Samsung to Make Tesla AI Chips in Multiyear Texas Deal

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1:56Eastern 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. Let's cross over to tech, to Tesla. Samsung Electronics will produce AI semiconductors for Tesla in a new$16.5 billion pack that marks a win for its underperforming foundry division. What does this mean for our friends at Tesla? Craig Trudell joins us. Bloomberg Global Auto's editor here. Craig, talk to us about what Tesla's trying to do here with this big deal with Samsung. Yeah, so this is a deal for a next generation AI chip for Tesla. So Samsung is an existing supplier of these high-powered semiconductors that are used for its driving systems that it markets as full self-driving and autopilot.

2:51And contrary to those names that, you know, you cannot buy a Tesla today and have it drive itself for you. You still need to pay attention and keep your hands on the wheel and eyes on the road. But it is the case that those systems are becoming more capable and that Tesla is trying to kind of press the issue with them to the point where, you know, they're taking people out of the driver's seat and having supervisors in the passenger seat of cars in Austin, Texas, and trying to take that elsewhere as well. This will be, interestingly, Musk announced overnight that they will be going to a TSMC chip for the next generation of semis that they use, and then go to Samsung relying on on supply from, from this plant in Texas that, that Samsung is poised to, to open, uh, in, in, in the near future.

3:50And when near future, how, how long does it take to build a fab plant? The cool kids say fab, right? That's what they do. Yep. Yeah, that's right. Yeah. I mean, I, I think, uh, you know, the, the, this is a project on Samsung's part that's been in the works for some time. Right. And, and so, uh, they, they, you know, were sort of moved actually by the, the CHIPS Act under the Biden administration. And Trump was critical of the CHIPS Act, you know, on the campaign trail. And yet we've seen sort of a continuation and somewhat of an embrace of it, you know, as we've seen a change in the White House.

4:29In terms of the exact timing of when exactly this new AI chip, you know, will be coming out of that Texas factory, it's not Yeah, clear from from Musk's posting on X. And the companies have not said much because, you know, they, of course, agreed to, you know, some some privacy here that Musk proceeded to sort of loosen up on, you know, at least over social media. Craig, do we know at this stage to what extent Elon Musk is engaged in the day to day, the strategic of Tesla, that he stepped back from his Doge responsibilities? I mean, I think you can glean so much from his activity on X as to what he's paying attention to.

5:18And it absolutely is the case that we're seeing him posting more about things like this deal with Samsung. And I do think that that's helpful sort of for sentiment around Tesla. And yet I would say, too, that if there was a sort of scorecard or sort of an informal scorecard that you'd be keeping track of where he's sort of devoting most of his time and attention to, I would say it's as much or more on XAI and just AI in general than it is on Tesla specifically. You know, you heard from him a few months ago that he would really be turning his attention back to Tesla, you know, as he was making his way out of the White House.

5:59But I think, you know, the amount of attention and emphasis he's put on trying to catch up to the likes of open AI and Google and artificial intelligence and LLMs is, you know, definitely exceeds, you know, the amount of, you know, noise we're hearing from him about the day to day inner workings of Tesla. All right. Excellent. Craig, thanks so much for joining us. Appreciate your reporting there. Craig Trudeau, Global Autos Editor for Bloomberg News, joining us from our London HQ. Samsung to make Tesla chips in multi-year Texas deals. And Elon's going to actually walk the floor. He used to sleep in the Tesla plants back in the day.

6:52Watch us live on YouTube. Let's talk beer, John. I mean, I'll drink a Heineken. Perfect day for it. I'll drink a Heineken, you put it in front. Yeah, especially with the heat today. Heineken beer sales fall as price dispute took longer. What's going on with our friends at Heineken? Let's go to the go-to guy there. Duncan Fox, senior consumer, Staples, analyst for Bloomberg Intelligence. He's based over there in our London office, Queen Victoria Street, right in the center of the city of London. Duncan, talk to us about Heineken. What's going on there? Well, essentially, European retailers decided not delayed pushing the prices up after, I suppose, last year wasn't particularly big on pricing, about 3 % of the global Heineken brand.

7:35But the previous two years, when inflation was raging, they did get 14 % and 10 % respectively in 2022 and 2023. Costs of goods are not really going up. So I think the retailers just pushed back and it took them longer to push out to get a small price through in Europe. and that's just hit the sell. It's about 50 % of the overall business. What does a Heineken cost in the pub? Well, if you're in London, a heck of a lot. It's probably£8 plus. I can't be above£10. I used to put a... I'd endorse it. You'd be lucky to get it around£5 to£6. But nevertheless, when you're pushing the price up, the premium Heineken brand, which is probably 20 % more expensive than any other sort of mainstream beer that they've got on their portfolio, you can see why the volume has struggled in the short term given the cost of living crisis.

8:35So it's something they will resolve. They have resolved, in fact, on the pricing. So one would hope it will get better as we go through the second half with better weather than we've had in Europe. So we had, I guess, the announcement of a trade deal between the U.S. and the EU. I don't think, what's it mean for the spirits business, the beer business, the wine business, asking for a friend? I hope you've already stocked up. But 15 % is probably a good outcome, given some of the rumors that were going around from April onwards that it could have gone up to 200%. But obviously the cost of beer coming in for some like Harnik and they basically ship in from either Holland or Mexico.

9:20Some of the Mexican beer may well be tariff free on the USMCA agreement, but then you've got the cans. So Lord knows how much that will push the price up. But yeah, they'll just have to push prices up on beer and spirits. spirits at 15 % probably say it's not huge, but it'll mean pushing prices up 3%, 4%, something of that order, on top of what they would normally try and get. So it's not going to be easy to do, but it's not as disastrous as 30 % or something like that, which Remi said last week would take profits down to€35 million. euro so um a little bit better than expected uh or feared but it's still not going to be great in his wine there really isn't anybody um that exports wine uh that's quoted um so it's a bit difficult to say what the impact is but it'll certainly make it more expensive compared to your good u.s uh great varieties that come on the market so i would have thought you'll see people switch to u.s wines i find this kind of disturbing this part of the story where you quote the CEO of Heineken, beer markets have declined at a pace Heineken has rarely seen any time before.

10:34Is this the end of humanity as we know it? Well, if it carries on, I think there's been stories that the Gen Zs have given up on drink. I think that's wildly wrong. But certainly people are abstaining during the week a little bit. but the real problem is that people are drinking more at home rather than going to the pub and that's sort of changed that's the big change from covid so you've got to make sure you get your pricing at retailers right goes back to your original question because people are now it's sort of more like 80 drinking at home in the u.s it's anywhere between sort of 50 and 20 percent uh depends on where you are in the world but a lot more people drinking at home and going to pubs clubs so the mix is is is poor really or has been and it needs the good summer would help and it needs people to have a bit more money in their pocket as well so maybe feeling a little bit more confident that they can go out and spend it with their friends rather than buying it cheaper from retailers and entertaining at home duncan are you i wonder if this is a national phenomenon because it's a phenomenon on the jersey shore which is people are drinking like these iced tea, vodka things, the White Claws, all this stuff that's not beer.

11:56Are you seeing that? Is that a trend around the world? He hasn't been to my beach, by the way. Unfortunately, it seems to be that it's a trend. You get a lot of ready-to-drinks being pushed, and they're big for sort of 12, 18 months, and it does tend to go against the beer volume more than anything else. Spirit companies are doing it with no alcohol spirits now, and they're also pushing in by gin and time, or ready to drink gin and time, and stuff like that. So there's just a lot more choice for the consumer than there was when I was a kid. So it just takes a little bit of the shine off. You can try new things.

12:39I want to say people are spending more or spending a similar amount on alcohol. They're just buying less of it in terms of volume. So it's all about getting the value right. Premium brands are doing well. Arnequin premium brand did very well in these results, but it's only 24 % of their overall volume. So 4.5 % on 24 % doesn't sort of help too much overall. Is there any chance Heineken's going to build a brewery, a factory in the United States? I mean, I don't know if it would be the same. I would say it's unlikely. So that's a big commitment. And you've got to make sure that volume growth will be there because otherwise you're spending quite a lot of capital over the next two years if you have a site ready today.

13:25And then you've got to make sure that you have enough volume throughput for that to make money for you and be better than shipping it in. Even with the tariffs, at this moment, it doesn't seem that they're likely to build a brewery in the US. But if tariffs were higher, I suspect there would be a chance. But, I mean, they're building a big one in Mexico, and I suspect I'll ship it from there. All right, Duncan, thanks so much for joining us. Duncan Fox, senior consumer staples analyst for Bloomberg Intelligence. He's over there in London. And they shut down the Bud Brewery in Newark, right, by Newark Airport?

13:59Did they? I think so. I think that shut down. I don't know. And there's a Bush Brewery right across the street from Newark Airport. I didn't even hear about that. Yeah, I think that's a thing here. Did you feel true? Yeah. field trip. Exactly. We'll have to do some investigative reporting. Exactly. When your options are limited, so are your opportunities. At SIBO, the global exchange that pioneered options trading, we offer more ways to move with the market. From VIX and SPX options to global market data solutions, SIBO helps investors diversify, manage risk, and stay ahead of whatever the market does next.

14:31SIBO, life is better with options. Your investments could be too. There are risks associated with SIBO company products. Review the disclosures and disclaimers at SIBO.com slash US underscore disclaimers. Some people treat ChachiPT like some kind of smart search engine, and some use it to get work done. ChachiPT Work is a new way of working in ChachiPT 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.

15:14Put 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. It's time to plan ahead and make sure your brand is showing up in ways that can have an impact. That's where 4imprint comes in. 4imprint have promotional products that work as hard as you do. Durable, useful, and designed to make a lasting impression. Think quality apparel your team will wear again and again, including popular and exclusive brands. Drinkware that's enjoyed again and again. Bags, notebooks, tools, and tech items that don't just look good, but actually get used.

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16:30Listen on demand wherever you get your podcasts or watch us live on YouTube. All right, we got John Tucker, Paul Sweeney, live here in our Bloomberg Interactive Brokers Studio. And we are also doing that internet thing. We're on YouTube, so head over to youtube.com and search Bloomberg Live Radio, and that's where you'll find us. Tariffs, Europe, I guess we got a deal, John. We have a deal, but I'm still begging for some more details, especially when it comes to pharmaceuticals and autos. True. And with all these deals, I'm expecting, don't you have to negotiate these for like a year or two and there's like 10 ,000 pages agreement?

17:07Or is this just like a one-page term sheet we kind of put across the table and somebody initials it and we're good to go? I don't know. Somebody's got answers out there. Somebody's got answers. It's not me. Let's go to Brendan Murray. You might. Brendan Murray, he's a Bloomberg guy. Big take story today entitled Trump tariffs are already stunting world growth, but the markets are shrugging here. So let's get to it. Hey, Brendan, again, another big trade deal announcement today with the European Union. They're coming fast and furious. You know, I guess if you're looking at the economic data, I'm not sure we've seen any slowdown in the economy.

17:40I'm not sure I've seen any pickup in inflation, which were two of the concerns for a lot of people out there. What is your reporting show? Yeah, our reporting shows that when you look at what companies are saying their capital investment plans are and what they're saying about how they're going to try to absorb these costs, whether those are in margins or passing those costs on to consumers, that these tariffs are starting to take a bite. They're not happening all of a sudden. It's this kind of slow grind on the economy that we're seeing. And you can see it in some of the surveys that the government or private surveys that are reported.

18:23So the lesson here is that you don't just flip a switch and get inflation overnight. It's a slow moving process. And And the deals that are coming in from President Trump, the markets are celebrating because they're not the worst case scenario. But it still makes goods, the EU deal, let's say, makes European exports to the U.S. 15 % more expensive. So that's just the bottom line. And that's an economic headwind in any economist book. Hey, Brendan, when we hear Secretary Lutnik speak, for instance, he'll be saying something like China is going to pay so-and-so is going to pay. Settle this for us for people who don't follow this too closely.

19:12They're not paying. It's a tax, is it not? The American importers pay tariffs. They pay these taxes to the Customs Bureau. And so now those importers could go to the exporter in China or the European Union or wherever and say, hey, this is costing me an extra 15 percent. Can you lower your price? That happens in some cases. Most of the time, the profits of that company take a hit. Or they pass it on and or they pass it on to consumers. But the bottom line is they've got less to invest in. They've got less money to hire people. So this is what our reporting shows today in the Bloomberg big take is that we are starting to see that slow grind on the economy that tariffs have that that economists would warn you about that are happening now that the Trump administration would argue look this is going to incentivize companies to produce more in the United States and and some of that may actually happen so we shouldn't discount that completely But the tariffs hurt a lot more companies and consumers than they do help.

20:30Look at steel tariffs. We've seen an increase in domestic steel prices. There are a lot more companies and employees of those companies that use steel than make steel. And they are paying the price for it. So where will we see it, Craig? Greg, I mean, are we seeing will we see it in GDP numbers? Will we see it in headline inflation numbers? And if we do see it, when when do you think we will see it in the hard numbers? I know economists like to talk about. So so the investment figures, we're going to watch this week's GDP number very carefully. This is the second quarter. We're like the headline numbers likely to see a bounce back.

21:14Remember, it was a negative first quarter. the second quarter should be something in the 2.5 % range. But if you look at the part of those numbers that will give you a clean look at how companies are investing, that number is supposed to be flat. So there was a lot of distortion with tariffs over the second quarter. So some of that will still be some noise. But noise or not, those are companies that are not investing for the future in things like that will help their productivity and their growth. How long does this take to wind its way through before consumers, I mean, you've already mentioned steel, for instance, but other parts of inflation to show up in the economy?

22:07It could take a couple of quarters. You know, the Trump administration is rolling these deals out fairly gradually. You know, they're coming quite quickly toward the August 1st deadline. But they're going from 10 percent to 15 percent in a lot of cases. And so, you know, we're just going to see those costs for the American importer go up even higher. And what's really crushing to a lot of these businesses is the small businesses get hurt the most. The large retailers of the world, they have more the wherewithal to withstand some of this. But it's really the small business. And the National Retail Federation chronicles a lot of small businesses that are getting hit.

22:54All right, Brendan, thanks so much. We appreciate it. Brendan Murray, Global Trade Editor, Bloomberg News. This 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.

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