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On Today's Bloomberg Intelligence Show, we dig inside the big business stories impacting Wall Street and the global markets. Each and every week, we provide in depth research and data on some of the two thousand companies and one hundred and thirty industries our analysts covered worldwide. Today, we'll look at why the toymaker has broken is raising its full year outlook.
Plus we'll look at how General Motors is being impacted by President Donald Trump's tariffs.
But First, let's begin with the tech sector.
This week, tech giant Alphabet reported second quarter earnings that beat analyst expectations. Alphabet said demand for artificial intelligence products boosted quarterly sales and now requires an extreme increase in capital spending for more.
Lisa and I were joined by Mandep Singh, Bloomberg Intelligence senior tech industry analyst.
We first asked man Deep for his take on Alphabet's most recent earnings.
The fact that they are able to grow their search business double digit at that kind of run rate two hundred ten billion dollar plus. Like, think of how many incremental dollars they added just by virtue of that eleven percent growth in the two hundred ten billion dollar business. And that is where you know the real strength lies with a company like Alphabet. They are overlaying Gemini across
their family apps. AI overviews is actually driving ten percent more queries and AI Overviews is now used by two billion monthly active users. So Google Search has five billion monthly active users. Imagine AI overviews being used by two billion monthly active users. So they got the UI part right. Gemini as a standalone app has got four hundred and fifty million monthly active users. Imagine if everyone started paying a twenty dollars subscription like chatchipt, this could become one
hundred billion dollar business. In addition to search and then YouTube, I'm not even talking about you know, I'll talk about all the strengthen YouTube and way more. So this is a powerhouse when it comes to four hundred billion dollar run rate they will be at the end of the year.
So can you explain something to me, Because when the shares dropped because they said capex was a little bit more, well ten billion dollars more than expected a little bit, how is that different for an alphabet versus metaphor to say that?
So that's great. So look, let's frame the capex eighty five billion dollars at potentially a four hundred billion dollar revenue run rate by the end of the year. That's like a twenty five percent capex intensity. Meta, on the other hand, is already at a forty percent capex intensity because their CAPEX will be seventy billion at a undred of close to two hundred billion. So that just goes to show Alphabet is still far lower than their peer
group when it comes to the capex intensity. I mean, that's just the scale of the business that they are operating. And look, I do think the ROI on their capex is higher because Gemini's cost is much lower than all the other large ANGLID models, including Microsoft, including Meta. They
do inferencing at a lower cost. And that's the advantage of having your own chip, having your own large ANGLID model that Microsoft or Meta don't have because they rely on in video chips, whereas Google does most of their inferencing from the TPU chip. So I think that just vertical integration they have Alphabet has gives them such a big cost advantage when it comes to running the AI infrastructure.
Where's the company on the various regulatory issues outstanding? What are the one or two or three ones that we've really got to focus on in what's the market telling us?
So that's the biggest risk with Alphabet. That has been the biggest rag on their multiple and it remains because we have a catalyst next month where Judge Meta is going to make a decision on the remedies. And you know,
especially that Chrome split, that's still an overhang. Now the base case is there won't be any Chrome divestiture, but we still need to learn about what are the remedies that may come about in terms of you know, proposed by the judge, and that is where if they're asked to you know, share search data or some other type of remedy, that's going to hurt their position. I think that is the big Overhay.
This one could be this one. If you have a firm view on that. You buy the stock here and there's there's a ton in this thing. Are people doing that? Are people making bets here?
Think?
I bet you they have to be.
I mean, the narrative is still no netive, so negative. Everyone is fixated on oh chat ChiPT my work.
Bobby Action Rod on billions would somehow figure out where this judge is going to rule, make a bet one way or the other. You know, there's the Bobby Action Rods of the world out.
I agree. I think if you can figure out decisively what the judges verdict is going to be, the multiple wise, you could see easily a twenty five to thirty percent multiple expansion and numbers will go up for sure after print last night. But multiple expansion is like twenty five to thirty percent. Just and when is that ruling that's coming up in August September time frame to keep up with.
These things to do.
It's got like a huge team, global team behind him. I mean all he does is come on radio, TV and they give all the work. He's got everything everything.
So you mentioned YouTube before Google Video site, how is its advertising still going? Still going strong?
So look, YouTube subscriptions is what it's really doing well right now. So YouTube subscription growth is north of twenty percent. Imagine, you know, Netflix growing sixteen seventeen percent, YouTube subscriptions actually surpassing Netflix's growth. And then you layer ads on top of that, which grew at a very healthy thirteen percent.
So ads is a forty billion dollar business. Subscriptions is now close to you know, twenty billion dollars, and that is where you're seeing, you know, combined cloud plus YouTube arr is close to one hundred and fifteen billion. So imagine when just these two segments growing at north of twenty percent. I mean, it's it's just a phenomenal business these to both cloud and YouTube and on a standalone basis, there is so much runway for growing the to segment.
Our thanks to Man Deep Seeing Bloomberg Intelligence senior tech industry analyst.
We moved next to consumer earnings. Earlier this week, Philip Morris posted second quarter earnings that missed analysts expectations.
The results were due to the company's Zen nicotine pouch shipments accelerating less than expected. Separately, Coca Cola reported second quarter earnings that beat analse expectations.
And this came as a company announced it was launching a new version of its coke product made with US sugarcane this fall. President Donald Trump had urged a company to do so.
For more Lisa and I were joined by Ken Shay, Bloomberg Intelligence Senior consumer products analyst.
We first asked Ken to explain why Coca Cola is making a switch to cane sugar and if pressure from President Trump had an impact.
It certainly is in sync with what Coca Cola has been doing for a long time, and that is keeping its post on what the consumer wants to do. It has a lot of assets at his disposal, and a cane sugar product is not novel to Coca Cola. I mean, it's produced it in the US, largely more outside of US, but in the US on a selected basis, So it's really just going to expand that it may have been prompted to a degree by the President's tweets or whatever,
but it's certainly in synct. Like I said, you know, there's a there's an audience out there that prefers sugar based as opposed to high fructose corn cruit based, full calorie sodas, and they're going to play into that. Most likely, it's going to be a brand Coke extension, and it's going to be sell at a premium price in selected markets to give it, uh an aura of exclusivity. I'm guessing to to command those prices, and so just as
a little more excitement. It's it's one of many things Coke is doing now on the innovation front.
So from Coca Cola's economic perspective, do they care which ingredient they use?
Well, it depends, Paul, It depends if they can capture the premium price they're going to, you know, price it at kin share costs more than high fructose corns herup. You know, a corn is a heavily, heavily subsidized crop in the US. UH they built their supply chain around HFCs because of that, and most consumers early, you know, they don't really notice the difference. Some do but buy and large. You know, they've grown that franchise very well.
But I guess you know some tourists that go to Mexico and they taste the sugar cane sugar coke down there and they say, you know what, this is really good and they want to capture the same experience in the US.
I'm going to Chipotle and they do offer the Mexican zoda there. Let me ask, let me shift gears here. What is a zin patch?
A zin patch? You want a patch?
It?
I think they made a pouch pouch, Zin pouch, a pouch. You know, it's a it's an oral tobacco product. Actually, zin isn't. It really doesn't even contain tobacco. It's a synthetic products. It's lads with nicotine that is a facsimile for tobacco, which a lot of people will say causes harm, and a lot of people are right. So this is a product that you know, people can get their nicotine buzz in a you know, hands off kind of way,
doesn't emit smoke, doesn't offend your neighbor that you're working with. Uh, and it's done really really well. So those are really the Zin pouches that are doing really well. Yeah, yeah, I.
Thought it was Zinfindel the wine. That's no kidding, no idea, that pouch. So but I mean it's it's big enough a business can that Philip mars would would call it out.
Oh yeah, I know it in it's about eight percent of the sales, I believe at this point, but it's growing, you know, a twenty thirty percent rate as opposed to cigarettes, which are flat, if not down. But you know, Icoas is their smoke free device segment, which is doing very well. But if the low large numbers at some point, that's going to slow and Zen is filling the gap. They keep the overall volumes in a positive trend. They price these things very high. There's not a lot of competition
in this space. So you know, one of the things investors would say about the world of tobacco, because it's so consolidated, they can pass on a very high pricing and that's what really drives a top line and you know, the cash flows and so on, and Zen plays very, very very well into that model.
And how does it fair as far as we hear about e cigarettes, vaping things like that, how has Philip Marris been doing competing with this category.
So they have a product called viv which is their e vapor product as opposed to what they call Heat not Burn, which has actual tobacco in it, and they would say as a more appealing alternative for smokers who are trying to quit. It's a lower margin product. It's kind of seen by Philip Morris as a kind of an entry level product for those who are trying to
move away from combustible cigarettes. They can turn to e cigarettes a low cost method, and their hope is that, you know, even though it's a low margin product, their hope is that they can get that consumer maybe at some point to trade up to their heat not Burn product, which is, you know, a more profitable product for them.
Our thanks to Ken Shay, Bloomberg Intelligence Senior Consumer Products analyst.
Coming up, well look at why the hotel chain Hilton lowered expectations for net income this year.
You're listening to Bloomberg Intelligence on Bloomberg Radio, providing in depth research and data on two thousand companies and one hundred and thirty industries.
You can access Bloomberg Intelligence via Big on the terminal. I'm Lis Matteo and I'm Paul Sweeney.
This is Bloomberg.
You're listening to the Bloomberg Intelligence podcast. Catch us live weekdays at ten am Eastern on Apple Corplay and Android Auto with the Bloomberg Business App. Listen on demand wherever you get your podcasts, or watch us live on YouTube.
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We move next to the telecommunication space. This week, Verizon Communications posted second quarter revenue that surpassed analyst estimates, and the company raised this profit outlook.
The results were fueled by wireless price increases and favorable tax reform.
For more at Least and I were joined by John Butler, Bloomberg Intelligence senior telecom analysts.
We first asked John, what's making the company so optimistic?
When I look at Verizon, I think of the phrase game of the inches, right. I think the improvements here quartering and quarter out are incrementally better. They're edging towards that acquisition of Frontier, which is really going to change the game for them. But in the meantime, they put a lot of changes in place in terms of their go to market strategy, how they're combating promotions coming from T Mobile and AT and T and on the margin quarterin and quarter out, I just see them doing a
better and better job. I think all the actions they've taken are starting to work, and so taking the long view here, I really think Verizon is improving just quartering and quarter out. And this was another quarter where you could look at it in isolation and say, you know, it was a solid quarter, a little bit mixed on some of the metrics, but I think I'm balanced better than last quarter and last year.
John, what's kind of the positioning of Verizon in the marketplace? Like, I've been a long time Verizon wireless customers since the beginning of cillier service actually, and I guess I was initially drawn to it because I thought they had the best network. So quality, is that still the case because it seems like T Mobile's gotten a lot better in quality and AT and T. I don't know.
Yeah, you know, Paul, you bring up a good point. I think there's a question mark out there as to whether Verizon still has the best network versus T Mobile and AT and T. But I think they have a slight edge they are in terms of coverage. And it's interesting a lot of people ask me about wireless, who was the best network? Who should I choose? And the one thing that people are always ask about is how's their coverage. I think coverage is very important to people,
and I think when you think on that metric. In terms of that metric, for Riizon delivers the bars on your smartphone, probably more than T Mobile and AT and T in terms of download speeds, though I suspect that T Mobile probably is gaining the edge here.
Now, what about prices? Did Verizon increase their prices? If so, did that help?
So?
We did see in all the carriers are increasing prices right now as the market matures and new user growth is slowing considerably. The only way you're going to grow that important service revenue metric is by raising prices. They tend to do it on older plans for riizing stunted over the past six months. As if you look over the past year, so as AT and T and T Mobile, that's flowing through and it's helping to boost the service revenue.
I think over time they're adding in those little extras like you know, device insurance and perks like you know, added content that you can purchase at a discount through through Verizon, and I think all that together is going to continue to provide a lift to service revenue. It's nothing special.
Again.
I'm looking forward to that Frontier acquisition where they're going to buy, you know, access to two million Fiber broadband subscribers and eight million fiber homes passed, because once they get Frontier under the hood, they're going to be able to bundle that wireless service with Fiber and I think that's going to help to really drive renewed UH subscriber growth.
Our thanks to John Butler, Bloomberg Intelligence Senior Telecom Analist.
We move next to the toy industry.
This week, the toy maker has But reported second quarter earnings that beat analyst expectations.
The company also said it's raising its full year outlook. This comes after a record quarter for Hasbro's Magic the Gathering card game.
For more, co host Isabelle Lee and I were joined by Lindsey Dutch, Bloomberg Intelligence Consumer Hardlines Senior Analyst. You first asked Lindsay to break down what we learned from Hasbro this week.
Strong quarter are really a continuation from the first quarter where all the strength is really coming from Magic the Gathering Monopoly go and Hasbro's digital gaming business. What we did not learn from the release is really about the consumer and what the outlook is for toys in the second half, and that's causing a lot of uncertainty what that back half might look like.
I was going to ask how exposed is Hasbro to current consumers spending trends, Like, especially in the toys and entertainment area, do we see more middle income shoppers buying Hasbro or what kind of consumers are you seeing?
Yeah, so the toy business typically grows with GDP. It has been you know, coming down a bit challenge over the past couple of years after the peak during COVID when everyone was stuck at home buying a lot of toys. This year was supposed to be a turnaround year four toys and then early this year, you know, we got hit with the tariff news, which created a lot of
uncertainty in the business. One is, you know, we don't know how the consumer is going to react to broader price increases, and we do expect increases on toys very specifically, so companies like Hasbro and Mattel, you know what some of the biggest toy makers in the globe you know, are really faced with that challenge in second quarter. Normally retailers already start buying their holiday inventory. That didn't happen
this year. Those retailers Walmart, Target, took a pause. So normally by now we would sort of get a sense of holiday But because of that pullback, you know, Hasbro saw their consumer products segment see a sixteen percent decline in the second quarter revenue because of that hold on those orders.
Thought they would have tried to front run the tariffs. Here, what's the company saying about when they expect some of these retailers to place their orders, so.
They expect the orders to be sort of made up in the third quarter. And the challenge with that is, you know, some of those hotter toys that do sell out maybe in the early holiday shopping season, there will be very little time to sort of replenish on that end. So Hasbro did continue their production, which you know they do still make about fifty percent of their toy products in China. They continued in May. You know, they took some of that inventory on their books in the second quarter.
That's why we saw the inventory come up there. You know, they're hoping that the retailers, you know, place more of their orders in the third quarter, you know, ahead of holiday. You know, the risk is they just don't really know what those pre order will be and there will be limited time for additional orders like in that fourth quarter right before holiday.
To your point. In April, the company warned the tires clid impact profit by as much as sixty million two hundred and eighty million this year, and they did reduce their Chinese manufacturing output to less than forty percent, or at least plan to by twenty twenty six. If they do that, will they pass on the cost to consumers? And do you think consumers will bear the brand of that burden.
Yes, so Hasbro is using multiple mitigation strategies. You know, they have been very focused on cutting costs. You know, prior to tariffs, they sort of accelerated some cost cutting at the corporate level. They will be raising prices, I think selectively on toys. They are also just going to not sell certain toys in the US if it can't it doesn't make financial sense to do so if they can't raise the price and consumers would not buy it at that price. So they're sort of using a mixed strategy.
They had predicted tariffs to cost sixty million to one eighty million on an annual basis three months ago. They sort of dropped that impact closer to the sixty million side. That's because of lower rate on the Chinese imports. They are working to diversify the supply chain, but that will take time. The goal of less than forty percent that's really by twenty twenty seven, So in terms of this year,
you know where their supply chain is. They're sort of locked in with that at the moment, and they kind of have to work with the price increases and sort of balancing where do I increase price and not hurt the demand even.
More our thanks to Lindsay Dutch, Bloomberg Intelligence Consumer Hardline Senior Analyst, we've.
Moved next to the hospitality industry. This week. The hotel chain Hilton Worldwide lowered expectations for net income for twenty twenty five, while US hotel booking declined in the second quarter, and this comes as.
US travel demand has faced headwinds in recent months, including lower consumer confidence and a decline in international visitors.
For more co hosts, Isabelle Lee and I were joined by Jody Lourie Bloomberg Intelligence credit analyst. We first asked Jodie what we learned about Hilton from It's Ernie's call this week.
I mean, I think what's so interesting is they definitely tried to provide an upbeat, optimistic view. The amount of times they talked about the thawing that after the freeze from tariffs was sort of interesting to hear, and I mean, I think it fits a little bit with the conversation that we've been having with clients is that what we've been seeing in our data is twenty twenty five summer should still be pretty strong, but I think as we get into the latter part of the year and then
into next year, it's a little bit uncertain. And I think they were trying to suggest that economic data is positive for them and will provide for additional sort of demand, but it's still a little bit, you know, it's still a little bit hazy, at least for me. And I mean more than anything, you know, they're so focused on giving back to shareholders that and.
There's a credit analyst that's not something.
Necessarily that's yeah, yeah, you know, Hilton's one of those companies that we say, if they wanted to be investment grade. They probably could work to it yesterday and would have been investment grade five years ago. But you know, from a margin standpoint, they're so much stronger than of their peers. But from a leverage standpoint, they just they're happy being around three times three and a half times, and they've indicated that they want to be a little bit higher
than where they currently are. So I mean, I think they're going to invest in organic growth and look at ways to sort of grow some of their newer brands
like Spark, which they've been talking about. And the most interesting thing related to that is it seems like they're looking outside the US for growth opportunities, and maybe that's a function of the fact that they while they think the US is still having decent momentum, perhaps they need to sort of look outside to sort of really see the growth.
Where are they finding that growth elsewhere? And is that in relation to just the lower consumer confidence in the US and the decline of international travelers. So then they just decided maybe looking elsewhere US better. What was the rationale behind that?
So they actually talked about on the first quarter, they talked about Canada and Mexico, demand and they said specifically that it's such a small percentage, just like one percent of their total revenues is Canada MC, and inbound US is certainly a large portion, I think, larger than they sort of indicate. But I think they're also sort of saying, Okay, yeah, it's going to be an effect, but it's not that
much effect. I think they are seeing. And what we sort of heard on this most recent call is that there is an element of trickle down effect related to what's going on in the US, the prevalence of travelers coming into the US versus historically because of the tariff and geopolitical environment, and so, you know, they mentioned Saudi Arabia, they mentioned India, they mentioned turkeya on the call, and I think they're looking at anywhere there's potential growth opportunities.
I mean, Hilton's so large and global that it's not really surprising to me, but it is sort of interesting when you hear a company that's seventy five percent US dominant that they are sort of looking to expand elsewhere.
Our thanks to Jody Lourie Bloomberg Intelligence Credit Analyison coming up.
Well, look at how Elon Musk's recent political antics may be affecting his business empire.
You're listening to Bloomberg Intelligence on Bloomberg Radio, providing in depth research and data on two thousand companies and one hundred and thirty industries.
You can access Bloomberg Intelligence via bi go on the terminal.
I'm Lisa Mattheo and I'm Paul Sweeney. This is Bloomberg.
You're listening to the Bloomberg Intelligence podcast. Catch us live weekdays at ten am Eastern on Apple Corplay and Android Auto with the Bloomberg Business App. Listen on demand wherever you get your podcasts, or watch us live on YouTube through on.
Paul Street and I'm Lisa Matteo filling in on Bloomberg Intelligence.
Next, return to the auto sector.
This week, General Motors will lease second quarter earnings that beat analysts expectations, but the carmaker said it still suffered a one point one billion dollar profit hit from President Donald Trump's tariffs.
GM also revealed no plan for near term fixed to return to pre tariff profit levels. For more, Lisa and I were joined by David Welsh, Bloomberg News Detroit Buro chief.
First as David was he surprised by the one point one billion dollar tariff hit.
Not surprised at all. GM said they were going to take a fort to five billion dollar hit, or at least that they had forty five billion dollars in exposure this year to tariffs, and then they would only be able to offset about thirty percent of it, and the measures they're using to offset that you really won't see to the second half. I thought there would be a
pretty big hit to it. I don't think the street was surprised either, because the forecast for GM's earnings were for a pretty big drop off of the second quarter of last year. Already, GM did better than that because they did have some things, better profits in China than we saw a year ago and better sales in the
US that helped them. But overall, a pretty tough quarter, and it really shows that the car companies are going to have a tough time getting anything close to pre tariff profits going forward because there's just no easy way to get around them.
So I mean is what were to take away from them is that the autom manufacturers, for what reason, maybe they're just not able to or they chose not to pass along the bulk of their cost increases to consumers is at a policy or is that just an economic reality?
It's an economic reality. And look, we're at a period right now where interest rates are at pretty high levels. You have historically not record but pretty close to record new vehicle prices in the US right now, average monthly payment well over seven hundred dollars a month. We have a record number of people I think paying more than one thousand dollars a month for their monthly payment. Cars are expensive, so you know, you can go out there and say, hey, I'm going to pass this tariff cost
on to consumers or even some of it. But if consumers don't pay it, then you just lose the sales. And you haven't seen huge price increases. You've seen small and you seen companies sneak in, you know, some bigger fees for transporting the vehicle for example, things like that. But it's just not they just don't really have the ability to push in big price increases to you know, to pass on. In GM's case, a billion hours worth of tariffs in a quarter.
And it's not just terrors. What else affected profits for GM? I mean, how's their inventory for electric vehicles?
They built that up in the quarter and since the vehicles lose money, they have to count for that that that costs them. I think it was six hundred million dollars in the quarter they had three hundred million. Because they've had a big engine recalls, they've had higher warranty costs. It wasn't just because of that recall. They've had other
issues and they're working on that. Some of it, some of these quality issues you're seeing that are costing companies more in warranty and recall type costs, are all the software that goes into electric vehicles. These are kind of first times out with new software, new infotainment systems, power management systems in these vehicles, and it's just tough for them to go out there and not be buggy.
Right.
You know, think about how many times there's something on your smartphone that you know needs an update, and fixing that with the cars is often more expensive. So some of it was related to that. And actually, you know, they saw pricing go down with some of their fleet customers. There's a lot of competition out there for the for the corporate and fleet business, and they actually saw some downward price pressure there too, and that cost them a
couple one hundred million dollars. So a lot of things in the quarter that pushed profits down, But tariffs are the real story here, David.
You're out there in Detroit. You live and breathe this stuff every day. What's the feeling in Detroit as he relates to this evolution to evs and how will the tariff and the tariff impact on profitability? Is that going to slow this down even more?
Do you think?
I do?
I think everything that Trump administration is doing is really going to slow the EV transition. First of all, you know, the obvious one is there, comes September, they're going to be getting rid of the seventy five hundred dollars tax break for qualifying electric vehicles. But you know, with tariffs, you've got battery components, electronic components, wiring harnesses. There's more wiring in an EV than in a conventional vehicle. All that stuff adds to the cost of vehicles that already
lose money. Some of them are actually built overseas. In the case of Hyundai, they make some of theirs overseas. GM makes a couple of it's evs in Mexico. They do qualify for US MCA, but there are still some parts component tariffs that they can be hit with on some of these vehicles, and so you add cost to vehicles that are already pretty expensive, and you can't pass it on. If you do, even fewer people will buy them.
Companies may have less incentive to build and sell them if they lose a bit more money on these, So that's going to hurt as well. And then of course Trump's rhetoric for people who are you know, politically right of center and pretty far right is that you know, evs are a dumb purchase and they don't work for you, and I think that hurts sales as well. So all of this is just not good for the momentum that EV's had in the US, you know, before Trump got in office.
Yeah, so, David, last month the company said it would shift some production to the US from Mexico. So what other changes can we expect to see from the company.
Yeah, I think you'll see them try to bring more parts, more of the parts they buy into the US, so they'll be encouraging their suppliers to do what they're doing, which is move some production to the United States. And that'll take time, and you know, you may see them make some more production related moves. What they've done is
pretty big, so I'm not anticipating any big announcements. But you know, as they look at this and they find other ways to do it, you might see more vehicles, more parts built.
Here in the US our thanks to David Well, It's Bloomberg News Detroit Bureau Chief.
This week we focused on a Bloomberg Big Takes story entitled Elon musk Empire is Creaking under the Strains of His Antics. You can find it on Bloomberg dot Com and The Terminal.
The story looks at the state of Elon Musk's companies Tesla, SpaceX, and Xai, and it gives insight into how much Elon Musk's recent political antics are affecting his empire.
For more, Lisa I were joined by one of the stories co authors, Max Chafkin, Bloomberg BusinessWeek senior reporter and co host of the Elon Inc. Podcast.
We first asked Max if Elon musk political antics are impacting his business empire.
I mean absolutely, and it's because as much as Tesla is a car company, it is I think for many investors really an Elon Musk company. It's a way to bet on what they see as the singular genius of
this guy. And as you said, over the last few years, it's gotten harder to see that there have been challenges, and I think obviously the biggest challenges is this relationship with Donald Trump, where you had, you know, in December, Elon Musk, you know, helps get Trump elected and then is in this position of extreme influence, you know, probably more influence than almost any you know, executive ever and and you had this kind of Trump trade where people
were bidding up the stock based on the idea that Elon Musk was going to be able to get all of these policies that were going to help his company. His companies of course very very much enmeshed with the government and heavily regulated. And then we're seeing that in reverse, we're seeing that, you know, what happens when you get when you have a business and a bunch of businesses in fact, that are heavily regulated, and you're in a fight with you know, the most powerful person in the world.
And Donald Trump.
You say in the article that really stood out to me, you say, he is rich on paper, but he is cash poor. So kind of explain that to us.
Stick into that, Yeah, I mean part of this has to do with the fact that he's he's always making these big bets. But when you look at his wealth, it is mostly in Tesla's stock, Tesla stock and options, and he's running this empire which you know obviously includes Tesla, it also includes SpaceX. He's got a lot of SpaceX
stock as well. You know, neither of those companies. He's able to borrow money against his positions in these companies, and we have seen sort of company A buy equity and company B that sort of thing.
But there isn't just like a huge.
Pile of cash and he has all these things he's trying to do. You know, you there's there's really only one company in the portfolio that is reliably profitable, and that's Tesla. And then you have SpaceX, which of course has a lot of promise and has a dominant position in the launch market, but is not necessarily throwing off cash. And so you have this empire that is very large, but where different companies are supplying things to other Elon
Musk companies. And I'd say the most obvious example of that is this in this Xai investment round, which is already at Elon Musk has already said SpaceX is putting two billion dollars in. He's also indicated he's going to try to get Tesla to put five billion dollars into Xai. And this is a company that is burning, you know, a billion dollars a month. Now, this is the kind of thing that for any other executive, you know, it's like a pie. It's like a conflict of interest on
top of a conflict of interest. On the other hand, you know, Elon Musk has this fan base that has so far been willing to kind of go along with things that no other investment in, any other company, whatever, go along with.
Is there any reason to believe that the few, to whatever degree it is at the moment, between President Trump and Elon will de escalate.
Yeah, I mean, I definitely think that's possible, partly because both Trump and Musk, you know, obviously they're both famously kind of alpha, you know, very tough, but they also both you know, they they forgive like this. People have made this observation about Donald Trump that you know, although there are there are a handful of people that are sort of permanently outside of the circle of trust with Trump.
People fall in and out of love with Donald Trump, and he is able to kind of look past FEUs. Elon Musk is the same way, And there is a mutual interest here. As I said, you know, Trump kind of needs Musk because Musk was the most important financial backer for Republicans during the twenty twenty four cycle. He could very well be the most important backer in the
twenty twenty six cycle. And I'd say that Musk kind of needs Trump, both from a branding perspective, from the fact that, like, once you've alienated the entire universe of Democratic voters, which must kind of has done, then what do you have left? You have basically the Republicans, and you don't really want to be on the outs with Donald Trump as a cultural force. And then and then on top of that, you have the sort of regulatory issues.
You know, self driving, which is what Tesla is betting its future on, is a regulated industry, you know, rockets government contractors. So there are always ways that Donald Trump could either hurt or help Elon Musk, depending on what the relationship looks like in.
The last minute. So we have left it seems like someone else is kind of sliding into that position. Open Ay Sam Altman is he kind of taken over where Musk left the spot.
I mean incredible, right, like watching that happen, especially given the fact that Sam Altman, you know, former Democrat course Elon Musk at times has supported Democrats as well, but Sam Altman much more recently was a Trump critic and so on, and that is, you know, there there have been a bunch of political sort of mistakes, missteps made by Elon Musk, and that is you'd have to include that in the list, just because Sam Almons certainly didn't
have the pole position. And now open Ai this you know, AI large language model company competing with Xai is in a position of proximity to the president and and so yeah, that's that's yet another case where where this feud is not helping Elon Musk.
Our thanks to Max Chafkin, Bloomberg BusinessWeek Senior reporter and co host of the Elon Inc.
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