FBI Arrests NBA Players, Coaches in Sports Gambling Probes 

24:11That's how small some prop bets get. There had been a previous NBA case. Jonte Porter, actually the same federal investigation that brought the charges today, actually was how Jonte Porter wound up pleading guilty to taking himself out of games early, saying he was sick and having co-conspirators bet the under on a prop. So this is really the vulnerability for leagues. I want to say, are we surprised? I mean, the mixing meshing of gambling and sports, which was considered a no-no for so long. Yeah, look what happened to Pete Rose. Exactly, right? Like, no, don't do it, don't do it, don't do it.

24:51Here we are, and then this is happening. Yeah, I mean, it's really interesting. The question that is really hard to get to the bottom of is whether it's better or worse to have legal, regulated sports betting, right? Because clearly it's more widespread now. It's on your phone. It's advertised at you all the time, right? So there's just more people involved, more awareness. Dice and sliced a million different ways. It's also much more closely monitored when it's legal because you can see every bet, and there are these organizations that actually are watching for suspicious betting activity, which is how in many cases, including these cases, is investigators get tipped off.

25:29They see unusual betting activity and they follow up. All of the gaming apps on your phone, those are all regulated? People are monitoring or no? Yes. So if you're betting on FanDuel, DraftKings, other legal sportsbooks, yes, those bets are being monitored by these independent groups that have access to the data and whose job it is on behalf of the leagues and the sportsbooks who, you know, if you listen to federal prosecutors, are the victims in these cases because people are using insider information to take out bets that then win and the sportsbooks have to pay out. So they participate in these monitoring systems that are set up to catch suspicious activity where often is a lot of action suddenly, a lot of bets very suddenly on a player to underperform, you know, and very large bets for maybe bettors who've never bet before.

26:18Those are the things that get flagged. It does seem like, Ira, there could be a happy medium here where maybe the government comes out and says, okay, well, maybe we let the cat out of the bag a little too much a few years ago with the Supreme Court decision, or maybe the Supreme Court let the cat out of the bag. I don't know if they can do this legally, but what if there were a way to say, okay, we can allow you to bet on some stuff, the outcomes of games, but the granular prop bets that are 100 % in the control of one single player, that just isn't working. Is that possible to do? We're seeing this happen.

26:50Prop bets on college players in some states are not allowed. The NBA, after the John Tate Porter case, convinced major U.S. sports books to no longer offer under-prop bets on the lowest-paid players in the league. With the idea that the lowest-paid players would be more incentivized to do this? The most vulnerable. So John Tate Porter was what's called a two-way player on a$415 ,000 contract. What's interesting about the accusations today, the indictment today, is that Terry Rozier, who was accused of doing this, making$26 million this year. So it may not be just a case of going after the most vulnerable players.

27:27Adam Silver, the NBA commissioner, has recently hinted that they're looking at other things they might be able to do to restrict prop betting. And after the cases in Cleveland with the Guardians pitchers, the governor there, DeWine, asked their state gaming regulators to get rid of all prop bets. And so Ohio's looking into that. So there is movement to try to limit prop bets. but it's not clear kind of how that will shake out. And actually, I think one of the other things that this might lead to is more pressure to have a federally regulated system, which is what Adam Silver has always been asking for.

28:00You were part of a group of reporters the few years ago who did a big Bloomberg Business Week special on gambling and sports. And I'm just wondering if what we knew at then or now we knew then, would it have turned out this way? Or in other words, how has this gone? Has this gone okay? Yeah, I think the experiment, there's two big vulnerabilities, right? There's the erosion of trust and the corruption issue, right? Whether if you keep having cases like this, fans will no longer really believe in what they're watching on TV. That's a big problem. I think it grows today. We will see how persistent that is and how big it gets.

28:36The other thing that I think just more broadly in sort of the experiment of sports of legal sports betting in this country, I think once you've had legalization and it's now on phones and mobile, what we're finding out is that addiction is a real problem. And it's damaging the personal finances of a lot of particularly young men who get into this. So I think those are two things that it's not like we didn't know that problem gambling and manipulation existed. And it's not like those two things don't exist when you do this in black markets. But there is, I think, a real case to be made that opening it up this way has exacerbated those problems.

29:12Yeah, I know. And then you've got the other story that's out there. Our Cat Doherty wrote, I think you are part of that, too. DraftKings acquiring a federally regulated trading venue, marking its most aggressive move yet into the contested world of prediction markets. So this just melding of stuff is interesting. Come back soon so we can continue this. Ira Boudwe, global business of sports reporter at Bloomberg News, joining us here in our Bloomberg Interactive Brokers studio. This is the Bloomberg Business Week Daily Podcast. Listen live each weekday starting at 2 p.m. Eastern on Apple CarPlay and Android Auto with the Bloomberg Business app.

29:46You can also listen live on Amazon Alexa from our flagship New York station. Just say, Alexa, play Bloomberg 1130. Tesla shares, if you check them out, they have been bouncing around. 1.4 % right now. They turned positive later in the session, but for most of the day, they were lower. Yeah, down almost 6 % at their lows today, right? Listen, the company came out. They posted earnings late yesterday. Results largely disappointing. Profit missing estimates, despite record vehicle deliveries and operating income, plunging 40 percent in the third quarter, Tim. Meantime, the head of the company, the world's richest man, we're talking about Elon Musk.

30:21He hijacked the earnings call, pleading with investors to approve his one trillion dollar pay package and blasting the shareholder advisory firms that have come out against the proposal. The point is that there needs to be enough voting control to give a strong influence, but not so much that I can't be fired if I go insane. That's it? That's classic, Elon. Just in case I go insane. Just those two things? I guess so. That's the barometer? That's what we're doing? I guess so. I don't know. All right, that's Elon Musk apparently making the case last night for that pay package on the earnings call.

30:55And really, I guess, his position at the company. Let's talk all things Elon and Tesla. With us is Bloomberg Businessweek senior reporter Max Chafkin, co-host of the Everybody's Business Podcast, author of The Contrarian Peter Thiel and Silicon Valley's Pursuit of Power. Right here in studio. All right. We got a lot to talk about. That's classic Elon. It is. I mean, there's probably no figure in modern life who so openly flirts with the idea of his own insanity as Elon Musk. But, of course, what he's talking about. On an earnings call. Yeah, on an earnings call. But just share his responsibility.

31:25Of course, what he's saying essentially is you got to let me cook. And the only reason I should be fired is if I am going, you know, going crazy. And that would be crazier than he normally is, because, of course, he's pretty out there on a normal day. And for believers, that's kind of part of the appeal. Dare I say, Max, a lot of people would say, even though they could be critical of a trillion dollar pay package, they say, well, what would Tesla be without Elon Musk? Yeah, and that's kind of the difficult position that investors find themselves in this company where, yeah, there's some opposition to this pay package.

32:00And we've seen some of the shareholder advisory firms come out against it. But I think for most investors, you're kind of in a position where if you say no to this package and Elon Musk threatens to leave or even does leave, the stock falls, right? It doesn't go up because so much of this company's value is about the future, and that future is all about Elon Musk. The other thing I'll say about this pay package, big as it is, it's mostly requiring the company to get even bigger, to hit milestones that seem almost cartoonish at this point. So if you're an investor, you're saying, well, I mean, you know, let's hope it works out.

32:39He's been effective before. Why not this time? Well, I got to say one investor, we're talking about New York State and the comptroller, Thomas DiNapoli, did say that Tesla pay package for Elon is overly generous, lacks clear performance metrics to justify the$1 trillion that he could earn under this proposal. He plans to vote against the compensation package and Tesla directors up for reelection on November 6th. He spoke with Bloomberg Surveillance on TV earlier today. When you see the excessive compensation package, I mean, you know, credit to Mr. Musk, he's already one of the richest men in the world.

33:15How much more rich does one person have to be? I don't know. I'm not that rich. I know that we joke about that, but I don't know if that's the right question to be asking, Max. Is it about wealth or is it about control? I think it's about both. I mean, you know, people always say and you always hear things like, well, Elon Musk doesn't care. He's so rich. He is hundreds of worth hundreds of billion dollars. What's another couple hundred billion dollars? But I think I think when you're talking about this level of wealth, you do like the amount of money he stands to make on this package would, you know, double his wealth potentially.

33:48So that is a big difference. And the other thing, Tim, as you said, Musk says this is about control. It's about being able to maintain his position to essentially be able to operate without any kind of shareholder activism, a critic might say, without constraint. You know, having said that, you go to the core business, right? And Evie's like, listen, for a long time, he and Tesla did not really face much competition here in the U.S. And he and Tesla for a long time, promise, promise, promise, didn't deliver. And then they started to deliver. But the environment is changing. But so, too, is the evolution continuing for Tesla as a company, right?

34:28Whether it's battery storage and other businesses. But I don't know, what is the business? And does that business, would it be able to hit some of these metrics to justify this pay package? I mean, that is what's so difficult. And to the point that Thomas Napoli is making in there, you know, Tesla has not done that great over the last couple of years. The stock price has been phenomenal. phenomenal investors and particularly like the kind of retail investors who follow what Elon Musk says and buy his stock, like they are in love with this thing. There is a boom in AI. Elon Musk is talking a lot about AI.

35:04But, you know, car sales have not been great. And even in this quarter, which was good, right, where sales went way up, margins went down. And there is a sense among investors, and you've even heard this from the company itself, that this is going to be a bit an aberration because what happened is the tax credit, the$7 ,500, was effectively making electric cars cheaper. It went away as part of the big, beautiful bill that Trump passed. So this is kind of like a one-time thing where you have a bunch of people basically moving purchases forward. At the same time, lots of competition from lots of automakers.

35:38Now, we talked about this really for years, for almost a decade. Like, you know, GM and others are going to come. Well, they're here now. There are a bunch of really great electric cars that cost the same amount of money or in some markets less than a Tesla. You know, BYD has cars in Europe that are very, very competitive with Tesla and are cheaper. GM has cars now that are about the same price as the cheapest car and that are competitive. So that's a challenge. And then on the other hand, you have Musk's kind of fantastic promises around humanoid robots, around autonomy, And that stuff is hard to value.

36:12You basically either value that at zero or you value it at like$20 trillion. And so it's kind of created a gap in the discourse around this company. So look, obviously, none of us know the answer about how to value that business. But if increasingly these autos are becoming commodity and outside of the U.S., especially with competition BYD and Xiaomi, then it looks like a more insular market for Tesla, at least for autos here in the U.S. if they don't lean into Optimus, if they don't lean into other technology. Yeah, I think. Well, I think there are two things. So one is Optimus, humanoid robot.

36:48Elon Musk says, you know, very soon, like in a matter of years, we're going to have these things in our homes. They're going to be like friends. You're like not even going to be able to tell. I think he said on the earnings call, you're not going to barely be able to tell it's a robot. Like if that's true, obviously, that's great. The other thing the other thing is is sort of robo taxis, unsupervised self-driving, which Tesla has yet to do. But it is is trying to do. There is a question on how you value that because Elon Musk has said for years and years and years, you know, Basically, that is worth an unlimited amount of money.

37:21Your cars will increase in value because of this thing. But you're seeing Chinese companies essentially give this stuff away. So that's why I say we don't really know how valuable this is yet. Even though the idea of not having to drive your car and being able to take a nap, that obviously sounds great. It's just unclear how much people will pay for that and how much they will be asked to pay for that, given that a bunch of other automakers are giving away very similar technology. It's also not quite doable, right? Listen, we've talked about Waymo, how much we love it, but I mean, it's still tricky.

37:56And the infrastructure doesn't necessarily support it everywhere. No, do not take a nap in your Tesla today, despite what you see on Twitter. Yeah, I mean, there are huge question marks here. And I think when you look at Waymo, it's a big success, but it's a success in a very narrow way. Like a defined number of markets operating at slow speed. You know, they don't drive on highways yet. You know, there's tons of supervision. There's remote supervision. We've talked about this. Same thing with Tesla. And Waymo has been very deliberate, you know, rolling this out in just a handful of markets, moving very slowly.

38:29I think Tesla, and I think most people who cover the autonomy space closely, believe that there is no way Tesla gets anywhere near the timelines that Elon Musk is talking about. what we kind of expect is that it follows more like the Waymo path. Now, of course, and if it does that, it's worth a lot less money. Now, of course, Elon Musk is telling a different story where one day he's going to just basically flip the switch and you're going to see this deploy everywhere. We had an interesting conversation with Ross Gerber and with Ed Ludlow yesterday on the academic differences between the radar-Lidar side of things with Waymo and the vision-only stuff with Tesla.

39:02Where do you fall on that, Max? Is that, do you believe that, I mean, Ross Gerber doesn't think it's possible to have vision-only self-driving. There are a lot of experts who I've talked to who are very skeptical of the technical approach, which I think is a problem. The great thing about LIDAR is it's like an additional safety feature. I also think, again, there are so many reasons to think that the timeline is going to take much longer than what we're talking about, that it's almost not worth parsing the technical differences. This is something that is going to take decades to pull off in the way that Elon Musk wants it to pull off.

39:38Relevant when you've got a company that trades with a P.E. of 320 or a forward P.E. of about 262, right? Because these are things that aren't going to happen so quickly. Got to run. Love, love, love. Max Chafkin, senior reporter at Bloomberg Businessweek, co-host of the Everybody's Business podcast and author of The Contrarian, Peter Thiel, and Silicon Valley's Pursuit of Power. Stay with us. More from Bloomberg Businessweek Daily coming up after this.

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44:10Just building the momentum to the upside. Yeah, 7 % to the upside right now in the after hours. A little bit at the beginning, trepidation, I think, from shareholders. But I don't know, it could have to do also with some corrected numbers that were coming back and forth over the terminal for the results, the most recent results. As you mentioned, shares, what, up 90 percent going into the print this year? Well, yeah, we know like there was the U.S. taking that position in Intel specifically, an equity position. And it is now the third largest investor in Intel. So that certainly has given it a jolt, if you will, this year.

44:44But again, I think what's interesting is the company CFO speaking in an interview. You can check out our Ian King's write-through on this. But Intel saying the third quarter was stronger than it thought across the board. So yeah, server demand was a surprise positive. It feels like there's a lot of things that feel like the changes, the moves by Liputan, the CEO, maybe some of it's starting to pay off. Well, I wanted to see what Jay Goldberg has to say about all this. He's semiconductors and electronics senior analyst at Seaport Research Partners. He joins us from San Francisco. Jay, good to have you.

45:18You cover a lot of these companies, including Intel. You've got a neutral rating on Intel. Just give us your first reaction to this report that shows an encouraging forecast after a rebound in the PC chip market. Yeah, I think it's an encouraging step forward for the company. They've been through some rough times, and I think the driver of this quarter's results are their new products coming on stream using their 18A, their new manufacturing process, as well as some help from TSMC. So a bunch of new products starting to ramp into production and volume. I think that's helping a lot. And I'm most encouraged by sort of the gross margin outlook for next quarter.

45:59I haven't run through all my numbers, but it looks like it's much better than expected, which is important not just for the financial weight of that, But also, it's a good indicator into how their manufacturing process is tracking. I don't want to get you in trouble with compliance, but are you going to change your outlook, your rating on the stock? So I just upgraded it about a month ago from sell to neutral. And my concern here is more that big picture question you all were talking about earlier. As much as this quarter is good progress and we're seeing sort of tactically they're moving in the right direction, the looming question over the company is what are they going to do with the fabs?

46:40Last quarter, CEO Lip Bhutan said if they don't get a customer for Intel Foundry, an external customer for Foundry, they're going to stop doing advanced manufacturing. And I think that's one of these tough analyst calls because in the near term, if they stop doing that, it removes a lot of expense. Numbers go way up. Stock goes up. It's a near-term easy thing to do, but long-term it's probably really bad for the company. And it's just hard to square that sort of long-term forecast, multi-year forecast. So I'm still on the fence. Hey, one thing I want to just point out, Jay, is that it looks like they're talking about seeing a fourth quarter adjusted gross margin of 36.5%.

47:20Third quarter adjusted gross margin was 40 % against an estimate of 36.1%. Is that the number you were looking for? Yeah, but there's a lot of adjustments in there, so I haven't worked through them all, to be honest. Okay. Hey, listen, this is a company that's been around for a long time. You know, you're entrenched in how you were, what you were, different executives coming in to try and right this ship. You know, it's a big ship to turn while also facing lots of growing competition. Do you feel like it is in the right direction? I think it's too soon to tell. I really hope it's moving in the right direction, but it's too soon to tell.

48:00What are they going to do with those fabs? I've been saying for years that Intel's biggest challenge is not external competitors or customers. Their biggest challenge is internal and fixing their culture. So on that mark, I think this is a step forward. Lipu has a plan, and he's chipping away at this sort of internal problem. But they really have to readjust their worldview internally and understand that they're not the dominant player that they were for 20 years. They're the upstart now, and they've got to act like it. Jay, we spent a good portion of our program earlier talking about economic statecraft and the new role the U.S.

48:37government is taking in companies. They're reporting around potentially investing in some of these quantum companies. We, of course, have the U.S. government being among the biggest shareholders in Intel. U.S. Steel, the golden share there, the critical minerals and mining companies that have taken investment or had interest expressed in them. From an Intel perspective, how does the U.S. government investment change Intel? I think it is going to encourage other U.S. chip companies to consider working with Intel Foundry. Because NVIDIA has already invested in it. SoftBank's invested in Intel. now do we see Apple or Amazon or Google or one of these other potential Intel customers sign up to work with Intel Foundry, take that risk?

49:27Because it could be seen as patriotic. Well, that's okay. I'm glad you said that. Do they do it because it's the right thing for their business because it's the best option for a foundry? Or is it because it shows the Trump administration that they're supporting a business that the administration has invested in? So I think it can be both, right? My view is that these companies need to work with Intel. They need to see Intel Foundry succeed. Because if they abandon Intel Foundry today, and Intel abandons it entirely, what happens in five years when they're, you know, TSMC has an effective monopoly today?

50:02Right. In five years, they'll have a true actual monopoly. And that's that's going to be really challenging for all these all these companies. And so it's hard in the way the companies work. They're thinking on 90 day cycles. Somebody needs to be thinking of sort of the five, 10 year time horizon. And maybe the government is sort of the forcing function that gets us there. You know who thinks in more than five or 10 year cycles? A little country named China. They're pretty good about those long-term plannings. Just having some fun with you, Jay. Well, having said that, though, you know, on the other hand, are there companies who are saying, I don't want to get involved with anybody who's involved in the government?

50:40Because just like the way the U.S. government for a long time has been, or, you know, U.S. investors have been critical of, you know, sovereign-held entities, you know, in other countries. So is there some, you know, justification in that as well? Or should we just assume that Intel now has a massive, you know, backup called the U.S. government? So I think everybody's a little bit uncomfortable with the U.S. government taking stakes in companies. Everyone I know on Wall Street, everyone I know in the Valley, just a little bit uncomfortable about it, sort of ideologically. It's not something we're used to.

51:19it's clear that you know the u.s is moving towards some kind of national industrial policy this is one way to achieve that i'm not sure taking a stake in it is quite the right way to do it but you know there there are merits for being a little bit more somewhere in between the government controlling everything and the government doing nothing maybe there's a happy medium we can find hey 30 seconds uh on the call you're sitting down with intel execs what do you want to ask them just quickly? What are you doing with Foundry? Okay, that was great. So appreciate it. Jay Goldberg, thanks. Have a good evening.

51:53Senior Analysts, Semiconductors and Electronics at Seaport Research Partners. This is the Bloomberg Business Week Daily Podcast. Available on Apple, Spotify, and anywhere else you get your podcasts. Listen live weekday afternoons from 2 to 5 p.m. Eastern on Bloomberg.com, the iHeartRadio app. Tune in and the Bloomberg Business app. You can also watch us live every weekday on YouTube and always on the Bloomberg Terminal.

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