft better solutions."

Scott Galloway frames his predictions not as definitive forecasts, but as prompts for discussion. He emphasizes that while the future is uncertain, engaging in dialogue about potential outcomes can lead to the development of improved strategies and solutions.

"Trump's tariff policy is the definition of stupid: hurt others while hurting yourself. It has not inspired an increase in domestic manufacturing but a decrease in exports as reciprocal tariffs take effect and a rerouting of the global supply chain around the US."

Scott Galloway criticizes Donald Trump's tariff policies, arguing they are counterproductive. He explains that these tariffs have not stimulated domestic manufacturing as intended but have instead led to reduced exports and a redirection of global supply chains away from the United States.

"The greatest AI hallucination yet is the assumption that in the next few years we're going to build anywhere near the required grid and power capacity OpenAI needs 20% of current US electric capacity, equivalent to 250 nuclear power plants at a cost of $10 trillion."

Scott Galloway challenges the feasibility of current AI infrastructure growth, calling it an "AI hallucination." He highlights the immense and potentially unattainable demand for electricity and infrastructure required to support AI development, citing OpenAI's projected needs as an example.

"Just as Ford's assembly lines slashed automotive production time by 88%, Amazon's robotic investments have reduced the time from click to ship by 78%."

Scott Galloway draws a parallel between historical industrial innovation and Amazon's current operational efficiency. He uses the analogy of Ford's assembly lines to illustrate how Amazon's adoption of robotics has dramatically decreased the time it takes to fulfill customer orders.

"The cost of the personal computer decreased 58% during the 15-year dot com boom, and US IT spending increased 200%. The same pattern is happening now with AI."

Scott Galloway identifies a historical trend in technological adoption and applies it to the current AI landscape. He suggests that as the cost of AI-related technology decreases, similar to the personal computer during the dot-com era, overall investment and spending in the sector will significantly increase.

"Hollywood is the new Detroit, but with better weather. For creatives, the return on human capital is inversely correlated to the size of the screen."

Scott Galloway posits that Hollywood is undergoing a significant transformation, akin to Detroit's industrial decline. He argues that for creative professionals, the value and impact of their work are diminishing as screen sizes and traditional media platforms become less dominant.

Resources

External Resources

Books

"2026 Predictions" by Scott Galloway - Mentioned as the title of the episode's content, which is read by George Hahn.

Articles & Papers

"2026 Predictions" (profgalloway.com) - Mentioned as the source for the episode's predictions.

People

Scott Galloway - Host of the podcast and author of the predictions.
George Hahn - Reader of the 2026 predictions.
Xi - Mentioned as the leader whom the author would advise on engaging in AI dumping.
Rodney Brooks - MIT robotics professor emeritus, quoted on the future of humanoid robots.
Travis Kalanick - Former CEO of Uber, quoted on the cost of drivers.
Oprah Winfrey - Mentioned as a successful college dropout.
Mark Zuckerberg - Mentioned as a successful college dropout.
Larry Ellison - Mentioned as a successful college dropout.
Pele - Mentioned as a comparison for Scott McTominay's potential performance.
Scott McTominay - Mentioned as a player who could lead Scotland to the World Cup semifinals.
Ryan Reynolds - Spokesperson for Mint Mobile.

Organizations & Institutions

Northwest Registered Agent - Sponsor of the show, offering business identity services.
Odoo - Sponsor of the show, offering integrated business software.
Carmax - Sponsor of the show, offering car purchasing services.
OpenAI - Discussed in relation to AI dumping, market pressure, and potential disruption by incumbents.
a16z - Mentioned as a venture capital firm whose startups use open-source Chinese AI models.
Airbnb - Mentioned as a company registering similar or better AI performance with Chinese models.
Mag 7 - Refers to a group of companies (likely Apple, Microsoft, Alphabet, Amazon, Nvidia, Meta, Tesla) whose pricing power is threatened by AI competition.
Apple - Mentioned in comparison to Nvidia's projected revenue growth.
IBM - Mentioned in comparison to Nvidia's projected revenue growth.
Meta - Mentioned in comparison to Nvidia's projected revenue growth.
Tesla - Mentioned in comparison to Nvidia's projected revenue growth, and as a car company with a high market cap per car sold.
Disney - Mentioned in comparison to OpenAI's projected revenue growth.
Fox - Mentioned in comparison to OpenAI's projected revenue growth.
The New York Times - Mentioned in comparison to OpenAI's projected revenue growth.
Paramount - Mentioned in comparison to OpenAI's projected revenue growth.
WBD (Warner Bros. Discovery) - Mentioned in comparison to OpenAI's projected revenue growth.
Alphabet - Mentioned as a company with significant AI talent and improving Gemini summaries.
Amazon - Discussed as a bullish investment due to AI and robotics, and its ability to move atoms faster and cheaper.
NFL (National Football League) - Mentioned in the context of data analysis and performance.
Pro Football Focus (PFF) - Mentioned as a data source for player grading.
New England Patriots - Mentioned as an example team for performance analysis.
Ford - Mentioned in comparison to Amazon's robotic investments and Tesla's market cap per car sold.
General Motors (GM) - Mentioned in comparison to Tesla's market cap per car sold.
Toyota - Mentioned in comparison to Tesla's market cap per car sold.
BYD - Mentioned in comparison to Tesla's market cap per car sold.
SpaceX - Discussed as dominant in US space launches and controlling a significant portion of the space market.
Google - Mentioned as owning a large share of information via search.
TikTok - Discussed as a dominant platform for news and entertainment, and its potential forced sale.
CCP (Chinese Communist Party) - Mentioned in relation to TikTok.
The Late Show with Stephen Colbert - Mentioned as an example of a TV show that could be disrupted by podcasting.
WeMo - Discussed in relation to autonomous driving safety and adoption.
Uber - Mentioned as a company focusing on consumer experience and technology agnostic approach.
GM (General Motors) - Mentioned in comparison to Tesla's market cap per car sold.
Aristocrat Leisure - Mentioned as a company in the gaming business affected by prediction markets.
Caesars Entertainment - Mentioned as a company in the gaming business affected by prediction markets.
DraftKings - Mentioned as a company in the gaming business affected by prediction markets.
Evolution Gaming - Mentioned as a company in the gaming business affected by prediction markets.
Flutter Entertainment - Mentioned as a company in the gaming business affected by prediction markets.
MGM Resorts - Mentioned as a company in the gaming business affected by prediction markets.
Supreme Court - Mentioned in relation to the legalization of sports betting.
Character.AI - Mentioned as a platform where young users engage in long sessions, with some showing signs of mania or psychosis.
ChatGPT - Mentioned as a platform where users engage in conversations indicating self-harm plans.
Mint Mobile - Sponsor of the show, offering wireless plans.

Websites & Online Resources

northwestregisteredagent.com/paidpropg - URL provided for Northwest Registered Agent.
odoo.com - URL provided for Odoo.
profgalloway.com/2026-predictions/ - URL for the episode's predictions.
mintmobile.com - URL for Mint Mobile.

Other Resources

AI (Artificial Intelligence) - Discussed as a catalyst for market changes, data center growth, job creation, and disruption across industries.
AI Dumping - A strategy proposed for China to pressure US AI companies.
Tariffs - Mentioned in the context of US-China trade policy.
Domestic Manufacturing - Discussed in relation to the impact of tariffs.
Global Supply Chain - Mentioned as being rerouted due to US trade policy.
Data Center Bubble - A predicted bursting due to infrastructure and power capacity limitations.
Grid and Power Capacity - Discussed as a bottleneck for AI development.
LLM (Large Language Models) - Mentioned in the context of Chinese models competing with American ones.
CAPEX (Capital Expenditures) - Mentioned in relation to OpenAI's spending commitments.
Duopoly - Refers to the Nvidia and OpenAI dominance in AI.
Incumbent - Refers to established companies that may overtake disruptors.
Robotics - Discussed as a key area for Amazon's growth and a potential distraction from Tesla's core business.
Assembly Lines - Used as a historical comparison for the impact of automation.
GPU (Graphics Processing Unit) Operations - Mentioned in relation to falling costs and rising AI funding.
Space - Discussed as a significant addressable market controlled by SpaceX.
Payload into Orbit - A key metric for the cost reduction in the space industry.
Short-form Video - Discussed as a dominant content format, particularly on TikTok.
AI Arbitrage - The process of leveraging AI to reduce production costs.
Autonomous Driving - Discussed as a technology that can significantly reduce vehicle accidents.
Humanoid Robots - Discussed as a future technology, with skepticism about current designs mimicking humans.
Prediction Markets - Discussed as a form of gambling that leverages the wisdom of crowds and has implications for various industries.
Wisdom of Crowds - The principle behind prediction markets.
GLP-1s - Mentioned as a comparison for the impact of prediction markets on the gaming business.
Sports Betting - Discussed in relation to prediction markets and its societal externalities.
Synthetic Relationships - Discussed as a potential solution for loneliness but also a risk for young people.
Social Isolation - Mentioned as a risk factor for older Americans.
College Dropouts - Mentioned as a category of successful individuals.
Degree Requirements - Discussed in relation to employer hiring practices.
Tuition - Discussed in relation to the rising cost of college.
Exclusivity - Mentioned as a factor driving up college tuition.
World Cup - Mentioned as a tournament where Scott McTominay could perform exceptionally.