Tesla Slides on Concern Musk’s New Party Will Worsen Slump

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1:51Sam Fazeli:Bloomberg 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. For now, we want to go from the markets and shift over to Tesla. Tesla shares have been down. They're more than 7 % right now. Here to tell us about it more wise, Craig Trudell. He's Bloomberg Global Auditor's editor. Craig, want to start out and talk about this? Are investors, are they just tired? I guess this is assuming going according to what Elon Musk has been saying.

2:33Are they just tired of his kind of talking about this and putting himself out there and talking about politics when he should be focused on the company? I think they see all sorts of risks here. You know, this is a matter of now, you know, not just alienating Democrats, but also now going after Republicans and, you know, really sort of ticking off Donald Trump. And we've seen that with Trump going from, you know, kind of biting his tongue when Musk was first attacking, you know, the big, beautiful bill to really going after Musk in a more sort of pitched way. And so this is a risk for him to sort of make himself an enemy of both sides of the aisle in Washington potentially.

3:23But also just a great big distraction after he's assured everybody on multiple occasions, look, I'm going to sort of get back to business and tend to Tesla more than I have been since last year. So I have to ask this question. Is there a board here at this company that can rein in Elon Musk here? There is. You wouldn't necessarily know it from the actions of the board, right? But to the extent that we've heard from the board recently, it's been to say Elon's our guy. They batted down a report in the Wall Street Journal just in the last few months about potential succession planning at the company.

4:11I think the sort of read of that, a close read of that story, it wasn't necessarily the case that what the journal was saying was that they were actively looking to replace Musk. Musk, it was potentially more of a matter of, you know, sort of doing the job that you would expect a board to do. I should sort of, you know, give them credit in that regard, that at least they're preparing for, you know, the potential of needing to look for a next CEO. But, you know, Musk is very much in control of this company. And that was something that, you know, the Delaware Chancery Court judge, who threw out his pay package, you know, really emphasized in her ruling last year when she said, you know, he's very much in control of this company and its board and, you know, on those grounds, you know, throughout his compensation package, which has created, you know, another mess.

5:03And, you know, I think this, you know, political endeavors, you know, only complicates the board's attempt to try and get him compensated in a way that he's going to be happy with. Now, Craig, not too long ago, we heard Elamah saying, you know what, I'm going to get back to it. I'm going to focus on Tesla. This was after the last earnings. And now we're seeing the shift, right? He's talking about this America party. I mean, is this something that investors should be concerned about? He's kind of going back on his word there? Yeah. I mean, I think, you know, some of the it's not the only way in which he's sort of undermined himself and, you know, potentially you've made investors question the things that he's been telling them because he also said to Bloomberg back in May that our sales are turning around, right?

5:54And that was not borne out in the deliveries numbers that the company reported last week. They had a 13 % year-over-year decline in worldwide vehicle sales. That was almost bang on what they posted for the first quarter. So for him to say that he thinks in terms of political spending. He's done enough that he's going to do a lot less of it in the future. That was what he said in May. And this is pretty much 180 degrees different from what he was saying then. All right, Craig, thank you so much. I appreciate your reporting. Craig Trudell, Global Auto's editor for Bloomberg News. He is in London.

6:32I mean, it just feels like the brand has suffered damage, the Tesla brand. I guess the data will prove that out or not. kind of expected? I guess. I don't know. But it seems like if you do a third party, you're kind of upsetting everybody. It's like both sides of the aisle. I don't know how that's a good marketing strategy.

6:55Sam Fazeli: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. All right. Well, the House passed President Trump's latest tax and spending bill. But what does that mean for the pharmaceutical industry? Well, we're about to learn more. I want to introduce to you Sam Fazelli. He's Bloomberg with Intelligence Director of Research for Global Industry, Senior Pharmaceuticals. Sam, I want to start there. I mean, what does this mean for pharma?

7:30Sam Fazeli:So the one big, beautiful bill had in it a couple of things. Many things, Obviously, I can't remember how many patients it was supposed to be. But for the pharma industry, I'm going to focus on two things right now. One is a good thing. So there is an orphan drug change that impacts the IRA and actually impacts some really big drugs here. What's an orphan drug? When you develop a drug for a patient population that less than 200 ,000 in the U.S., you're called an orphan drug. You get a special exemption. It really helps you in terms of your duration of time that it can be on the market, et cetera, irrespective of your patent expiry.

8:11Sam Fazeli:It was all set up to help companies develop drugs for these underserved markets. 200 ,000, okay, it's not small. It's not big, but it's not that small. So it helped. One of the big drugs that had this was Keytruda, which is the biggest selling drug at the minute, and that's for cancer from Merck. So when IRA came along, it said what we're going to do is say your drug 2014 approval for Keytruda under orphan drug, great. If you're an orphan drug, you don't fall into IRA, the renegotiation of price and all that. But as soon as you get another indication, then that clock starts from the original date of approval.

8:50Sam Fazeli:So if you had a drug, orphan drug in 2014, and you get some other indication in 2022, they date back the clock counting to 2014. That was terrible. It really means that nobody would want to do multi-indication tests, etc. So that's been changed. Once an orphan drug is, you can keep that date. And so what does that mean for Keytruda, for Merck? One extra year before price negotiations by Medicare. And that's a$20,$30 billion drug selling something like 50 % of its revenues in the U.S. That's a huge win for the industry. Sam, I'm looking at some of the bigger names, the Merck down 18 percent and some of these other names, the big pharma companies, Bristol Myers down 17 percent.

9:35Is the market – what's that reflect? It's just uncertainty around trade, around tariffs?

9:40Sam Fazeli:All of it. So on the one hand, we've got this positive. On the other hand, we have two big things hanging over the pharma industry in general. One is the tariffs, sectoral tariffs that are still being discussed. We don't know yet. This is to try and incentivize companies to bring their products to a manufacturing to the U.S. if they want to sell in the U.S. market, et cetera. We did hear that perhaps in the trade deal with Switzerland, they're giving a special dispensation for the Swiss pharma companies, Roche and Novartis, and their share prices were up. But we don't know. We haven't seen this trade deal yet.

10:17Sam Fazeli:And then you've got the most favored nation, which is the one that's particularly draconian. And that is to say that whatever price you want to charge in the U.S., it's got to be closer to the lower end of companies with a similar GDP or something in the West. So that really is where I think the biggest problem is. We haven't heard anything, but that's still under discussion and under consideration. Might be another six to nine months before we hear anything. Sam, another big, I guess, component of this administration's policy has been cutting funding or maybe threatening to cut funding for research universities.

10:54And I have long experience with Duke University, which is a huge medical center and research area here. What's your industry saying about those potential cuts?

11:05Sam Fazeli:The industry itself is relatively quiet, Paul, because what they don't want to do is, I don't know whether the right phrase is here, shake the tiger's cage or whatever. You know, rattle the whole set here. But in reality, there is a, I think what I heard the last number was a 12 % increase in applications to some of the top universities in Europe versus what they were last year from the U.S. So that's folks that would have gone to or wanted to go to Harvard. They're now looking at Oxford, Cambridge, Sciences Po, et cetera, these brilliant universities across Europe. So there's that issue. But remember, in the OBBB, there's also another area where there is a cut to Medicaid spending.

11:48Sam Fazeli:That's 11 million Medicaid covered folks that lose it. That will also have repercussions for pharma companies, healthcare in general. And of course, you go to a hospital, you don't have insurance, they're going to treat you. Who's going to pay for that? It's going to go on your premium. That's a tax on you. Let's see how this all pans out, but not good there either. All right, Sam, I want to talk about the Medicaid cuts. I'm going to kind of put you on the spot there, but it's going to affect insurers who focus on Medicaid. They might lose customers. So what does this mean for, like, let's say Elephant Health, UnitedHealth, companies that do deal with this?

12:26Sam Fazeli:Yeah, so they are clearly under pressure and there's a risk for them. And one of the issues is exactly what you just said. You know, this is completely upsetting the cart here for the insurers in general. The point is, I'm not convinced that they will necessarily lose out. I mean, we have dedicated expert analysts who cover the sector, et cetera. But usually what's going to happen is that if they're not making money elsewhere, they're going to try and raise premiums somewhere else, which is what I said to start with. That there will be a way that they'll get through this. But clearly uncertainty in the near term.

13:02There's that word again, uncertainty. We hear it so many times throughout the day across so many different industries. Sam Fazelli, thanks so much for your time. Always appreciate checking in with you. Sam Fazelli, he's the Director of Research for Global Industries, Senior Pharmaceuticals, and Senior Wine Analyst for Bloomberg Intelligence, based over there in London.

13:21Sam Fazeli: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. All right, we're going to shift gears now. I want to take us to Anurag Arana. He is Bloomberg Intelligence Technology Analyst. CoreWeave, that is the big headline, buying core scientific. It's an all-stock transaction. Anurag, I want to bring you in and talk about this for CoreWeave. What is the benefit from this? What do they gain from this? I mean, think about it, that they have capacity to process X number of transactions or the backlog that they have.

14:00Sam Fazeli:With this particular deal, they are expanding their infrastructure. I mean, it's a very simple deal as if, you know, they're just buying more factories to produce what they do. So this is, you know, it's as simple as that. All right. So this, I'm not a tech person, but I know, tell us what CoreWeave is. What do they do and why are they shelling out$9 billion to get bigger, I guess? Yeah. So in the purest of pure forms, they are just renting computing resources to anybody that wants to run an AI infrastructure. They are a very big NVIDIA shop. They basically buy GPUs from NVIDIA. They create a network or an infrastructure, and they give it to people to go out and experiment or do whatever they need to do on that infrastructure.

14:43Sam Fazeli:It's no different than what AWS does, but very heavy focus on GPUs rather than the CPU. So that's really the big difference between a pure play provider like CoreWeave versus Amazon Web Services. Now, if you can dig into some of the background, what kind of challenges has CoreWeave had in the past? I mean, didn't they have a pretty dismal IPO? Yeah, I think that's really the most important thing is, you know, everybody thought when they're going to come out as the first pure play, you know, AI infrastructure IPO, it's going to be extremely popular. But it didn't happen. And the reason for that is because they need a large amount of upfront capital to build these data centers.

15:22Sam Fazeli:And then the workload comes in over the next several years. So there's a lot of questions about whether there's going to be sustainability of this GPU demand going forward several years out. So that's why you are right. The IPO came at 40. In a few days, it was down to 35. But now we are seeing, you know, the stock closer to 160 before this deal was announced. So, you know, we have talked about it before that, you know, why aren't they doing a secondary when it's like 160 bucks stock? So what they did instead is they use their stock to go out and buy another competitor. I shouldn't say competitor, but, you know, another company in that space so that it expands their capacity.

15:58Sam Fazeli:And, you know, I think they're doing the right thing by using stock at this point. Are there more core weaves out there on Iran, kind of more pure play, AI stories, maybe the kind of the sausage of AI, if you will, the guts that somebody could take public? There are multiples of them, but they are much smaller size in Corby. I would say there would be hundreds of them at this point because, you know, you go out, you buy the GPU, you go out and start renting it out. In a long time ago, this high-powered computing was used for Bitcoin mining. And then, you know, when that's not in favor, these guys are renting out their infrastructure for other reasons.

16:38Sam Fazeli:So there are other players out there, but almost all of them are much smaller than CoreV from a pure play point of view. Now, we dig into CoreV. What about Core Scientific? What's the attraction to them? I mean, it's just they are expanding the number of, you know, the capacity that they have to process the transactions in a sense that Corvive has a massive backlog right now. They have people wanting to use their services. And then these guys have to go out and lease it from, you know, other companies like Core Scientific. In this case, they said, you know, they have an agreement with them to lease their facilities.

17:13Sam Fazeli:They just said, you know, we'll buy it out and expand their size. And I think that's as simple as that. And I think I have to point out, Lisa, Corweave, based in Livingston, New Jersey. New Jersey, yes. So it just goes to my, folks, a little history lesson. Before there was Silicon Valley, there was New Jersey. There was Central Jersey, the Institute for Advanced Study, Princeton University. Menlo Park, New Jersey. Before there was a Menlo Park, California, Menlo, before there was a Sand Hill Road in Silicon Valley, there was a Sand Hill Road in Jersey. So it all, there's all these Jersey guys.

17:45It all comes back to New Jersey. It all comes back to New Jersey. All right, Anurag, thank you so much. We appreciate it. Anurag Rhyme, he's a technology analyst for Bloomberg Intelligence. He's in that Chicago bureau trying to establish Chicago as a technology hub here. Quick one before you jump back in. You're listening for ways to help teams move faster, make sharper decisions, and turn scattered context into work they can use. ChatGPT for Business can help. ChatGPT for Business gives teams a shared workspace with admin controls, permissions, and access to work and codecs in ChatGPT. This means your business can move from question to answer and code to rollout quicker.

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19:46Sam Fazeli:That's genius. 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. We want to move on now to the latest TikTok news. We're going to bring in Mandeep Singh, Bloomberg Intelligence, senior tech industry analyst. Okay, so Mandeep, President Trump getting ready to begin talks with China about a possible TikTok deal to sell the app. I want to ask you, where do we stand in this right now? What is the latest? I mean, from what we know, President Trump is pretty confident that there is a buyer.

20:24In fact, there could be private equity buyers, a consortium who may be interested in buying TikTok U.S. And at this point, you know, they want to make sure that it goes through in terms of getting the approval from China. But in the process, they have launched a new app, TikTok has. And that sort of suggests they want to decouple the algorithm from the core TikTok usage. So that was also a point of contention in terms of getting the approval. So I think the two go hand in hand that one, there is a buyer available and the other, the app is getting a changeover in terms of decoupling the algorithm.

21:06All right. So am I going to have effectively two TikToks out there, the TikTok app we all know and love, and then something that they are doubling internally is M2. So now there's going to be two effective TikTok apps out there for all these people? Yes. And look, with apps, there's always like a date when the first app will obviously be phased out and folks won't have access to it. I mean, remember what happened during the ban? You know, the app wasn't even available. So in this case, the plan is if and when the deal gets announced and the new TikTok owner, which we don't know who it will be, will get access to the new app.

21:51And then the first one gets phased out. All right. So my kids want to know. Because they're asking, OK, is there any chance of none of this going through? Like just TikTok disappearing from the U.S. in general? They'd be devastated, Mandy. I mean, look, it happened for two days. The app went dark. And at that time, Instagram got a very nice pop in terms of engagement. So from that perspective, this will be all positive news for a meta Snapchat or, you know, even a Duolingo was mentioned as a beneficiary of TikTok admin dark. I know it's not very intuitive, but it did happen in the data. You could see for those two days, Duolingo did get a pop in engagement time.

22:35All right. I mean, you got to spend your time somehow, God forbid, reading a book. says the father, you know. Okay, so China, if I'm China, what's my incentive to approve a sale to, say, a group, maybe including somebody like an Oracle? What's my incentive? The incentive is it's the president of the United States who is negotiating the deal, you know? And this is part of a much bigger conversation when it comes to China tariffs and everything that they are negotiating. So TikTok deal to me is part of that bigger negotiation now. And President Trump is obviously keen to have a deal for the TikTok US.

23:17He doesn't want the app to be banned. And as part of that, he wants some concessions on the tariff front. So to me, this is part of a much bigger negotiation. Now, you mentioned Oracle. Is Oracle the only name being thrown around? They are the trusted one when it comes to Washington. They are among all the hyperscalers. I think they get the trust of the president in terms of moving ahead. What's the draw? Why Oracle? Well, Oracle clearly hosts all the backend infrastructure for TikTok. So this has been going on a while and they have moved all the backend infrastructure to Oracle's platform. And they clearly have some sort of synergy when it comes to hosting that, making sure nothing gets saved in Chinese data centers and none of the data gets transferred there.

24:04So I think they're in the best position to do that. 30 seconds. Any sense of timing when this could happen? It sounded like President Trump is confident about this happening over the course of the next 90 days. Because remember, he extended the ban by another 90 days. So that would be my guess. All right, Mandeep. Thank you so much. Appreciate that. Mandeep Singh, senior tech industry analyst. I can't imagine he's on TikTok, but you never know. Bloomberg Intelligence joining us here in our Bloomberg Interactive Broker Studio. Lisa, are you a TikToker? I am not, but I, well, actually I take that back.