Musk's Political Ambitions, CoreWeave's Big Purchase

24:52Despite the spend, 6 out of 10 American adults still don't get the 7 to 9 hours of sleep the credible science says we need. As for experts, they recommend making lifestyle changes, such as getting sunlight and limiting screen time to improve sleep. That's the Bloomberg Tech Minute brought to you by ChatGPT. Put ChatGPT to work on your most ambitious ideas and projects. Get started at ChatGPT.com today by selecting Work Mode, available on Plus and Pro Plans. Let's talk about health care for a second. It doesn't always work the way people expect it to. If you've ever waited on a prescription refill or had a hard time getting the care you needed, you know the feeling.

25:33The system should just work better for everyone. That's exactly what the people at Optum are trying to do every day. They're a health care company linking patient care and pharmacy services and using data and technology to drive the whole system. So care is connected, not complicated for patients and providers. Things like making it easier to get care that looks at the whole person, from primary care doctors to mental health support and even in-home care, and then using technology to make sure they all work together. Technology designed to help doctors spend less time on busy work and more time with their patients.

26:07And those prescriptions? Optum is working to bring costs down, save patients money, and make it easier to get refills. Little by little, Optum is helping make healthcare work as one for everyone. Head to business.optum.com to see how.

26:48Plus, China hits back at EU restrictions on their medical device makers, announcing reciprocal curbs. Beijing says it will exclude EU-based companies from Chinese government procurement on certain medical devices. The move comes ahead of high-stakes meetings between the EU and Chinese leaders. And TikTok may be building a new version of its app for US users. It's according to reports, and the company is planning to launch the new app on September 5th. TikTok users would have to download the new app and migrate in order to continue using the social media platform. Now, the existing app, it's said to work only until March of next year.

27:23Ed. Okay, coming up, CoreWeave agrees to buy Core Scientific in a$9 billion all-stock transaction. We've got the details of some Monday M &A coming up next. This is Bloomberg Tech.

27:49Welcome back to Bloomberg Tech. I'm looking at a couple of big tech names moving to the downside. And what's interesting about Apple and Alphabet, both lower this Monday, is news out of the EU. So starting with Apple, Apple is appealing that 500 million euro fine that was relating to the App Store, saying that the requirements the EU has for App Store changes are unlawful. Maybe some pressure there. Similarly, Alphabet or Google is saying that it's going to list the search results of competitors right at the top of the page in order to conform the Digital Markets Act. Again, a stock that's down 1%.

28:20That news came out on July 4th holiday here in America. Maybe it's having an impact. Then there's the big one. Tesla, the biggest mover to the downside in terms of the points drag on those major indices. Elon Musk has founded the America Party. The sell side are worried that it's going to be a distraction away from Tesla, his core obligation. and there's the impact of the President of the United States commenting on that. Later in the program, we're going to go out to Craig Trudell. He's going to give us a lot more of the market reaction in this story, Cara. Yeah, amid all of that, though, we've got some M &A news, Ed.

28:52And that's as Capgemini in France races to build bolder AI offerings with a transatlantic deal. And here in the US, CoreWeave has agreed to buy Core Scientific to expand its data center capacity. Again, it's capitalizing on AI demand. Leanna Baker is here with us, who leads the deal team. Leanna, let's go to CoreWeave and Core Scientific first, because this is all about the need for compute. They actually eyed the asset about a year ago for a much less price point. And since then, Core Scientific shares have gone up a lot, so I think patience has paid off for them. Although you might see that shares are down today.

29:26That's something we're following closely, because you don't often see that in M &A. But because it's an all-stock deal, and CoreWeave is a pretty volatile stock, that could be weighing on shares. Of course, scientifically. There's also this kind of broader M &A Monday vibe. Capgemini is doing something in the market to get itself up to speed on AI. What do we know about the backstory? I've been reading reports about this piece of M &A for some time. Thanks, Ed. We've been all over this story. So Capgemini first started talks with this company a couple months ago. They were in advanced negotiations, and then we had dislocation in the market, you might remember all that tariff drama.

30:03So talk sort of stalled there, but then it came back. We'd been hearing a few weeks ago that things were happening. We were trying to get that final price. We didn't get there, unfortunately, but you saw it announced today. Since then, since talks broke off, you know, the euro has strengthened a bit. Maybe that came into play, but definitely there's going to be consolidation among companies that consult other companies. These B2B companies are being affected by AI, and that's going to be a trend that we're seeing. So I'd say W &S is looking to get stronger here by getting with a bigger rival. Bloomberg's Liana Baker, who leads our deals team.

30:38Thank you very much. Let's get back to today's big story. Tesla, after CEO Elon Musk announced the formation of a new political party, how do investors feel about it? Let's bring in Michael Green, portfolio manager and tree strategist at Simplify Asset Management. I was on the Bloomberg on the HDS function. I think you have a very small holding in Tesla, maybe 13 ,000 shares or so. to clarify that for us. But your reaction is somebody that has exposed us to that name and Elon Musk forming a political party, how do you react? Well, very quickly. So Simplify has a 2x levered variant of the Tesla fund that provides access to that.

31:15It is a very small fund. As an investor in Tesla, however, I would argue that this is not so much a choice that he has, but almost an inevitability at this point. He has managed, Tesla is very closely as is SpaceX and related businesses from Elon Musk. They're very heavily tied into the political allocation machine, whether that is the Department of Defense and NASA through SpaceX, whether that is through the environmental credits associated with Tesla and solar. You know, this is a business that is deeply tied into the political framework. And at the end of the day, unfortunately, Elon Musk has now managed to basically alienate both Democrats and Republicans, Democrats by aligning with Trump initially and the anti-woke movement.

32:02And now, of course, Republicans by breaking with Donald Trump and launching the American Party. I've drawn the analogy that this is much more like William Randolph Hearst than any form of traditional technologist. He's largely known at this point for his political and communications empire in the form of Twitter, the town square. You know, that really seems to be setting the tone here, whether he is establishing. As opposed to being the key inventor or the technical brain himself, right? Like the thing that we always go back to is that in many annual regulatory filings, in the boilerplate, they'll put Elon Musk is essential to this company.

32:44And if anything were to happen to him, that would be to Tesla's detriment. But as I know, I've reported a lot on it, right? There are many talented and influential and impactful people at that company. Even so, there is an element of key man risk from Tesla's own perspective. It's in the filings. Yeah, at the end of the day, the Tesla buyer is suffering from their car being keyed in a parking lot, not because of the technologist, but because of the chief executive officer and leader of the company. That is clearly a risk, both from a management standpoint and a talent acquisition standpoint. He is a transformative figure to many in the technology space who dared to actually build stuff in a technology world that was largely focused around consumer apps.

33:29But he is not the inventor. He is not the key technologist. What he is is the key spokesperson. And so the underlying behavior that is occurring here, it's not entirely clear that he has a choice to back away from the political sphere given the exposure that his businesses have. whether this is reckless or not is ultimately going to be determined by the history books. We can't really know the influence, but with a deeply divided electorate, the threat of a third party does have the potential to disrupt elections, primarily hurting Republicans much more than it would likely hurt Democrats. This is a global company as well.

34:05And Michael, we've seen the impact in Europe that Musk's political affiliations have had. You then think about China, where real growth engine for them, but maybe China starts to look at the lessening in political weight that Elon has had with the administration, backs away there, and then you've got competition. Do you remain as exposed to this name, as little as it is? Well, ultimately, we have a fund that is dedicated to Tesla. So we will buy that just based on whether shareholders want exposure to that name or not through that fund. But at the end of the day, this is a business that for the very first time in history is actually looking at the potential for a sales decline.

34:43It has had extraordinary success in a few models. The Model Y was obviously a huge runaway success. But it has an aging product mix. It has significant new competition, particularly from Chinese companies coming in. And this is, of course, creating conditions under which the business itself is very much under threat. It has always been a bit of a mystery from a valuation standpoint. And so it's very hard to create a compelling argument for why you should be aggressively buying Tesla now, other than the desire to gain exposure to a very high volatility, high beta name, which has been one of the key characteristics that have attracted people to it over time.

35:23Yeah, Michael, give us the signal that you're getting from those that have wanted to get into your fund, that have wanted the exposure to the volatility or to the mystery around Elon Musk in and of itself. Is that waned in any way in the current political environment? We haven't really seen it wane in any meaningful way, but the reality is that most of these levered ETFs are simply offering investors a tool to access lower cost leverage than they could obtain through a margin account. You can get a 2x levered exposure at a fraction of the cost once you factor in management fees and the cost of the leverage that can be obtained in the institutional space.

35:58It's much less expensive than trying to obtain that through margin or through options. And so the argument is very compelling. If you want that levered exposure, the question is ultimately, do you want levered exposure to a business that really has gone somewhat ex-growth and is now looking at a situation in which those political liabilities, both in China, where it's perceived as an American company at a time period where that's probably not particularly attractive, Europe, similar phenomenon, and as I mentioned, And growing competition in the United States, as well as the political headwinds, make this a very challenging environment for Elon Musk.

36:35Fascinating conversation. Michael Green of Simplify Asset Management. Appreciate your time today. Now coming up, more crackdown on chips as the U.S. Well, we're looking at the White House saying to prepare more chip curbs in an effort to combat smuggling into China. More on that next. This is Bloomberg Tech.

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38:24And so it may come as no surprise that there are seemingly no limits to what we will do to get a good night's sleep. People are spending on everything from pricey sleep trackers, AI-powered scent therapy machines, to$3 ,000 body temperature-regulating Manosphere-endorsed mattress covers, and couples outfitting totally separate bedrooms. As Bloomberg's Dina Shanker reports, it all adds up to a sleep support industry that's a$300 million business, with growth coming from functional beverages and sleep powders, even as some experts warn that these products may not be effective and can even be harmful.

39:00Despite the spend, 6 out of 10 American adults still don't get the 7 to 9 hours of sleep the credible science says we need. As for experts, they recommend making lifestyle changes, such as getting sunlight and limiting screen time to improve sleep. That's the Bloomberg Tech Minute, brought to you by ChatGPT. Put ChatGPT to work on your most ambitious ideas and projects. Get started at ChatGPT.com today by selecting Work Mode, available on Plus and Pro Plans. Let's talk about health care for a second. It doesn't always work the way people expect it to. If you've ever waited on a prescription refill or had a hard time getting the care you needed, you know the feeling.

39:41The system should just work better for everyone. That's exactly what the people at Optum are trying to do every day. They're a health care company linking patient care and pharmacy services and using data and technology to drive the whole system. So care is connected, not complicated for patients and providers. Things like making it easier to get care that looks at the whole person, from primary care doctors to mental health support and even in-home care, and then using technology to make sure they all work together. Technology designed to help doctors spend less time on busy work and more time with their patients.

40:14And those prescriptions? Optum is working to bring costs down, save patients money, and make it easier to get refills. Little by little, Optum is helping make healthcare work as one for everyone. Head to business.optum.com to see how.

40:56through a backdoor third party into China. What do we know? Well, what we're hearing from the Commerce Department is that we may be seeing a move soon to try to limit sales. It will require companies based in Malaysia or Thailand to obtain licenses to buy these advanced AI chips. Pretty much when you think about it, it is NVIDIA and also AMD that makes the most advanced out there used for artificial intelligence purposes. And the idea is to prevent those buyers in Malaysia and Thailand from diverting chips possibly to Thailand and to China. And the concern that the U.S. has articulated over and over again, and it's not just the current administration, but the prior administration too, was that other countries could be, through their prior relationships with China, a source of chips that China right now is prohibited from buying.

41:53The U.S. has imposed restriction after restriction since the early part of the 2020s aimed at keeping these advanced chips from China to slow its position in the race to dominate artificial intelligence. Now, what is unclear is where this rule is. It's still in the draft stages. Things could still change. And it's important to note that Secretary of State Marco Rubio is heading to the region. He'll be in Kuala Lumpur later this week for a regional meeting of foreign policy chiefs from various countries in the area. They obviously have a lot at stake when it comes to the tariffs that the Trump administration is preparing to unleash on so many of those countries, not just Malaysia and Thailand, but so many others in the region.

42:41But they're also going to be concerned as well about export controls. This step is also considered another glimpse of what would replace what the Biden administration had unveiled in its final days before leaving office, the so-called AI diffusion rule that restricted countries' access on a three-tiered basis. But it was an approach that many in the industry and many allies around the world had viewed as cumbersome and perhaps unfair to them. Well said, Mike Shepard. Appreciate the update. Look, let's get an investor perspective on those potential chip curbs and more broadly. Beth Kindig is with us, IO fund lead, technology analyst.

43:20So despite all of this and the clear narrative that U.S. wants to restrict access to technology to China, we still have Jensen Huang actually wanting to sell into China more long term. Beth, is that a fool's dream? Yeah, I think there are two sides to this. From NVIDIA's perspective, they don't want to lose that revenue. This is a massive country. But what the United States government is really communicating is that the technology has too far reaching implications for this to really be about like the next consumer app, the next enterprise app. This is really a matter of national security. From an investor standpoint, I love that demand signal.

44:00I love the signal that the United States government is doing everything they can to control this technology. I don't have demand concerns. I think this is bullish regardless of if NVIDIA sells into China or not. What about supply concerns, therefore, and whether or not we're able to bring the manufacturing and the expertise into the United States so that we're not so dependent to be able to make such sophisticated technology abroad? I think a lot of this is hitting the news wires now and has been over, let's just say, the last six months. But the United States has been preparing for this for years.

44:37We know that because Taiwan Semiconductor has built this fab in Arizona. This is not an overnight project. It's been going on for years as someone who's tracked AI for many, many years. Therefore, I think we are more prepared than what might be assumed right now to onshore and to keep those supply chains fairly domestic. Beth, we saw shares in Malaysia and Thailand drop overnight in those respective fields, data center, chips. But many of the sell side notes point out that actually those most exposed to this potential initiative are American companies. Which American companies do you worry about?

45:16I will be quite bold and tell you I'm not too worried about this. I think if there was ever a technology that has this outsized demand and it goes back to, is it going to be 500 billion? Is it going to be 700 billion in AI chip sales by the time we end this decade? Maybe even higher. And I have very little concern over what China impact would be specifically on this technology. It is not a consumer technology. Consumer technologies, your Tesla, your Apple, they badly need China's population. This is not a consumer technology. It's primarily enterprise. And then, of course, you have sovereign AI at the government level.

46:01We really do not need China the way we did on the consumer side. with those other technologies. Beth, you mentioned one demand signal. I follow you on social. Which other hard and soft data sets are you tracking right now to give you your demand signals that inform your thesis? What we probably track most closely is really those generation of GPUs, that product roadmap by NVIDIA. And then of course, within that supply chain, there are many partners that will give you early signals. What I'm hearing and what I'm seeing is we will close this year with NVIDIA on top again, zero demand issues again.

46:412023 and 2024 combined is what we have for H2 of 2025. That is a very big statement, and it's so far so good. Greenlight. Greenlight, NVIDIA, stay with it, Beth. It's interesting that maybe we think about an Oracle and its exposure to trying to build out its cloud offering over in Malaysia, for example, and maybe that has to be thought through a little bit more and politically negotiated if there are limitations to access to the GPUs that it needs over there. Who are the other names that you do like? Is it all just about NVIDIA as a one-stop shop, or can you broaden it out? I'm still loving hardware quite a bit.

47:20When we look at NVIDIA, there are companies sandwiched between that custom silicon, which is going to see a resurgence off inference, and one stock that's in between NVIDIA and something like Amazon's Tranium is Astera Labs. Beth Kendig of IO Fund, great to have you back on Bloomberg Tech. Thank you very much.

47:45I believe you've now hit a point. I think the board's going to have to get involved because this is now over. I think there's a lie in the sand that he's now starting to cross and that's the frustration. There's someone who's a huge supporter of Tesla, Autonomous, the golden age ahead. You cannot kind of go down this path. That was Wedbush analyst Dan Ives there earlier today, weighing in on Musk's political aspirations. And here's what Jed Dorsheimer from William Blair had to say as well. With Elon, it's a little bit of a double-edged sword where, you know, I would argue what people are paying for is his ability to innovate.

48:25Elon Musk is one of the great innovators of our modern day. So taking him out, does the board really, would they really want that? And I think, you know, when you kind of ask that difficult question, I just don't see them stepping in at this stage. Bloomberg's Craig Jadel is here to unpack the impact of the news on Tesla shares. We've got the sell side reaction in those sound bites, but investor sentiment mirrors that as well. Yeah, I think that's right. You know, I think Musk may have had a point when he told us back in May that, you know, for every person on the political left that he was turning off with his actions in Washington, he was, you know, perhaps opening some doors for Tesla on the political right.

49:11Now he's potentially getting himself on the wrong side of the GOP and on the wrong side of President Trump. And, you know, I think there's probably a fair number of consumers, too, who would just say altogether, you know, I'd rather not have my car sort of be wrapped up in the politics of the world's richest person and, you know, have what I drive sort of send some political signal altogether. That's not, you know, a reason necessarily for people to go out and buy your car. And there haven't been. We saw the sales down 13 percent in the previous quarter, Craig. We're also seeing the impact on the stock.

49:49We're down another$71 billion in terms of market cap today. We're not actually at the depths that we saw in the previous feud at the beginning of June. What does that tell us? Yeah, I mean, I think this is still a stock that is pretty richly valued and maybe has some value ascribed to it left over from, Even if we think back to just where the shares were trading before Trump won the election, the stock is still up from those levels. And so, you know, are we going to see investors continue to rethink and sort of reevaluate whether this company has a better shot with an Elon Musk who has gone from, you know, maybe being well positioned with the White House to now not being well positioned at all and perhaps even becoming something of a foe for President Trump?

50:46Craig, I wrote to Tesla's board this morning through the avenues that are available to me. I wrote to Elon. As you know, I regularly ask him to come on the program. Do we have any sense of the Tesla response at all? And if the answer is no, I think that's okay because it's pretty standard. Yeah. I mean, I think this is a board that has been pretty, you know, mums the word over the years and really has only piped up in very rare circumstances. I think, you know it's it's going to be interesting in the months to come you know what exactly this board has planned for for a compensation package for musk we know that uh tesla disclosed earlier this year that it had set up a special committee uh for compensation related matters and you know so not only is there this question of you know just how much the the board wants him around but also how are they going to keep him around craig drudell we appreciate it from london and that does it for this edition of Bloomberg TechEd.

51:44Yeah, don't forget to check out the podcast. You know where to find it. It's on the Bloomberg Terminal, as well as online on Apple, Spotify, and on iHeart. From New York City and San Francisco, this is Bloomberg Tech.

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