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<\/p>\nEvery year, we make predictions. Our missives on 2025, made in October \u201924, registered the most direct hits since we first pulled out our Ouija board a decade ago. Our objective isn\u2019t to be right \u2014 though that helps \u2014 but to inspire a conversation that crafts better solutions. OK, enough of that. We begin with our 2025 report card, followed by our 2026 predictions.<\/p>\n
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2026 Predictions
\nAI Stocks Correct<\/p>\n
The question isn\u2019t when the AI bubble will burst, but what the catalyst will be. A: China. Trump has changed U.S. tariffs on China 17 times this year. They\u2019re tired of having a major trading partner with sclerotic decision-making and the demeanor of a raccoon on meth. Since 2019, China has decreased its share of exports to the U.S. from 17% to 10%<\/a>. Meanwhile, China\u2019s global exports are up 40%, while imports are flat. Trump\u2019s 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 U.S.\u00a0 \u201cHigher prices, lower growth\u201d makes for a lousy bumper sticker.<\/p>\n If I were advising Xi, I\u2019d counsel him to go for the jugular by engaging in AI-dumping, a repeat of their aughts steel-dumping playbook. It\u2019s already underway \u2014 and working. Eighty percent<\/a> of a16z startups use open-source Chinese models. Same story at Airbnb. China is registering similar or better performance as the American LLM leaders, but with a fraction of the capex. Flooding the market with competitive, less-expensive AI models will put pressure on the margins and pricing power of the Mag 7, taking down a frighteningly concentrated S&P and likely sending the U.S., possibly the globe, into recession.<\/p>\n The Data Center Bubble Bursts<\/p>\n OpenAI is promising Oracle $300 billion \u2014 money it doesn\u2019t have \u2014 for infrastructure Oracle hasn\u2019t built. We can\u2019t see the actual contract, but this is BS. The greatest AI hallucination yet is the assumption that in the next few years we\u2019re going to build anywhere near the required grid and power capacity. OpenAI needs 20% of current U.S. electric capacity \u2014 equivalent to 250 nuclear power plants \u2014 at a cost of $10 trillion. There\u2019s a five- to eight-year wait<\/a> to connect a new data center to the grid. Meanwhile, China has more than twice America\u2019s energy capacity<\/a> at half the cost<\/a>. Second greatest AI hallucination? Job creation. The average number of full-time employees at a data center is equivalent to the number of people working at two Applebee\u2019s<\/a>.<\/p>\n Nvidia & OpenAI Duopoly Comes Under Siege<\/p>\n Based on its valuation, Nvidia is telling the market it will add an additional $800 billion in revenue<\/a> over the next five years \u2014 equivalent to the combined revenue of Apple, IBM, Meta, and Tesla. OpenAI, which has $20 billion in annual revenue<\/a>, is projecting it\u2019ll add $180 billion in revenue<\/a> over the same period \u2014 equivalent to the combined revenue of Disney, Fox, the New York Times, Paramount, and WBD. Also, OpenAI\u2019s $1.4 trillion in spending commitments<\/a> exceeds Argentina\u2019s national debt.<\/p>\n Meanwhile, the competition is heating up. China is putting out comparable models at a fraction of the price (see above), Anthropic has captured the lead for enterprise users<\/a>, and, as I predicted last year, the empire (Alphabet) is striking back. Gemini summaries are improving, and arguably the greatest concentration of AI talent resides at Alphabet. OpenAI could be our era\u2019s Netscape, i.e., the disruptor that enjoys a moment in the spotlight before being eclipsed by an incumbent.<\/p>\n Big Tech Pick: Amazon<\/p>\n I\u2019m bullish on Amazon, even though it underperformed the Mag 7 this year. The collision of AI and robotics is the Champagne and cocaine cocktail fueling Amazon\u2019s retail margin expansion, catalyzing a 2x increase in<\/a> the gross merchandise value of its largest business (retail) by 2033, without adding any human workers. Just as Ford\u2019s assembly line slashed automotive production time by 88%, Amazon\u2019s robotics investments have reduced the time from click to ship by 78%<\/a>. The rest of the Mag 7 capitalizes on the elevation of information (bits) over objects (atoms), while Amazon is leveraging bits to move atoms faster and cheaper. Notably, the market hasn\u2019t priced this in yet; in 2025 Amazon stock traded at a P\/E ratio of 33, compared to its historic average of 58. The greatest accretion in shareholder value from AI will be at companies that leverage others\u2019 AI. Specifically, Amazon.\u00a0 Space: The Next Big \u2018Thing\u2019<\/p>\n When technology gets cheaper, startups form, the ecosystem attracts cheaper and cheaper capital, which spurs innovation, and so on and so on. The cost of the personal computer decreased 58% during the 15-year dot-com boom, and U.S. IT spending increased 200%. The same pattern is happening now with AI: The cost of GPU operations has fallen by 74%, while global AI funding has risen by 280%. The key metric for space? Over the past 15 years, the cost to get a kilogram of payload into orbit is down 89%, while private U.S. space investment jumped 6x.<\/p>\n SpaceX is dominant, registering 84% of U.S. space launches in 2024<\/a>, up from 18% in 2008. If I were running investor relations, I\u2019d position SpaceX as follows: Google owns 93% of information with search, Meta controls two-thirds of social connection, Amazon has half of e-commerce. SpaceX controls 90% of everything else in the universe<\/a>. Everything is a subset of the addressable market that is space.\u00a0\u00a0<\/p>\n Best Investment (You Don\u2019t Have Access to): TikTok U.S.<\/p>\n TikTok\u2019s success underscores the biggest mistake marketers make, believing choice is a good thing. It isn\u2019t. Consumers spend five days per year<\/a> deciding what to watch on Netflix. TikTok has only one channel, and it\u2019s the best one you\u2019re ever going to watch. Forty-three percent of Americans 18 to 29<\/a> get their news from TikTok. We also spend more time, on average, with TikTok (54 minutes per day) than with friends (35 minutes). When I say TikTok is our new best friend, I mean CCP spy. But I digress.<\/p>\n The math on TikTok\u2019s forced sale doesn\u2019t math, though, unless you\u2019re one of the president\u2019s cronies. TikTok\u2019s U.S. ad revenue was $12 billion in 2024. Applying a 10x P\/S ratio, its U.S. business has an implied value of $120 billion. Accounting for a revenue share with China, Trump\u2019s deal values U.S. TikTok at $28 billion. But I\u2019m a Democrat, so I\u2019m not allowed to invest. These insider deals reduce people\u2019s faith in the market, raising the cost of capital for everyone. U.S. economic policy could best be described as corrupt, but stupid.\u00a0<\/p>\n Short-Form Video and AI Meteors Strike Hollywood<\/p>\n 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. Seventy-eight percent<\/a> of Americans age 10 to 24 watch TV and movies on YouTube and TikTok. The Kids Diana Show on YouTube averages between 2 and 10 minutes per episode \u2014 perfectly calibrated for young people\u2019s shrinking attention spans. The show registers 137 million subscribers; Disney+ has 128 million subscribers.\u00a0<\/p>\n The other meteor headed for Hollywood is AI. What AI will do to Hollywood is what podcasting is doing to TV. The Late Show with Stephen Colbert employs 200 people, costs $100 million, and makes $60 million. When Colbert shifts to podcasting, he\u2019ll take eight people with him and make just $20 million, but it\u2019ll only cost $5 million to produce. The means of production are being arbitraged. There will be outrage from the creative community, who believe they\u2019re too precious to face disruption. But consumers, much less the Ellisons, don\u2019t give a shit.<\/p>\n Waymo Dominates<\/p>\n Automobile deaths kill 40,000 Americans annually \u2014 equivalent to prostate cancer, Parkinson\u2019s disease, and breast cancer combined. Autonomous driving may be the equivalent of a cure for (some types of) cancer. A study evaluating tens of millions of miles<\/a> driven by Waymo found that its autonomous cars were involved in 96% fewer vehicle-to-vehicle crashes, resulting in 90% fewer bodily-injury claims, and 92%\u00a0 fewer pedestrian injuries compared to cars driven by humans.\u00a0<\/p>\n Waymo went from 38,000 paid rides per month<\/a> in 2023 to 1 million just two years later<\/a>. The company is lapping the competition, logging 100 million fully autonomous miles<\/a>, compared to Tesla\u2019s 1.25 million miles with human safety monitors. The second horse to watch is Uber. It\u2019s technology-agnostic, choosing to pour capital into the consumer experience. As former CEO Travis Kalanick said, the most expensive part of the business is the person in the driver\u2019s seat.\u00a0<\/p>\n Humanoid Robots = Self-Driving Cars of 2015<\/p>\n Similar to self-driving cars circa 2015, humanoid robots are another Musk weapon of mass distraction designed to draw attention away from the fact that Tesla is a car company. Tesla\u2019s market cap per car sold is 77x what it is for GM and Ford, 28x Toyota, and 24x BYD. According to Musk, Tesla\u2019s Optimus robot will be an \u201cinfinite money glitch<\/a>\u201d that ends poverty and performs surgery. It\u2019s as if he\u2019s on ketamine. According to MIT robotics professor emeritus Rodney Brooks, \u201cWe will have plenty of humanoid robots 15 years from now, but they will look like neither today\u2019s humanoid robots nor humans.\u201d The current \/ future opportunities aren\u2019t robots that mimic humans, but robots that augment \/ replace humans at industrial scale.\u00a0\u00a0<\/p>\n Vice of the Year: Prediction Markets<\/p>\n Prediction markets leverage the wisdom of crowds. In turn, crowds supercharged by integrations with news brands create a virtual self-propulsion marketing machine. Participants may be deluded into believing they\u2019re engaging in an intellectual pursuit when they bet on an election\u2019s outcome, but it\u2019s gambling, just more fun and interesting. What GLP-1s did to fast food, prediction markets are doing to the gaming business. Aristocrat Leisure, Caesars Entertainment, DraftKings, Evolution Gaming, Flutter Entertainment, and MGM Resorts are down 22% YTD, on average. Las Vegas tourism is down 8%. Nobody will be in Vegas once Vegas is on everyone\u2019s phone.<\/p>\n The externalities are huge. Half the men in the U.S. between 18 and 49 have a sports betting account. Among sports bettors, 23% say they\u2019re addicted; the share jumps to 37% for Gen-Z. One in five<\/a> people with a gambling addiction attempt suicide. Personal bankruptcy filings increased by 28%<\/a> in states that legalized sports betting after a 2018 Supreme Court ruling. There are also civic externalities, as prediction markets represent the mother of all insider trading opportunities. Wagering on what Musk will Tweet next, Trump\u2019s Fed pick, the speed of a pitch, or when a candidate will drop out of a race invites corruption into every aspect of American life.\u00a0\u00a0\u00a0<\/p>\n Synthetic Relationships Take Center Stage<\/p>\n There\u2019s a use case for AI companions, but it\u2019s uncomfortable \u2014 a sad story about lonely old people. One-quarter of Americans 65 and up<\/a> are socially isolated, increasing their risk of stroke and dementia by 30% and 50%, respectively. The share of the population aged 65 and older is projected to reach 21% by the end of the decade<\/a>. In one year-long analysis of older Americans living alone, 95% of participants<\/a> said bots reduced loneliness. If synthetic relationships can make older people less lonely and stave off dementia, that\u2019s great.<\/p>\n The problem? Young people aren\u2019t developing the skills to navigate life\u2019s hardest \/ most rewarding thing: relationships. Google search volume for \u201chow to make friends\u201d has increased 5x since 2004, while the share of Americans who say they have no close friends increased 4x from 1990 to 2021.\u00a0<\/p>\n I believe synthetic companions are the next opioid crisis for young people. On Character.ai, 79% of the users are under 35; the average session is 93 minutes<\/a>. In any given week on ChatGPT, 560,000 people show signs of mania or psychosis, while 1.2 million people engage in conversations that indicate they have a plan to self-harm. Unfortunately, Congress is The Walking Dead meets The Golden Girls. They see the danger from synthetic relationships about as clearly as the propaganda threat posed by TikTok.<\/p>\n The \u2018College Is Dead\u2019 Narrative Collapses<\/p>\n Some of the most successful people of our age are college dropouts \u2014 Mark Zuckerberg, Larry Ellison, Oprah. You should assume your son is not Oprah. Despite the noise about employers removing degree requirements, the share of workers without a degree increased only 3.5% between 2019 and 2024, while 45% of all firms made no changes to their hiring practices. In pure economic terms, the median household income for a college graduate is more than 2x what is for someone without a degree. College graduates see better nonfinancial outcomes, too, in the form of lower rates of obesity, divorce, and suicide. On average, they also live six years longer<\/a>.\u00a0<\/p>\n After declining during the pandemic, enrollment has rebounded. The issue isn\u2019t value add, but value (i.e., cost). Adjusted for inflation, tuition rose 53% and 32% at public and private schools, respectively, between 2000 and 2025. Why? A: My industry is corrupt. We artificially sequester supply so we can raise tuition faster than inflation. Faculty, administrators, and alumni are drunk on exclusivity. We\u2019ve lost the script and begun believing we\u2019re luxury goods, not educators.\u00a0<\/p>\n Finally, Team Scotland will reach the semifinals of the World Cup on the back of a Pele-like performance from Scott McTominay. Hey \u2026 I can dream.<\/p>\n The best way to predict the future is to make it. I hope the New Year brings you the perspective and presence of mind to realize that, if you live in America, are healthy, and have people who let you love them completely, 2026 will be the best year of your life.\u00a0\u00a0<\/p>\n Life is so rich,<\/p>\n![\"\"](\"https:\/\/www.newsbeep.com\/au\/wp-content\/uploads\/2025\/12\/01.png\")
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