Will Trump Fire Powell? ASML Sinks on Tariff Fears & An Interview with Windsurf CEO Jeff Wang

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1:36Like tea time you. Mmm. Or this tea time you. Or even this tea time you. So did you hear about Dave? Or even tea time, tea time, tea time you. Mmm. So update on Dave. It's up to you. We'll take the laundry. Rinse. It's time to be great. Today's number? 211. That's how many Republicans voted not to release the Epstein files. According to Representative Virginia Fox, most people believe the president will release the files when it's, quote, time to release them. We weren't so sure of that claim. However, we retract our doubts as the statement was later fact-checked and verified by the Center for Little St.

2:19James.

2:22Money market's bad. If money is evil, then that building is hell. The show goes on!

2:32Welcome to Prof G Markets. I'm Ed Elson. It is July 17th. Let's check in on yesterday's market vitals. The major indices whipsawed as Trump's beef with Powell roiled the markets. We'll talk more about that in a second. Still, the Nasdaq managed to hit its third straight record close. Meanwhile, the dollar failed to recover from the drama, ending the day lower and giving up its four-day winning streak. Johnson & Johnson stock rose 6 % after the company posted better than expected second quarter earnings and tempered its outlook for tariff impacts. And finally, Bitcoin climbed on renewed optimism for the crypto legislation we've been following, even as the bill stalled again in the House.

3:12Okay, what else is happening? Trump to fire Jerome Powell, or will he? That is the question that seesawed the markets yesterday. Late Wednesday morning, news broke that Trump had drafted a letter to fire Jerome Powell and had shown it off to lawmakers. Meanwhile, a White House official said Jerome Powell was likely to get fired. Markets fell very sharply on that news until right after that, Trump held a press conference where he told reporters no, he wouldn't fire Jerome Powell. The president said, quote, we're not planning on doing anything. I don't rule out anything, but I think it's highly unlikely.

3:52Markets immediately rebounded after Trump denied those firing rumors. So, more drama between Jerome Powell and the president. More drama that, unfortunately, we have to cover because of the implications it has on the markets. This is lowbrow, tabloid, Daily Mail gossip-type news. However, it is happening inside of the White House and it involves the chair of the Federal Reserve and the president of the United States. So yeah, we have to talk about it, even if it is, in essence, not really any different from beef between Drake and Kendrick or name your celebrity gossip drama. This is just the world we live in.

4:39So we're going to bring in Scott because we want to see what he makes of this news.

4:47Scott, where are you? I am in Colorado, which is my self-conscious way of saying Aspen. I'm in Colorado. You're out west. I'm out west. My boys, of course, are walking ahead of me because they want nothing to do with me, because I, according to them, am the lamest person in the world, and substantially erode their riz in the town of Aspen. They're expecting to be kind of little players here. Not sure it's working. Anyways, they're walking about 20 feet ahead of me. I want to get your take on this beef between Jerome Powell and Donald Trump. What are your initial reactions? Okay, so first off, we need to stop referring to Jerome Powell's chairman Powell.

5:26He's Jerome Epstein. He's Chairman Epstein. Because this is nothing but a sophomoric yet effective attempt to get people to look away from the Epstein drama of Trump and magazine making. This is ridiculous. He does not have the authority to remove Sermon Powell. He does not have the legal standing to take away someone's citizenship because he doesn't like them. But what you're going to see is every day he's going to come up with something more and more ridiculous that grabs headlines, whether it's declaring economic war on Canada. But every day, just wait for it tomorrow. it'll be something else because he wants something that the media, which they will do, will take the bait and not talk about, see above the Epstein files.

6:17I was watching CNBC while I was working out this morning. And of course, it was the taco trade again with Powell. The markets dipped. Then they realized he couldn't fire Jerome Powell. He got a twofer the next day. He backtracked, which made more news. But again, every time he makes news, they have something to shove aside the real news here. And that is he has spent the last seven years convincing his cult to worship the sun, which is that the deep state was involved in some sort of pedophile ring on an island that would implicate a bunch of Democrats. He's encouraged these acolytes to worship the sun.

6:53And then all of a sudden I said, put on sunglasses and never look at the sun again. And they're not having it. But this is nothing but pure distraction, Ed. So does this bring more meaning to Taco then? I mean, it sounds like there is even more incentive now to create stupid headline worthy executive orders or threaten to make those executive orders, cause a lot of frenzying, get the news hopped up. And it's all basically just to distract us from the real issue, which is his involvement with a pedophile. I mean, And is this going to be, does this mean more taco? Well, 100%. And what's interesting is the market continues to fall for it, but with less volatility.

7:38So again, yesterday, the markets dipped when the prospect of the president tried to remove Chairman Powell, who has been a steady hand. And then what do you know? He backtracked because he got another chance to distract us the next day. This is the equivalent of a magician sawing a woman in half and then yelling out Benghazi, trying to focus on the fact that he's not actually signer in half, or if we were at the Nuremberg trials and somebody whipped out and started playing a kazoo. This is so ridiculous. Rosie, I mean, I'm going to revoke the citizenship of someone I hate. Oh, good. CNBC and CNN and Fox all fall for it and go there.

8:19This is a tactic from the magicians and the GRU. Flood the zone with bullshit. Get them talking about anything else other than the following. If the president had gone down to an island of a wealthy man who loved to have parties and surrounded himself with famous people and through great parties and Trump partied and he said, it was an error in judgment, I shouldn't have gone down, but he did not engage in the rape of children, America and his acolytes would accept that. He has done a lot worse. People have forgiven him for things that are much worse than that. For rape of adults, yeah. Yeah. That's right.

9:00Fair point. They forgave him for the rape of an adult. Convicted for the rape of an adult. The line is children. So chances are, if he was just down there parting and air in judgment, like a lot of very famous people have owned up to, the market and the media and his cult would have moved on. But the fact that he has clearly instructed his AG to not let this list out, it reeks of something much more, much more nefarious, much more mendacious, much more serious. So he has handled this really poorly. He is creating so much smoke around this fire. He's, it's just staggering. And my favorite is when he, going back to Jerome Powell, when he threatened to replace Jerome Powell with Mike Lindell.

9:45It's like trying to diffuse a bomb by duct taping it to your ex-wife. I mean, it's just, that's good, Ed. You like that one. You'll get it. You'll get it. It'll have more meaning if you finally put a ring on it and then it doesn't work out seven or 10 years later. You'll get that joke. This is, again, America, keep your eyes on the prize here. This is Rosie Epstein. Yes. This is Chairman Jerome Epstein. You are being played. And my prediction here, you can bet in the next 24 hours, there's going to be another stupid, insane headline grabbing. He has a comms group right now, and the instruction is simple.

10:26Come up with a headline every day that crowds out the word Epstein. Full stop. Yes. That is entirely what this administration is focused on right now. Announce a 200 % pariff against Myanmar. say that you are going to ban David Hasselhoff from all future TV shows. Whatever it is, it can be ridiculous. It can be stupid. Just make sure it doesn't have the word Epstein, and all of media just follows it like the fucking idiots they are. Too much, Ed? Too much? No, I think that's on point. We're going to have to change the name of this podcast to the Epstein podcast. We need to really keep our eyes on the prize.

11:06We need to get focused. The Epstein files with Ed Elson. I love it. Okay, Scott, enjoy your walk. Thanks for calling in. Cheers, brother.

11:21ASML shares plunged yesterday after the chip infrastructure company reported second quarter earnings. The quarter showed a strong beat on both the top and the bottom lines. The dark spot, however, was the company's growth forecast for 2026, which, according to the CEO, could not be confirmed because of, quote, increasing uncertainty driven by macroeconomic and geopolitical developments, end quote. As the call went on, it became clear that those macro concerns were indeed the tariffs, and that is why they couldn't give a growth forecast. Shares in ASML fell nearly 10%. Okay, so ASML, one of the biggest AI companies in the world, has shed a tenth of its value in one day, one of the biggest drops of the week.

12:09And not because of the earnings, the earnings were actually pretty great, but because of the CEO's concerns about the future, or more specifically, the macro environment, the geopolitics, the tariffs. Now, as a reminder, ASML is a Dutch company. They make the machines that make the chips that make AI. So they are, in a way, ground zero for the AI ecosystem, a great place to be right now. But as a Dutch company, it also leaves them quite exposed to the tariffs. And as you know, Trump just threatened a 30 % tariff on Europe this week, which would have major implications for ASML. America makes up a significant share of their revenue, almost 20%.

12:53So if you slap a 30 % tariff on Europe, you're going to see a huge drop-off in demand for those ASML machines that are indeed built in Europe. And so that is why yesterday on the earnings call, the CEO issued this warning. He is very worried about the tariffs and what those tariffs might do to the business. And that is also why we saw this huge sell-off, because Wall Street saw his concern, and that made them concerned too. And, you know, fair enough, 30 % tariffs would be terrible for this company. But there's also something missing here. And you might see where I'm headed with this. There is an elephant in the room that Wall Street seems to be ignoring on this news.

13:34And that is the taco trade. The belief that these tariffs are just threats and that ultimately they're not actually going to happen. In fact, that is exactly what the market told us when Trump first made those tariff threats on Europe. We barely saw a reaction from the market, both in America and in Europe. Investors said, no, we've seen this movie before. We don't believe you. So why is it that when Trump talked about tariffs, the markets shrugged, but when the CEO of this Dutch lithography company talks about tariffs, suddenly the markets buy it? How could that be? Well, to be honest, we don't have an answer here.

14:13The market appears to be contradicting itself. On the one hand, it's saying taco. And then on the other hand, it's saying, actually, no, we believe it. The tariffs are real, but only for ASML. So our conclusion here is that we might have some dislocation on our hands. And as a result, we think this is probably a buying opportunity. Because if you believe that those EU tariffs will not hold as the markets have expressed, then there is no reason you should reverse that belief just because some executive in the Netherlands got freaked out. That's just not enough evidence to change your thesis. And in fact, if you look at ASML's earnings history, this is actually a company with a long track record of under-promising and over-delivering.

14:57They are frequently quite concerned about the future. They are often expressing doubts about the macro environment. And at the same time, their earnings continue to impress every quarter. And that's exactly what we saw this quarter too. A major beat across every relevant metric from sales to margins to income. It was an excellent quarter for ASML. The only problem was that the CEO got spooked out by Trump's threats. So not investment advice, blah, blah, blah. But if you are a believer in taco, then our thesis is that ASML just got put up for sale. As of market close on Wednesday, July 16th, yesterday, it is 8 % off on ASML.

15:43And for no other reason other than the CEO is buying into the tariff drama while the rest of America isn't. And that, to us, spells buying opportunity. After the break, what's really going on behind the scenes at the AI company, Windsurf. Stay with us.

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18:27We're back with ProfG Markets. On Tuesday, we discussed the latest acquihire in Silicon Valley, Google's$2.5 billion deal to license the technology of an AI company called Windsurf and also take many of their top researchers as well as their CEO. It was a highly dramatic event in the world of technology. For one, the company had just been acquired by OpenAI, though apparently that fell through, But also, it mirrored this theme that we keep seeing in AI, and that is the ever-growing overreach of big tech. From inflection to scale and now to windsurf, big tech is paying billions to capture talent from the AI startup world to reorganize their structures and, in many cases, shut them down, all under the guise of investment.

19:16Now, there was another piece to this story that we didn't fully unpack on Tuesday. And that is right after the Google deal was announced, Windsurf was suddenly scooped up and acquired by a separate company called Cognition. And although the price was not disclosed, Cognition bought everything that was left of Windsurf, the product, the IP, the remaining employees, and the brand as a whole. A crazy twist in this already crazy story. And so we wanted to find out what happened here. Why was this AI company passed around from OpenAI to Google, and now to Cognition? And what does all of this say about the future of AI?

19:56Well, joining us now to answer those questions is Jeff Wang, the CEO of Winsurf.

20:08Jeff Wang, thank you so much for joining me on ProfG Markets. Thanks for having me back. Yeah, it's great to have you on. It's been an insane week for you, I'm sure. And I'm sure that there is a lot that you can't say, which I also want to acknowledge. But to the best of your ability, Jeff, just give us the rundown. What happened this week? Yeah, I would say I walked into the office Tuesday last week, so about a week ago from filming. I was told, hey, you're running the company now. And there's a lot of people that are also going to leave the company. and good luck. And on Friday, we have to tell everybody, right?

20:54So I had to kind of find the right people that were remaining to like continue running the company. And then Friday comes, we have to tell like 250 people the situation with the acquisition from Google. And, you know, it was really tough. I mean, there was a lot of people that probably thought it was just all over. And I had to give like a very achievable kind of goal. right um and and a lot of people honestly didn't believe it i had a lot of phone calls in fact i was on on the phone like 24 hours after the all hands just trying to find options um and then afterwards uh we talked to scott woo from cognition uh as one of the options and uh he it seemed like a perfect fit and we can get into that in a bit um but after that was a lot of just getting this done before monday because like time was our enemy here uh customers were already confused.

21:48A lot of reps were panicking. Recruiters were reaching out to everybody in the company. So we can go into a little more detail. But on Monday, we announced that Cognition had acquired Windsurf. And we literally signed the paper 30 minutes before the all hands. Like we were just at the last minute and got the definitive agreement. And I'm pleased to say that today it is officially all done. Yeah, let me just tell you like the way that we see it, this whole, all the events that unfolded, we kind of see it as there is this power struggle among big tech, basically to capture the best AI startups and do that without triggering antitrust enforcement.

22:30And our view is that you guys, Windsurf, you were the object of that power struggle this week, from OpenAI trying to acquire you and then OpenAI disagreeing with Microsoft about the rights to your IP, and then Google coming in, paying two and a half billion dollars to essentially take a bunch of your people. And it was all this sort of Shakespearean drama between the big tech giants to capture AI, not be scrutinized by the FTC. And then it ended with this kind of rabbit out of the hat masterstroke agreement that you appear to have brokered, which has allowed Windsurf to find a real home and a real backer in cognition.

23:16That's sort of the way we've seen this. So is there anything in there that you would disagree with, that you would maybe amend, or anything in there that you would want to comment on? I think one way to look at it is if you look at a startup, how valuable kind of the components are, right? And if you over-index on the founders, maybe the founders are the most valuable piece of the startup. And if you look at VCs, that's certainly what they index on. Then you can imagine a lot of big tech is going to go after the founders. But I think people forget that the other components are also very valuable too.

23:52And if you have a team that is this good at what they do and the product is actually still there, we own everything still, we own the trademark, the IP and everything, the customer base, it's still there. It's still very valuable. And then now you've kind of taken away all the investors and the founders off the cap table. Yeah. Actually, it's a very interesting case study of like, this is like now an employee-owned company. And you could even think about like, okay, if the investors or big tech over-indexes on the founders, even the remainder of the company, everybody can be very happy, right?

24:25Even if there's a smaller valuation than when the founders left. So I think there's like two ways of looking at it. One is like, yeah, big tech is getting some really good talent, but they're not getting everything there because everything that's still there is very valuable. Yes, but it is. It sounds like it is a war for talent that they have perhaps not executed to perfection, because as you say, there's still a ton of talent that remains that they didn't get their hands on. They got their hands on a few people, and perhaps that was an attempt to, in my view, it looks like they're trying to kind of get rid of the competition.