Motley Fool co-founder and CEO Tom Gardner closes out 2025 with a big-picture look at what's driven the market's strong run, why enthusiasm can push valuations too high, and how investors can stay disciplined as artificial intelligence transforms business.
He argues that while AI could significantly boost productivity and corporate margins, it will also reshape the employment landscape. Investors should focus on disciplined investing in well-run businesses and maintain a long-term perspective.
Also in this episode:
- Vinod Khosla's view that AI could raise the "revenue per employee" benchmark 5 to 10 times, and what that could mean for productivity and employment across industries.
- Why the biggest AI investing opportunity may shift from foundational models and infrastructure to the "AI leaders" within each industry -- and what to look for as margins and productivity improve.
- How to handle market volatility with a long-term plan: expect regular 10% and occasional 20% declines, keep adding consistently (often via ETFs/index funds), and don't chase heavily marketed IPOs.
A full transcript is below the video.
This podcast was published on Dec. 18, 2025.
Tom Gardner, co-founder and CEO of The Motley Fool, with some thoughts on the markets and investing, and life, here as we close out calendar year 2025. It's been another productive year for stock market investors. It's been amazing the last 15 years, and we're talking about almost 15% annualized returns over the last 15 years. That is pretty much unmatched in the history of the public markets.
That's happening because there's a lot of enthusiasm for new technologies. It's also happening because AI is gonna be completely transformative, and we'll talk about that in a second. And then finally, it's happening because where there is excitement, excitement feeds upon excitement, and we are at high valuations in the public markets, and we need to learn to add some cautious and moderate positions in our portfolio as well, make sure that we're not getting too excited about the new IPOs that are gonna get a lot of marketing pizzazz behind them, and recognize that we need to find very well run businesses.
In some cases, they don't have to be very rapid-growth businesses. They can just generate excellent economics, serve their customers very well, and make us double-digit returns as investors. Let's start with some thinking about what's happening with artificial intelligence.
Vinod Khosla is one of the brightest minds in the world of technology and investing in American history. He's the founder of Khosla Ventures. They've made investments in a remarkable number of successful companies that we're all familiar with. I won't go through the inventory of their success stories. But Vinod Khosla said just in the last two weeks that the historical marker for Silicon Valley companies is to generate one million in revenue per employee, whereas that is the marker. He believes the proper marker with AI is five to ten million in revenue per employee.
What that means cannot be overstated.
The significance of that transformation, I cannot oversell to you the importance of understanding the implications if Vinod Khosla is anywhere near accurate. That would mean that the average company today would either need to generate five to ten times more productivity from its existing base of employees, or reduce its workforce by seventy to 85%.
The answer is much more likely in the middle, that there will be major productivity gains by existing workforces using technology, but there will also be a tremendous shift in rewriting and remapping of employment across every industry. It's going to start, obviously, in IT and move to finance and then move its way across other industries, but we're so for investors, what does that mean, and what does that mean for us in our working lives? Let's start with us as investors.
It means that we should expect to invest in companies that have increasing gross margins, operating margins, and that are able to generate steady, healthy growth rates because they're driving customer demand. One of the interesting things to follow as AI investors is that these foundational models are starting to overlap. Which one is more effective for you? GPT or Grok or Gemini three or Claude?
We're starting to see a lot of similarities between those four models, and they're becoming commoditized, and they're still taking on massive investments. There will be major innovation, but it's going be hard for those four to get much lead over the other three. Of course, there will be some breakouts, but in general, we're starting to see that companies with a massive amount of data that have tens of billions or tremendous amount of cash flow each year and access to the top technical talent in the world are advancing those models very rapidly in competition with each other, and there's not necessarily that much competitive advantage forming in that category.
The second thing for us to look at as AI investors is to recognize that we will move from infrastructure investments that will still be very, very substantial, and all the investments that have to happen in power capacity and energy across nuclear energy, eventually across solar as well, those are breakthrough opportunities for the long term as investors. But what we're also going to see is a move from AI foundational models and AI infrastructure to the AI expressions by industry. Who are the industry leaders using artificial intelligence? What company in biotech? What company is in finance?
Investing? What company is in education? Which are the businesses that are moving most rapidly forward with new technologies? Again, that's culturally difficult because it means letting go a lot of our habits and practices and a lot of what was previously viewed as the highest merited work in an organization now is being transformed by those who can utilize AI and work at scale more effectively.
So, as investors, we need to really concentrate and find who the AI leaders are by industry. At The Motley Fool, we have database scoring systems that score public companies across every industry and give that those scores and those indicators. So obviously, I encourage you to become a member of The Motley Fool, if you're choosing to do it on your own, or another provider satisfies you, keep looking for the AI leader by industry. It will be a breakout factor for long-term returns for investors.
Now, what are we supposed to do in our working lives when Vinod Khosla says that the new marker for companies, technology companies to start is $5-10 million in revenue per employee?
It's going to mean a few things. First of all, we're going to have to have some societal change and some new policies that make it easier and easier to apprentice at companies, to get new job opportunities for people right out of high school, in college, right out of college.
It's also going to mean a lot of retraining will need to happen across every industry, and finally, it just comes down to us as an individual. Unfortunately, we have to recognize that we do live in a society where, for whatever reason, and we can imagine some of those reasons, large banks get bailed out when they're in trouble, but small individuals, when they get put out of work by new innovations and new technologies like AI, we don't have a safety net strong enough in place right now to help people through that change. So I think it's very important to seek second incomes, to continue to explore how AI can affect your specific job, your work, your company's work, your industry, what you're most fascinated by.
I do believe that there is we're going be K shaped with this, that some people are going to multiply the opportunities because they really decided to take advantage of the new technologies. If you think of the direction of somebody who is an editor and what is the pathway for their employment, there will be a select group of editors that that role expands because they're able to edit more using AI tooling, and they start to realize they're a content strategist now, and before you know it, they actually can expand the output of an organization substantially because of their understanding of those tools versus the group that maybe felt that AI wasn't gonna be as threatening and now are finding it hard to get a job if their employer doesn't need their services.
So there's a lot of change on coming. It's very important to stay active in understanding what what it means for your company and your industry, and and, of course, there's gonna have to be a lot of legislation to help us get through this transformative change. So we're in a marketplace where that dynamism is at an all time high, I would say, for business leaders, for investors, for anyone working in any industry.
And the last point I'll make is that there is no question that this technology favors investment and capital. It's placing pressure on labor, and it is a rewarding investment. So it is very important, and you can simplify your investing by just going with ETFs. You can just utilize ETFs and funds.
You don't have to buy individual stocks. Of course, if you're interested in individual stocks, we love working on that with you at The Motley Fool, but we're also excited to help you get a game plan and a financial plan for your approach and to help you with ETFs and funds. But I think no matter who you are, we should expect that the markets will be volatile. You should not be surprised at all to see the stock market fall 20%.
It happened in a few weeks in April of this year. So, 20% declines will happen in the market, a market this volatile and this dynamic with this much change. We're also gonna see a lot of companies that look like American brands that we've relied on for many years. They're never gonna disappear, but then those brands were Kmart, those brands were MTV, those brands were Circuit City, those brands were Blockbuster, those brands were shopping malls, those brands were travel agencies, and they all pretty much got wiped out in the Internet era.
We're gonna see a lot of that change happen with artificial intelligence, and I think that it's just important that we're in the game understanding and following these things, but recognizing that one of the ways to safely navigate the equity markets is to do so with ETFs and funds and indexes, low cost index funds, and just keep adding to them because I think the long term rewards of equity investment, given these productivity gains and these margin gains you're going to see across businesses, will be substantial, and it will continue to be the best way to get financial independence for you and your family, and that is to access the equity markets and to repeatedly invest month after month, quarter after quarter, no matter whether the market is up or down that year, just to methodically add and let the performance of these businesses and these new technologies take you into a successful financial life.
Those are my thoughts on the market here at the close of 2025. Again, another great year. I guess I'll close by reminding us, on average, the stock market falls 10% once a year, 20% once every four years. Just keep that in mind.
So when you see the 10% decline or the 20% decline, that's not the time to freak out. That's not the time to start selling all your shares. It's actually the time to think about maybe trying to find some extra savings and make some investments when the market goes down twenty percent. Whereas, as the market rises, that might not be the time to get most excited about making the most speculative investment you can.
So think about steering clear of IPOs. Let those companies operate in the public markets a little bit. There's so much marketing when they come public, so much enthusiasm on day one. What did the stock do? How much was it up on day one?
It literally means nothing. Most of the greatest companies in history tell me what they did on their first day, their first quarter, their first six months in the public markets. It's meaningless. It's meaningless what any of these great businesses did in the early weeks and months of their time in the public market, so don't be the person who jumps in at the highest price on the first day just because there's a lot of marketing coming out of the investment banks and Wall Street.
Keep your long-term perspective, keep the discipline of methodically adding money in, and don't hesitate to make some cautious and moderate investments to make sure your portfolio is secure and you're emotionally stable through the natural volatility of the equity markets. Thanks so much for thinking as a long-term investor, adding money to the markets. Of course, we want you to be a Motley Fool member, but our mission is to help you invest better, whether you're a member of The Motley Fool or not, to help you succeed with your long-term financial decision-making and your investment decisions.
We're here to help wherever we can, and we wish you the best of luck with your investments and hope you have the same level of excitement and enthusiasm that we do for 2026 and beyond. Fool on.
