Musk Turns to Tesla and SpaceX to Fuel AI Ambitions

0:00Some people treat ChatGPT like some kind of smart search engine, and some use it to get work done. ChatGPT Work is a new way of working in ChatGPT that can take action across your apps and files, stay with a project for hours if needed, and turn a goal into finished work. It's designed to help you move from a chaotic starting point to a reviewable first version. So all the source materials, briefs, and scattered information that you have to grind through to turn into something useful can just become something useful. Put ChatGPT to work on your most ambitious ideas and projects. Get started at ChatGPT.com by selecting Work Mode, available on Plus and Pro plans.

0:44What if you could make that stop? With LPL Financial, we remove the things holding you back and provide the services to help push you forward. If you're a financial advisor, what if you could have more freedom, but also more support? Ready to invest? What if you could have an advisor that really understood you? When it comes to your finances, your business, your future, at LPL Financial, we believe the only question should be, what if you could? Pitt advertisement, Anna Kendrick is not a client of LPL Financial LLC and receives compensation to promote LPL. Investing involves risk, including potential loss of principal LPL Financial LLC, member FINRA, SIPC.

1:14Join Bloomberg for the Canadian Finance Conference, proudly sponsored by National Bank of Canada Capital Markets on September 29th in New York. Hear from influential corporate and government leaders as they discuss the strategies shaping Canada's economic future. Connect with senior decision makers, gain actionable insights and be part of the conversations driving business forward. Register at BloombergLive.com slash Canadian Finance. That's BloombergLive.com slash Canadian Finance.

1:46Bloomberg Audio Studios, podcasts, radio, news. You're listening to the Bloomberg Intelligence Podcast. Catch us live weekdays at 10 a.m. Eastern on Apple CarPlay and Android Auto with the Bloomberg Business App. Listen on demand wherever you get your podcasts or watch us live on YouTube. Tesla shares, they are higher this morning. They're up about three-tenths of percent. But there was some news. Elon Musk said the company plans to poll Tesla shareholders on whether to invest in his other company, that's XAI. So here to break it all down for us is Craig Trudell. He's Bloomberg Global Auto Editor.

2:25Craig, I have to ask you, this is something that came out. I mean, what kind of message is this sending? It's sending that, you know, Elon's business empire is becoming all the more intertwined. So this has been, you know, sort of a case on and off for years. We can think back to, say, you know, the Tesla SolarCity acquisition, you know, and that's going back quite a ways. But, you know, in this case, it would be Tesla, you know, his most valuable company investing in sort of his up and comer and one where he's spent an awful lot of time and energy focused on lately as Tesla's electric vehicle sales have been slowing.

3:11He's been really sort of dead set on taking on open open A.I. and sort of standing up as a competitor to chat GPT. And as with all the companies in this space, spending an awful lot of money to try and compete in that realm. So where do we stand here in terms of kind of how investors are viewing their investment in Tesla? Are they invested in an auto company? Are they invested in an AI company? Are they invested just in Elon, Inc.? How do they think about it these days? Yeah, I mean, I think Musk has been trying for several years now to sell and position Tesla as much more than just a car company, right?

3:53And, you know, it's definitely in the energy space and, you know, has a battery business to show for that. And in AI, he's talked a big game about developing self-driving technology. He's not gotten there yet. As we've seen with the company starting to offer rides in Teslas around Austin, Texas, they still have Tesla employees in the front passenger seat to sort of take over in events where the cars have not been able to handle navigating the streets on their own. And yet with SpaceX, I think, interestingly, for them to have just pumped$2 billion into XAI, I think there's a little bit of FOMO on the part of some in the Tesla shareholder base where they've seen XAI go from not all that valuable a startup to suddenly an extremely valuable startup.

4:55And they feel like they've missed out on some of this appreciation and won in on that. So with all that said, Craig, I mean, does Musk support a merger between XAI and Tesla or maybe XAI and SpaceX? You mentioned SpaceX, too. He says he does not. And I think there's been talk about this for years, right, that, you know, and on and off again, there's been questions as to whether or not Musk is sort of stretched too thin and doing too much. Would it make more sense to turn his companies into into one and sort of, you know, sort of the think about it as sort of the general electric of the new age?

5:34Right. Which is kind of fascinating because, of course, that didn't work out too well for GE. And yet, even some of Musk's own allies have sort of alluded to viewing him and his empire as sort of a modern-day General Electric. So, he did take pains to say on X that he does not support a full-blown merger of Tesla and XAI. But he has, you know, signals on there multiple times now that he would be in favor of Tesla putting money in. And, you know, that's, of course, you know, a proposition that could be helpful if XAI continues to grow its valuation. We should note, however, that our colleagues have reported just in the last month or so that XAI has been burning through about a billion dollars a month.

6:28So this is a company that is really sort of cash hungry and needy as it's trying to stand up a business with all of this capability. Yeah. And Craig, it's been, I don't know, a month or two since Elon Musk left the U.S. government, Doge. Is there any evidence that he is meaningfully engaging with Tesla? You know, I think he's messaging more about, you know, sort of what Tesla's up to than he was while he was in Washington. He did also post just within the last day that, you know, he was in Tesla's design studio and sort of hyped up how excited he was about what he saw. But the company is in this really challenging state from a sales perspective.

7:17And you've gotten indications that, well, maybe he doesn't necessarily fully have his finger on the pulse in the sense that he told us just within the last few months that sales have turned around. A couple months later, the company reports that its vehicle deliveries had fallen 13 % in the second quarter. So either he was, you know, not necessarily up to speed on the state of sales or perhaps he was optimistic, more optimistic that they were able to going to be able to turn things around than they ultimately were able to last quarter. OK, Greg, thanks so much for your reporting. Appreciate it.

7:52Craig Trudeau is a Global Autos editor for Bloomberg News. He's based in London. Joining us via Zoom here. you're listening to the bloomberg intelligence podcast catch us live weekdays at 10 a.m eastern on apple carplay and android auto with the bloomberg business app listen on demand wherever you get your podcasts or watch us live on youtube this is bloomberg intelligence i'm lisa mateo alongside paul sweeney uh paul so summer barbecue you think hot dogs right love it okay what's your favorite what's your go-to hot dog uh oscar meyer there you go question oh yes okay see i'm a Brooklyn girl. I go Nathan's.

8:27Okay, that's good. That's good. That all said. There is some big news when it comes to your barbecue. So a company may be splitting up. Sources saying Kraft Heinz could break itself up, spin off into this large part of the business, into this new entity. What is this all about? Let's bring in someone who knows about it. Jennifer Bartaschus. She's Bloomberg Intelligence Senior Analyst, Retail Staples and Package Food. Jennifer, I know sources are saying a lot of things. What's the latest that you're hearing about this breakup? Yeah, good morning. So this is an interesting breakup because it's 10 years after they merged together, and it seems that the main portions of that initial merger will go their separate ways.

9:05The way we look at it, it looks like there's a core group of what they consider their taste elevation platform, which is the sauces and the seasonings. Taste elevation. Oh, please. That's got McKinsey written all over it. Is that just spices and condiments? That's spices and condiments, yeah. Exactly. And then they have, you know, that's kind of been their growth area for the last couple of years. So we think that that's really going to be what will be the residual part of Heinz. And then there is, it's undetermined yet exactly what will go into the rest of the business, but it'll be largely those grocery categories where they've invested a lot to try to revitalize brands, and it just hasn't worked in terms of really rejuvenating sales.

9:47You know, when I think about brands in the shop, you know, going to the supermarket, boy, those house brands, private label. Talk to us about the growth of private label in general. Boy, and if you're a brand like an Oscar Mayer or something that you spend gajillions of dollars over 100 years, it seems to kind of go by the wayside almost. It's true. You've got a good point, Paul. Private label has been consistently growing and got a huge bump since the pandemic. And part of that is that the retailers have really invested in the quality and the differentiation of those private label brands. So where consumers now really consider them not just a replacement for national brands, but in some instances, just regular brands of their own right.

10:30And so Kraft Heinz actually had reduced some of its exposure to private label when they sold off the planters business, when they sold off the cheese, like the shredded cheese business with Kraft. But the core grocery business, they do still have a lot of exposure to private label. So is this a lot of competition from, let's say, startup food companies appealing to younger consumers? I mean, what kind of sparked this? Well, there's really been a shift in the way consumers are looking at brands. And unless you own a long legacy brand that you can reinvent and really drive interest from younger generations, it's really hard to keep that going.

11:08And so what we've seen is that they've done a good job with revitalizing things like Philly cream cheese. But despite a lot of investment, brands like Capri Sun, Oscar Mayer, Maxwell House, these brands just aren't resonating with younger consumers. And that means that the growth prospects for those brands are a lot lower. And that makes it hard to really bill yourself as a growth-type oriented company. So I know, as I think back to my M &A memory banks 10 years ago, Craft & Hines, Berkshire Hathaway had a big hand in putting these two companies together. And look now, they're still the largest shareholder with just under 28 percent of the stock.

11:47I assume Berkshire Hathaway, Warren Buffet has kind of signed off on this deal or is open to it, at least. I would assume that they're open to it. You know, I mean, over time, you know, Berkshire Hathaway has actually done quite well out of this deal, even though Kraft Heinz as an overall entity is probably disappointed in the overall analysis. But the merger was in 2015. It's been 10 years. The value of the deal at the time in 2015 was$45 billion. Today's market cap, it's$32 billion. And yes, they've sold off a couple of brands, but it just hasn't materialized to be the type of growth that I think Berkshire Hathaway initially envisioned it would happen.

12:28Jennifer, can you dig more into some of the advantages, but also the risks associated with breaking up the company? Obviously, some of the advantages, it seems very similar to what Kellogg did when they spun Kelanova and WK Kellogg out into two separate companies. They separated the growth prospects and then those from the slow growth areas. That's very similar to what Kraft Heinz seems to be doing. Obviously, if you can focus on growth areas, that gives you undivided attention to really expand and grow. That would be an advantage. I think one of the disadvantages, and this is something that's kind of a broader question to consider, is whether there's a cycle that's starting.

13:14Because we've seen companies like Kelanova split. We see Unilever spinning off their ice cream business. And those new entities are now being bought up by others. So you've got Mars acquiring Calanova, you have Ferrero acquiring W.K. Kellogg. But in order to get regulatory approval, you have to have categories that aren't overlapping. And so you're seeing a new birth of new kind of conglomerates of dissimilar portfolios. And so it makes me wonder if we're setting up another cycle where in another five years, ten years, we're going to see these companies that have been buying up the underperforming brands going through a similar type of activity.

13:55What's driving all this? It doesn't feel like this M &A activity, whether you're buying or divesting, is out of position of strength. It always feels like, I don't know, I'm doing it because I don't have any growth and I got to do something. I got pressure from shareholders to do something. So I'm either buying or selling. Because your business doesn't have a lot of growth. No, it's true, Paul. And I think one of the crises that we've sort of seen in packaged food, at least as the North American companies, is a lack of real true innovation. So what's happened is a lot of companies have fallen into this pattern of innovation being a new flavor or a new extension, a new size of the product.

14:35And that's not really what gets consumers excited. You need to bring new and different products to market. And that's an expensive endeavor. And companies have sort of shied away from that. And although they're trying to reinvigorate that innovation pipeline, we just haven't seen a lot of home runs coming out since the pandemic. And so, you know, I think when you've got that backdrop, you have to evaluate for your portfolio and say, how do we focus on the strengths that we have? And can someone else do better with the categories where we're not doing as well? All right, Jen, thanks so much for joining us.

15:08Jen Bartasch, Senior Retail Analyst, Bloomberg Intelligence. All right, Lisa, the key question, you're Nathan's Hot Dogs. Are you ketchup or mustard? Oh, mustard with sauerkraut and red onions. Okay, solid, solid. I'm a mustard person too. But if somebody put a hot dog with ketchup in front of me, I would not eat it. Well, here's the thing. I just came back from Chicago and they said if you put ketchup on your hot dog, no. That's a big no-no. They do not do that in Chicago. In Chicago. Okay, good to know. Good to know. Yeah, you know, I'm definitely a mustard person. But again, you throw a hot dog in front of me with ketchup, I'll probably eat it as well.

15:42Some people treat Chachi PT like some kind of smart search engine. And some use it to get work done. ChatGPT Work is a new way of working in ChatGPT that can take action across your apps and files, stay with a project for hours if needed, and turn a goal into finished work. It's designed to help you move from a chaotic starting point to a reviewable first version. So all the source materials, briefs, and scattered information that you have to grind through to turn into something useful can just become something useful. Put ChatGPT to work on your most ambitious ideas and projects. Get started at ChachiPT.com by selecting Work Mode, available on Plus and Pro plans.

16:24What if you could have more wins? More support? More sound effects? At LPL Financial, we like the sound of that. Because LPL offers more. Advisors, what if you could have more ways to help your clients? Ready to invest? What if you could find an advisor that really understands you? When it comes to your finances, your business, your future, At LPL, we ask, what if you could? Paid advertisement. Investing involves risk, including potential loss of principal. LPL Financial LLC, member FINRA SIPC. Gain insight on the innovators, disruptors, and tech-driven trends shaping today's complex economy. I'm Carol Masser.

17:01And I'm Tim Stenevec. Wrap up your workday with the Bloomberg Businessweek Daily Podcast. We bring you deeper dives into the story shaping your world, from the evolution of AI to the shifting priorities of global business. Plus, Silicon Valley power players and the latest tech trends. Catch up on the conversations you miss during the day. Subscribe to the Bloomberg Business Week Daily Podcast on Apple, Spotify, or anywhere you listen. You're listening to the Bloomberg Intelligence Podcast. Catch us live weekdays at 10 a.m. Eastern on Apple CarPlay and Android Auto with the Bloomberg Business App.

17:35Listen on demand wherever you get your podcasts or watch us live on YouTube. Welcome back to Bloomberg Intelligence. I'm Lisa Matteo alongside Paul Sweeney. Weight loss drugs, right? All the rage. I always want to know what is the latest with it. So here with that and much more is Sam Fazelli, Bloomberg Intelligence Director of Research for Global Industries and Senior Pharmaceuticals. Sam, thank you for joining us this morning. Just want to ask, what is the latest? Because we hear so much about weight loss drugs and different companies. What's the latest you've been hearing so far? Yeah. Hi, Lisa.

18:07So in terms of what's happening in the market, we're still waiting to see whether the prescription counts for Novo Nordisk's U.S. Wegovi numbers are up or not. They've been flat for pretty much most of this year in terms of the number of scripts that doctors are writing for their Wegovi. And the opposite is the case for Lillie Zepan. This continues to keep going up. And it's a pretty interesting battle, which seems to be currently being won by Lilly. And time will tell. What is interesting is that my colleague, Ord Gersbacker, just finished a deep patent analysis for... That's right, exactly, Paul.

18:52For Wigovi. And, I mean, the dates in terms of patent experience, of course, they're important, because that's when generics can come in and compete with you. Here we go from possibly, she says, 2031, 2032 in the U.S. at least to 2040. I mean, look, that's an amazing outcome. And she puts a decent probability on it in terms of the ways that they could protect it. So that could mean a lot for a product that could be selling five or ten billion dollars a year. Right. All right. We got to go to the elephant in the room here. I mean, Jesus, for our listeners on radio, Sam is in some kind of contraption.

19:26like he, I'm guessing he fell off a barstool and hurt his arm or shoulder here. What happened, Sammy? It's that cheap drink you guys sell in the U.S. You know, it just doesn't work for me. What I need is classified growth red wines and white wines. Right, Paul? So what, I mean, I'm assuming there's something going on there. So, all right. So it's a rotator cuff surgery. He's not an athlete. He's popping a bottle of Bordeaux. Yes, he's popping a bottle of Bordeaux throughout his shoulder, opening a bottle of Bordeaux. So talk to us about what's the latest on the cancer field, Sam. I know you go to a lot of conferences and you're on top of the latest research.

20:04What should we as consumers and maybe even investors in health care stocks and biotechs, what should we be thinking about as the next frontier on the cancer front? Yeah, I mean, we have a bunch of conferences coming up very soon. So the Myeloma Conference, the International Myeloma Society in September, the World Lung Cancer Congress, then there's the big European Society for Medical Oncology Conference in October. During these, we're going to hear about whether there's going to be big step changes again in the treatment of some diseases, particularly lung cancer. So we've got some therapeutics with possibly some data coming up, maybe a world lung cancer.

20:48We'll see Oradesmo. And we've just done a survey of U.S. physicians, which came back with very interesting comments, which he's going to write about tomorrow, about some other trials that are ongoing. So obviously, I can't front run that. The data will be published tomorrow on the terminal. But there is stuff still happening in cancer where we're seeing potential for paradigm shift. And that's some of the things that we'll be referring to tomorrow. Of course, in the middle of all this, we have pharma companies continue looking for products to expand their pipelines through M &A. Now, Sam, we've been talking a lot about tariffs lately.

21:23How is the biotech sector, even pharmaceuticals, if you can dig more into how they're being affected by tariffs? Yeah, so that's one area. If you look at the performance of the pharma stocks relative to the rest of the market, I mean, Mag7, I mean, I don't know where they're going, but Paul, I'm sure, knows more because of the background he has in analyzing in tech, but they just keep going up. I mean, there's nowhere else for them to go. If you put them aside, okay, the S &P 500 maybe hasn't been as magical when it includes the Max 7, but pharma has been a little even less, a bit more lackluster, partly because of this continuing conversation about tariffs, that 200 % is something that President Trump mentioned just very recently, although it's delayed till next year.

22:12You've got your most favored nation pricing that's coming up. You've got your possibility that the regulators are going to be, we don't know where the regulator is going at the minute, to be honest with you, positive, negative, favorable, not favorable for the evolution of regulatory framework in the U.S. So there's a lot of questions. And I know this is Paul's favorite word, uncertainty, that still dogs the pharma sector. Yeah, that's certainly the case. So maybe, you know, August 1 might be a date. We get some more clarity there. Sam Fazelli, Director of Research for Global Industries and his Senior Pharmaceutical Analyst for Bloomberg Intelligence.

22:49He's covalescing there in London and our London studios. But he makes it into the studio, folks, even with one arm in a sling. So we appreciate that. He's playing hurt out there for us. That's what happens when you get old, Lisa. You know, things happen. They just kind of go out on you. Are we going to see you in a sling? I hope not. I hope not. Exactly. So Sam Fazelli there. So and M &A, you mentioned M &A. Yeah. So far in the first quarter, this is according to Sam's notes, so far in the first half,$32 billion M &A in pharma, 13 deals. Last year, it was$16 billion for 16 deals. So dollar amounts certainly bigger this year.

23:28This is the Bloomberg Intelligence Podcast, available on Apple, Spotify, and anywhere else you get your podcasts. Listen live each weekday, 10 a.m. to noon Eastern on Bloomberg.com, the iHeartRadio app, TuneIn, and the Bloomberg Business app. You can also watch us live every weekday on YouTube and always on the Bloomberg Terminal.

24:05is not a client of LPL Financial LLC and receives compensation to promote LPL. Investing involves risk, including potential loss of principal LPL Financial LLC member, FINRA, SIPC. Hi, I'm Barry Ritholtz, inviting you to join me for the Masters in Business podcast. Every week, we bring you conversations with the people who shape markets, investing, and business. I speak with CEOs, Nobel laureates, market innovators, and legendary investors. Whether you own stocks, bonds, real estate, commodities, even crypto, these are discussions you absolutely need to here. Subscribe to the Masters in Business podcast on Apple, Spotify, or anywhere you listen.