Why AI Stocks Are Overvalued + Are Networking Events Actually Worth It?

**SPEAKER_1** (0:00)
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**Scott Galloway** (1:29)
Welcome to Office Hours with Prof G. This is the part of the show where we answer your questions about business, big tech, entrepreneurship, and whatever else is on your mind. Anyway, if you'd like to submit a question for next time, you can send a voice recording to officehoursprofgmedia.com. Again, that's officehoursprofgmedia.com. Or post your question on the Scott Galloway subreddit, and we just might feature it in our next episode. Plus, now you can call or text us a question at 201-472-3656.
That's 201-472-3656. Let's bust right into it. Our first question comes from a listener who emailed us.

**Pablo** (2:05)
Hi, Scott. This is Pablo, and I currently live in Boston, Massachusetts. First, thank you for your work you do and for consistently bringing sharp opinions to important topics. I really enjoy the podcast family at Prof G Media.
I work in AI adoption and consulting, and I'm seeing what feels like AI fatigue across organizations. For many employees, AI is starting to feel like an annual checklist, something they're expected to learn and keep up on top of their actual job. At the same time, managers are struggling to measure ROI and justify ongoing AI spending, and adoption often seems concentrating among small groups.
What's your take? Are expectations for AI outpacing organization's ability to absorb it? And if so, what does that mean for productivity, AI investment and for the broader market and economy over the next few years? Thank you again.

**Scott Galloway** (2:59)
Thanks for the question. I think it's a question a lot of people are asking, investors, CFOs, users. So AI spending is up. That's pretty obvious. Worldwide spending on AI is forecast to total 2.6 trillion in 2026, a 47 percent increase year over year. And total AI spending in 2025 was 1.76 trillion. So as you can see from about 1.8 to 2.6. For most functions, human labor actually remains more cost effective. Now, how long that lasts will be seen as token pricing comes down. NVIDIA VP of Applied Deep Learning claims that for his team, AI costs more than the employees themselves. The 2024 MIT study found that 77 percent of vision-based tasks, it is cheaper to employ humans than AI. And last month, Microsoft began canceling most of its direct cloud code licenses just six months after opening access to it. I wonder how much of that is them trying to, I don't know, ship post anthropic in favor of their own or open AI's LLMs. I think there might be some politics there. Anyways, what we're seeing in the market, a survey of 6,000 senior business executives found that 90 percent of firms report AI having no impact on productivity over the last three years. Sixty-nine percent of firms actively use AI with higher usage rates at younger, more productive firms, and two-thirds of execs regularly use AI, but their average usage is just one and a half hours a week. According to Apollo chief economist, Thorsten Slock, a friend of the pod, there are no signs of AI boosting profit margins for companies outside of the tax sector. Yet, according to Morgan Stanley Research, AI adopters are seeing their capital margin expansion outpacing the global average by 2x. AI tools increased coder productivity on individual files by 290%, but only uplifted a company codes product by 30%.
We have seen an increase in productivity in the US economy, which I do think is a function of AI. But I'm a bear around AI stocks right now. I'm bullish on AI technology. I think the technology will survive and it will, I don't want to say live up to expectations but be an incredible unlock for productivity. I don't think we're going to have the labor apocalypse that's being predicted. I think a lot of those predictions are just investor relations saying, my technology is so disruptive, it's going to create chaos in labor markets. Please fund my next round at ridiculous valuation. I think you're going to see a desert or an era of disappointment around ROI that will result in a pretty serious drawdown. Not a collapse that we saw in 2000 because these companies are five and 10x in their revenues. But at this point, it feels almost impossible for their growth and earnings to meet the expectations built into the current valuations. I think we're about to enter into the ROI phase. For example, an area where there has been negative ROI is in the design space. The number of designers at IBM and tech companies, as a percentage of total employees, has actually gone up because this human-centered, interesting, differentiated design is more important than ever. An AI hasn't proven to be great at visuals and design. Remember that Coca-Cola doing the AI commercial, and Sora designing things, and Sora was shut down. At the same time, I think you're going to see a lot of, I don't know, boring shit, like supply chain.