Elon Musk Weighs In… And Fed Survey Results 5/20/25

0:02Live from the Nasdaq market site in the heart of New York City's Times Square, this is Fast Money. Here's what's on tap tonight. A Tesla turnaround. Shares hitting a three-month high as CEO Elon Musk sits down with their own David Faber. All the headlines from that exclusive interview coming up. Plus, losing ground. Alphabet shares falling into the red as its Google I.O. conference kicks off. Why investors weren't so excited about the company's place in the AI race. And Toll Brothers and Palo Alto on the move after their latest earnings reports. Pfizer inks an up to$6 billion deal in the cancer space.

0:32We're counting down to target earnings? Will the company hit the bullseye or will it be a miss for the retail giant? I'm Melissa Lee. Come to you live from Studio B at the NASDAQ. On the desk tonight, Bono and Eisen, Dan Nathan, Guy Adami and Julie Beal. We'll get to Alphabet's AI ambitions in just a moment, but we start off with all the biggest headlines from Elon Musk's big day. The polarizing Tesla CEO saying in just the last hour he believes the company's optimist robots will be the biggest product ever. Speaking with our David Faber not once but twice today about everything from Tesla's robo-taxi rollout and competition in China to the progress Doge is making in Washington.

1:07Musk also saying earlier today he's committed to remain CEO of the EV maker for the next five years. Our Phil Lebeau has even more on Musk and Tesla's stock reaction. Phil. Melissa, let's start first off with the comments he made regarding the robo-taxi development and the service that the company plans to launch starting next month. And he gave us a timeline for the robo-taxi. Now, this is not new, but it is a little more detailed in terms of what's going to happen here. He did confirm that the Austin, Texas launch next month is on schedule. Small number of cars. They're going to start maybe in 10, 15, 20 range and then ramp from there in a geo-fenced service area within Austin.

1:46And these vehicles, while they will not have a driver in the vehicle, they will be monitored by remote drivers. Here's Musk talking with our David Faber. We'll start with probably 10 for a week, then increase it to 20, 30, 40. And I think by, say, you know, we'll probably be at a thousand within a few months. And then we'll expand to other cities, expand to San Francisco, California, Los Angeles, Is that a real possibility in the not too distant future? I mean, Texas is very different, I don't need to tell you, than California when it comes to regulation. We'll see what happens as the rollout develops over the next year, year and a half here.

2:33Elon Musk once again reiterated that he sees the potential for Tesla vehicle owners who have the full self-driving, unsupervised full self-driving technology within their vehicles to add those vehicles. And perhaps your own personal vehicle could be part of the Tesla robo taxi network. But he stressed time and again, they are going to go slow in launching this robo taxi network. We're going to be extremely paranoid about the deployment as we should be. It would be foolish not to be. So we'll be watching what the cars are doing very carefully. And as we find, as confidence grows, you know, less of that will be needed.

3:17One last thing. We're going to show you Tesla versus BYD over the last year. And why are we showing you this. David Faber asked him point blank, what about the competition in China? What about BYD? You know what he said, Melissa? I don't watch the competitors. I don't know. You can make your own mind up about whether or not you believe he doesn't watch the competitors because they're certainly watching him and they will be watching him as they launch the robo taxi service starting next month in Austin. Melissa? If he doesn't, maybe he should. Phil, he also made comments suggesting that Tesla sales are rebounding, which I would have thought would have been better for the stock.

3:55Yes, but increasingly, Melissa, it seems like the sales of Tesla vehicles, while they may have an impact when they're starting to slow down, as they did earlier this year, especially around when sales are reported, if they're way below expectations, we do see it hit the stock. But increasingly, this is a stock that is moving on the optimism that Elon Musk has when it comes to autonomous vehicle technology and the humanoid robots. Those two things, which he has pounded time and again for the last nine months, that's what's driving the stock, Melissa. So, yes, sales may be improving, but the traditional business, auto business within Tesla of selling vehicles to people like you and me, that is not driving the stock as much as it once did.

4:40All right. Phil, thanks. Phil LeBeau. You bet. And when Phil's talking about driving the stock, the stock is up more than 40 percent since it reported earnings April 22nd here. So what do you make of these comments of the interview? I mean, it was an unprecedented two-part interview here. David does a great job. I mean, a lot to glean from that without question. There's a lot of hopium, as Dan will tell you. Self-driving is the way. I mean, their head of self-driving basically said, I think it was earlier this month, that Waymo is a couple years ahead of them. So there clearly is competition. But break down the stock from here.

5:10Made an all-time high close to$500 earlier this year for a lot of different reasons. Traded down to that sort of 220 level, which we collectively said was support before, should be support again. This bounce that you've seen, and you just mentioned it's a big one, is about a 50 % retracement of that entire move. It makes sense that we're here. The question is, do you continue to own the stock on the optimism, or do you trade around the edges, which has been an opportunity for the last few years? Yeah, so what's interesting, you asked, is it driving the stock? When you look at Waymo, they probably have 700 cars out there in four different cities right now.

5:44They work pretty well. I've been in them. It's a pretty interesting experience. It takes up to four people in those cars. In the Google or Alphabet's other bets last year, they lost about$2 billion, right? So this takes me back to Tesla back in the day. The Model S and the Model X were meant to fund what's going on in the lower end, which is the Model 3 and the Model Y. Now, those cars have done really well. I think it's a really low percentage of the cars that they make right now are those higher end ones. So if you think about all the losses that Alphabet has just to put Waymo on the streets until you get some level of scale, these things are not scaling.

6:21Even the Waymo is not scaling. So when you think about what's going on, they're going to launch 10, maybe 20 of these robo taxis or cyber cabs. They're two seat cars, which is kind of, you know, it doesn't make a lot of sense. They're two seat cars. And so at the end of the day, if Tesla is going to make these things, then that means that they have to own the fleet. And that's something that we learned this from Uber over the last 10 years or so. Nobody wants to own the fleet. If you want to talk about losses until something scales, that's the thing. And one last point, when you look at earnings for Tesla, they're expected to do$4 in 2027.

6:55They did$4.07 back in 2022. So you've got to figure out how to pay for this thing. So if the stock is up 40 percent right now, it's got over a trillion dollar market cap. I just don't see how it grows into that because Optimus is years away. Yeah, I don't really think there's much debate over whether or not, you know, the stock is trading a bit dislocated from the actual automotive business. I mean, if you look at the last quarter's numbers, you had a 20 percent decline in revenue and 71 percent decline in net income. So clearly that coupled with the 40 percent rally, you see some dislocation there.

7:27That doesn't really seem to make a lot of sense. With that said, and Dan makes a good point, if you talk about the fleet, you typically don't see these type of multiples on very highly capital-intensive businesses. It just kind of erodes gross margin. You have deferred maintenance. You have capex. You have all these things that you have to – an inflated cost basis that makes it very tough to support that type of multiple. With that said, I clearly think the bulls are all about humanoid robots, full self-driving, and you really have to get behind that story if you're going to own the stock, particularly at this level.

7:58It has never traded with an auto multiple. It has never traded on sales. It has never traded on all these things that you guys are talking about. It's always traded on hope. Adam Jonas and Morgan Stanley makes an interesting point. He says most of the valuation of Tesla is based on products that have no disclosure, little disclosure, or far from commercialization. And it has always been the case for Tesla's valuation that that has made up the bulk of the valuation. Julie Beal, I know you can't get on board with Tesla, but can you see why others might? No, not at all. I think the real thing is that it's all kind of hopes and dreams.

8:40Remember, the very first time we talked about robo-taxis was in 2019, and Elon was promising one million robo-taxis by 2020. So I think the credibility gap with the proclamations that we're expecting has always been very wide. There's never really been an ability to deliver. And I think if you look at what the Cybertruck really means, it's an inability to recognize product market fit. And I think it's the same with having a two-seater for your robot. You're really building off of what you think is kind of cool and great, but I really don't have conviction that it's what the market is looking for.

9:17And I think that's really what's going to hinder the stock and earnings, although it doesn't seem to really matter in terms of the stock multiple. But I do think at a fundamental level, there's really not enough here to justify anywhere near this level of valuation. Yeah, I think everything Julie just said makes a lot of sense here. And I just I'll guess this right here. I think they'll buy X and XAI. They won't. Well, I mean, he says a lot of things. And you know what I mean? But but think about it. If the autos don't really rebound, they're expected to do one point eight million units this year.

9:48I think some have estimates down at one point six million. You're going to have to say, don't look here, look there, especially if RoboTaxi doesn't scale because Optimus is years away. But you make the point how disconnected it is. That's fine. A lot of people have made a lot of money doing it. But you better believe that all this stuff that Cathie Wood believes that Ron Barron Lee, you know what I mean? because we've never seen a stock like this in the history of stocks. Like, think about it. How many trillion-dollar market cap companies are there? There's probably seven. This is one of them.

10:18The others trade on fundamentals. This one does it. I don't know why it's special. You know, you mentioned Ron Barron. I mean, he is convicted in a major way. We had the futurist from the ARK Innovation, ARK Invest, I think, the day of earnings. You know, he said, I mean, I'm paraphrasing to a point, but, you know, the auto business is sort of a lost leader, and you're not focused on the right things. I mean, there are people out there, and they might wind up being right, that think Tesla, forget about a trillion-dollar company, could be the first$10 trillion company. And a lot of people, a lot smarter than I, believe that.

10:48Not a high bar, I know, but there is the other side of that coin. Well, if you missed any part of David Faber's interview with Elon Musk, you can catch the full conversation 7 p.m. Eastern time right here on CNBC. Well, another MAG7 name-making headlines today, that would be Alphabet. The stock turning sharply lower as it kicked off its Google I.O. developer conference today. The company also just releasing new Waymo trip numbers. CNBC's Deidre Bosa has got all the details of moving the stock. Deebo. Hey, Mel. So Google, it showed off advanced AI capabilities and features, but what it didn't do was answer the biggest question and really the biggest dilemma around its business right now.

11:22Is this an evolution of search or is it a replacement? And so the implications of a new landscape on Google's cash cow advertising still not clear. Despite today's move, Alphabet shares they have climbed back from the EDIQ comments a few weeks ago about declining Safari search volumes and viable alternatives to search. And underneath the surface, Google is catching up as it focuses on adoption, but it really needed to tell a narrative today. Now, one area where Google is the clear leader is its subsidiary Waymo, driverless cars. Waymo has just surpassed 10 million fully driverless paid rides, doubling its lifetime total in just the last five months.

12:01The Alphabet unit, it hit 5 million rides at the end of last year. And trajectory is set to accelerate as it expands to new cities like Atlanta and Miami. This is a major milestone for the robo-taxi race. I know you guys were just talking about it. It's also a direct challenge to Tesla out of its own autonomy push. I spoke exclusively to Waymo's co-co, Takedra Mawakana, who said that Waymo's approach is about replacing the driver entirely, not just assisting them. So guys, as you talk about Tesla and the robo-taxi trade, it is so notable that Waymo is that 10 million paid driverless rides, which is just a massive milestone considering that Tesla is going to be putting 10 to 15 out on the road.

12:41Yeah, a very timely update on the Waymo business. Deirdre, I'm curious in terms of the AI mode, do they speak exclusively about how they're going to experiment putting in ads? It sounded like they were considering putting ads in, but they haven't reached the point where they will. Yeah, so the key word, as you said, Mel, is experimentation, right? There's AI mode, which is now going to be a tab. There's AI overviews, and then you've got Gemini. The way that they're incorporating AI into search is exactly how they can figure out how to experiment with ads. And they say that they're actually seeing more engagement in AI mode and AI overview.

13:19So that should lead to monetization that should keep up with sort of the old search 10 blue links business model. But we'll have to see if that's the case, right? Because we know that OpenAI perplexity and others are working on their own ad models and, you know, experimenting as well in very different ways. I guess the question is whether or not this AI mode will actually replace traditional search and whether it can monetize fast enough in order to make up for the lost business on traditional search. I mean, that's the$10 ,000 question, Exactly. And Google's kind of been straddling both, right?

13:51They're not going all in on Gemini. They're having AI mode, so they're having their cake and eat it, too. And some might question whether if you don't take a risk on one, do you risk losing it all? Yep. Deidre, thank you. Deidre Bosa from the Google conference. So is it competitive with some of the smaller upstarts out there? I mean, you've used all of them. Flexi, ChatGPT, blah, blah, blah, et cetera. Deirdre had a great interview last week of Dmitry Shevlenko. He is the chief business officer at Perplexity. And they are going to be releasing a browser soon. So is OpenAI. And I think that's going to be a huge headwind for Google because a lot of people use Chrome.

14:27Most of the people use Chrome as a browser. That's the only time I am doing Google searches when I have my browser up right now. I use Perplexity all the time. And I'm going to continue to do that. So once the browser comes out, I think it's going to be a huge headwind for Google. But I get it. It's probably years off. And I am actually really excited about Waymo. I think you're going to keep seeing investments into that product, which will. And this goes for Tesla, too, by the way. They don't have a hard time raising money. So if you have private equity or some of these other folks come in and actually fund the expansion of these things, that will be, I think, a big positive for both of those guys.

15:03All right. For more on Alphabet's newest AI announcements, let's bring Fast Money Friend and Deepwater Asset Management Managing Partner Gene Munster. Gene, always good to get your take on things. What do you make of Google's AI advancements? I don't know if you want to call it advancements at this point. Melissa, we actually, I think we learned a fair amount today. And we learned first that the landscape's changing more fast than what they had expected. They're opening comments around search. They said it's been a profound change over the past year. Second, we learned that their answer is AI mode.

15:40And basically what AI mode is, think of it as AI overviews or just a generative search result that has ads wrapped around it. So it's not the peer kind of GPT simple answer. And then the third piece that we learned was that Google's not willing to rip the band-aid off. And not that they should, given that they've got 2.2 billion people that use search 20 plus times a day. I mean, just huge muscle memory there. But that's something that really stuck out. And I think that's what investors were hoping was that they would be a little bit more aggressive. Effectively, what Google is telling those users that really haven't got the bug related to generative AI yet is just trust us.

16:25We're going to have a great experience. No need to look over here. My sense is that over time people would just still find their way to these more simplified results. But I think we learned a lot, and we learned that Google understands there's a lot at stake here. Gene, obviously your take is extraordinarily important, but, you know, Ben writes, I think it was the end of March or early April, and I don't think he made this comparison likely, but he sort of compared, he didn't sort of, he compared Google with Eastman Kodak, which, again, he obviously thought about that. Thoughts on the potential for them to become as irrelevant as Kodak did seemingly overnight?

17:01So my version of that isn't quite as harsh. It's that they're the next eBay. And I don't know how long it took Eastman Kodak to wind down, but I was recently looking at how long it took Netflix for their DVD business. And by the way, we recently had a conversation about Outerbox. same thing, Redbox, is that it took 16 years from the time that Netflix announced that they were going to effectively focus on the, in 2007, on the streaming business, they shut it down in 2022 or 2023. So what does that tell us as we think about that Eastman Kodak or that eBay, is that this is going to take a long time.

17:42And despite the fact that things are moving at a profound speed. And I'm a person who I just quick jump forward one, two, five years and kind of think down there. And the reality is, is that Google is going to have a good search quarter between here and there and the stock's going to skyrocket. And then it's going to kind of drift back down until they really answer that question, a true offering that competes with these other generative, very simple answers. I think that's ultimately what they need. Well, are they moving fast enough to answer that question, Gene? Because I think, I mean, if the stock is going to be caught in a range because of that the lack of an answer to that question then it's it's i don't know it's not a holding that you hold and and you said and forget it kind of thing definitely don't hold and forget it and they've got time here i mean again muscle memory 20 times a day 2.2 billion people use their product i mean that is just unprecedented and that gives them room to figure this stuff out.

18:37And those people, like we obsess about this, but the average person just likes Google and they find ways to use it. They don't want the Band-Aid to get ripped off. And so I think that they do have time. And right now, my sense as an investor, I don't have time for this. We don't own the stock anymore. But I think that for as we kind of move forward, they're going to still have good pockets here that investors are going to say it's not happening as fast as we thought it will be. And so you just kind of have this bumpy road down. Definitely don't want to rule them out. I mean, make no mistake, they got an incredible brand, but they probably need to, they do need to innovate beyond what they're showing with AI mode.

19:14But I'm curious though, because as they continue to push AI mode and AI tabs to the average, you know, Google search person, and let's say more and more people use those tabs, but they're not monetizing they can have a good search quarter but advertising wise it might not be a good quarter well they will the the basically why they did ai mode is because they still have search shots on net i mean it it will show you a generative result but at least i watched the demo twice there's there's paid there's basically paid links on the bottom and the side and so you can what's unique is you can keep going down a thread which you really can't do with ai overviews today It doesn't allow you to keep going down there.

19:57So that's something that definitely is better. But to answer your question, I mean, they promoted this 10 percent increase in search and there's more usage. And that's just shots on that. So that's how they can kind of keep moving along here is that as more people do it, they can they can capture those blue links. Jean, thanks. Always good to get your take. Thank you. Jean Munster, Deepwater Asset Management. Julie Veal, how are you feeling about Alphabet? that? I just think they're in such a difficult position. You know, if you think about how much they're going to have to do, how much they have to overcome, people have already decided it feels like the chat GPT is the winner.

20:33There are inroads for them. I think if they can really make inroads in terms of getting into the iOS system so that it's not just chat GPT, but they have a shot there, I think there's opportunity for them. The thing is, is that, you know, if you think about the internet writ large, right, we made a decision at the very beginning that the way we were going to of fund all of it was through advertising. And advertising is its own form of cocaine for, you know, capital markets. It's what's kind of supported Netflix through its last transition. And I think like what's really difficult is what we're trying to do, it feels like with a lot of these AI models is do freemium or subscription models, because you get a better multiple on those for sure.

21:11And I just think that they are really trying to sit in the chasm of being able to have it all, they really are going to have to commit one way or the other. I agree there's a lot of inertia for most people. But for investors who are really seeing what's out on the horizon, it's just not good enough. You know, I'm of the opinion, I think DeepSea kind of informed us all that I'm of the opinion that they have to get it right, but they don't necessarily have to get it right right now. And I don't believe that search is going away. For me, they really need to be able to produce a premium offering. And as we start to see inference and innovation over time, the lapse between being able to come up with something and bring it to market, that time is going to shrink.

21:49So I'm still of the opinion that they can continue to use ads to fund that business and that growth model. So, yes, I think investors are a bit uneasy that they don't have a solution right now. But I'm a bit hesitant to kind of pull the ripcord because they don't have an answer yet, being that we've seen how quickly a new innovation can come to market. Coming up to last week's trade talks with China moved the needle on recession odds. The latest results from CNBC's Flash Fed survey is coming up. But first, shares of Toll Brothers and Palo Alto networks both on the move after reporting results, details and numbers from the quarters.

22:21Next, don't go anywhere. Fast Money is back in two.

22:32Welcome back. We've got a news alert on the FAA and the issues at Newark Airport. Phil LeBeau is back with the details. Phil. Melissa, after meeting with the airlines last week and after saying on Friday that it planned to make a proposal for 28 arrivals and departures per day at Newark, and then 34 after June 14th per day. That's what the FAA has just instituted, announcing just a few minutes ago that until June 15th, when one of the runways under construction, most of that work will be finished, it'll be 28 departures and arrivals per day out of Newark. And then after June 15th until October 25th, it'll be 34 departures and arrivals per day.

23:12So the schedule has been reduced officially by the FAA at Newark International Airport. Melissa, back to you. All right, Phil, thanks. Bill LeBeau. Meantime, we've got an earnings alert on Toll Brothers. Shares of the luxury home builder jumping on an earnings and revenue beat. Toll also reaffirming its full year guidance. Same week's Diana Oleg has got all the details. Diana. Beat on the top and bottom lines. Toll's adjusted gross margin came in at 27.5%, in line with expectations slightly higher. Home deliveries were up 10 percent year over year, well above expectations, and the average price of those homes was$933 ,700.

23:48That was below estimates of$954 ,200. Toll's CEO, Doug Yearley, noted a softer demand environment in the release, part of that likely due to rising mortgage rates during the quarter and the big swings in the stock market after the tariff announcement in early April. But he added that given the shortage of housing and favorable demographics, we continue to believe the long-term outlook for the new home market remains positive, particularly for our luxury niche. And this goes along with what we've been seeing in the overall market, which is much more activity on the higher end where buyers are not so sensitive to mortgage rates.