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Musk vs. Trump and how it's affecting Tesla (0:25). Broadcom, CoreWeave and AI stocks (8:05). ON Semiconductor movements (12:15). Dollar General earnings and Zscaler's follow through (13:45). Tariff updates, CPI data, and Powell pressure (18:00).
Transcript
Rena Sherbill: Brian Stewart, Seeking Alpha's Director of news. Welcome back to the podcast. Always great to talk to you on these Wall Street Roundups.
Brian Stewart: Great to be here. Looking forward to it, thanks.
RS: We were discussing what might be the top story of the week, a lot of stories in contention. But perhaps Tesla (NASDAQ:TSLA), everybody's favorite underfollowed stock and favorite underfollowed CEO and favorite underfollowed topic.
What did Tesla show us this week? A lot of discussion about Musk and DOGE and Tesla and whether it it can recover. What did we see out of Tesla this week?
BS: Quiet reserves, unassuming Elon Musk somehow found himself in the news this week. I mean, if you're looking at it from just sort of a drama perspective, obviously, can't help but talk about the turn that's happened.
It's Musk versus Trump now. Elon Musk has come out against the the bill, the budget bill that's currently passed the House. It's now working its way through the senate.
Musk's main con point of contention seems to be around the, electric vehicle provisions in the bill. Specifically, there was incentives to purchase tax incentives to purchase electric vehicles in the old law and this gets rid of that.
Musk is taking a a broader view in his public commentary, talking about the additional the debt impact from the spending bill, which obviously is opposed to the DOGE goals that he was chasing not too long ago.
So I think for Tesla as a stock, it's an interesting turning point, interesting next step in this journey. Tesla obviously has had wide swings so far this year, largely based on kind of the political fate of its CEO.
There was the narrative being formed was that Musk's return to Tesla after his DOGE adventure was good news for the stock and the stock was now going to be able to get back to normal.
And then that CEO instantly picks a fight with the President that he had supported just a few weeks ago. So it's difficult to to to see where the branding situation goes from here.
There had been talk that Tesla, even though it faced a lot of backlash from Musk's political activities recently, that it was building in a Trump premium that fans of Donald Trump would rally to Tesla as a symbol of that side of the political spectrum.
If Musk's going to take on Trump then that premium might disappear, which I mean, maybe that just leaves Tesla as a normal company again, kind of xing out the situation that happened earlier this year, or maybe it leaves Tesla with fewer fans generally. It remains to be seen.
RS: Well, everybody knows the whole world's a stage, but did you anticipate - last week, I asked you if you anticipated some of the tariff conversation movements out of the courts, out of Trump.
Did anybody expect or was this expected, this jawboning between Musk and Trump? Is this part of the drama? Is this part of the play? Any sense, is there a clear cut answer here or is this part of the play that we find ourselves in as the audience?
BS: Just tracking the personalities, I think this is pretty predictable. You've got two people who think pretty highly of their opinion, two people who have their own base of power.
They don't rely on each other in any way. Musk being the richest man in the world, Trump being President of the United States.
They don't really need to be allies in any sense. They're also both both people who don't mind a public spat, who aren't known for their consistency in terms of their rhetoric and their goals from moment to moment.
So the idea that they would be aligned for a period and then be in opposition for a period, I don't think it's strange at all. I also wouldn't think it was strange if they made amends and were aligned again at some point in the future. So I don't see this necessarily as a a permanent rift. I don't even know if this will have a lasting impact on Tesla.
What might have a lasting impact, though, is the actual provisions of the spending bill as it works its way through Congress where that lands might might affect Tesla's business.
I think from an investor's point of view, you have to think about it as there being two Teslas. And one Tesla is the car company, and that business is certainly in flux.
There's a lot of uncertainty surrounding that. Obviously, there was some brand damage done. I'm especially thinking about in Europe where sales were down pretty sharply while Musk was doing DOGE.
Meanwhile, if you're losing the tax support you were getting for selling electric vehicles, that will impact the possibilities for sales moving forward. Tesla was already facing some market share pressure from just the proliferation of EVs and EV makers.
The other Tesla though is the the broader tech company. So autonomous vehicles, robotics, the other projects that Tesla likes to announce and then work towards over time.
If you're still a big believer in that promise and those further horizons that really have nothing to do with the car company except the car company is the the launching pad for those future technologies, then it doesn't really matter what the the spending bill has to say about EV support or what Musk's current association is with the President of the United States.
You're betting for five, ten, fifteen years in the future, and you're betting on trillion dollar markets. So I think it really comes down to who you are as an investor.
Are you are you a believer in that long term vision? Do you think that that's gonna happen? Or are you buying into a car company, in which case, I think the current situation becomes much more relevant.
RS: Do you have the sense that there is more strategy behind this timing and this jawboning and this public disagreement?
Do you think from both sides, from both Trump and Musk, do you think that there's more strategy involved in - you talk about a tale of two Teslas.
Are there a tale of two Musks? Are there a tale of two Trumps in terms of what they're strategizing for behind closed doors and how they're making that known in front of people?
BS: There could be. Certainly, on Musk's part, if he had come to the conclusion or had been convinced by leadership at Tesla that the association with the administration was ultimately near term losing or they'd already kind of had the benefit they were gonna get from that or it was just becoming a pure distraction.
There could be an upside to making a very obvious rake, not just, hey, I'm gonna set this aside and go back to my day job, but literally saying I am no longer part of this administration. In fact, now we have beef.
I could see a strategic component to it. It's hard to say because every action Musk does, you can interpret strategically, you can interpret as aggressive behavior from a person who has the resources to do whatever he wants.
So I don't know. I think we're obviously separated from his thinking, so it's hard to make a definitive judgment. And I think in terms of, if you're trying to guess from the outside looking in, it's kind of in the eye of the beholder.
RS: Something that has been a thread through these conversations and also through many conversations on our Investing Experts podcast has been this notion about AI and who the top players may be at the end of one year, two year, five years, and and how the, evolution of the AI conversation will advance.
Some of those prominent names that we've seen in the past couple of weeks make a lot of market movements, be up, be down for consecutive days, and that we've heard a lot of bullish sentiment and some bearish sentiment on our Investing Experts podcast.
Two names has have been CoreWeave (CRWV), which IPO'd a few months ago, and Broadcom (AVGO).
I think that those might be two specific stocks to highlight from the AI conversation. Broadcom is releasing earnings after we speak today, so it's a bit preemptive, but I think still some insight to be had.
And, also, CoreWeave, they've been down today but had repeated consecutive sessions of gains. How would you contextualize the moves in those two stocks? Do they deserve to be part of the same conversation? What are your thoughts there?
BS: So Broadcom, as you point out, is reporting after the close today. We're recording this on Thursday. So the listeners are gonna know more about the specific earnings than we are talking about it now.
However, I will note that the stock has been up seven days in a row going into today, Thursday. It was up fractionally when I checked a little earlier. So if it finishes higher, that's eight days in a row. So that's a lot of enthusiasm, a lot of optimism going into the earnings report.
So I think, speaking to the people of the future, it'll be interesting to see to what extent Broadcom was able to fulfill that promise, going into it.
And I think in terms of beyond the headline numbers for Broadcom, I think look to the commentary from executives about the buying behavior of the big players that Broadcom is associated with.
So Apple (AAPL), Google (GOOG) (GOOGL), those are the kind of clients that Broadcom has. And so if they have any sort of information on where that is headed in the near term, I think that'll be interesting for the sector as a whole.
And CoreWeave, I think, is interesting to keep track of just because it's the most prominent AI driven IPO that's come out recently.
So I think, probably the early stages of a wave of companies that are gonna come to market specifically, meant to or situated to appeal to AI investors.
So this is next generation, stalwarts like Nvidia (NVDA) who took advantage of the early wave of AI interest.
And so CoreWeave at last check was down about 16% as we're talking on Thursday, but that's coming off of four days of gains, including a 25%, rise on Tuesday. This is all pretty much momentum play. The stock continues to build new post IPO gains. It's up nearly 250% since IPO.
It's sitting at about just below 140. It IPO'd at 40 back in March. Another interesting aspect of CoreWeave that we've mentioned when we talked about it before is it didn't have a lot of enthusiasm in that initial run.
Like, you'll see IPOs that pop significantly on the first day and then kinda drift lower or or kind of move sideways. CoreWeave was a much more delayed response from the market. It came public in kind of a whimper and then built momentum.
I think that is an interesting model to look at when you're looking at the way in which AI investors and tech investors generally are looking for new ideas.
RS: Speaking of tech investors, one another, stock that saw some movements that's peripherally related to this conversation is ON Semiconductor (ON). What would you say about that stock and its place in this conversation around tech stocks?
BS: ON Semiconductor rallied earlier this week. It's had some executives speaking at an investor conference. They were very upbeat. They said a recovery is beginning and they think Q2 will be the bottom. I mean, the key to that obviously is to be a bottom, you've got to have trouble. That's happened in the past. ON Semiconductor has been facing an inventory glut, underutilized capacity. It wasn't well positioned for the the coming tech market, the market that emerged.
So executives are starting to get to the point where they think that turnaround is gonna happen. I think it's noteworthy that their main markets are the industrial and automotive markets. So these are old economy customers.
So it underlines the idea that even within the tech space, you have to look at these companies as individuals and see what their markets are, who their customers are, what they're targeting, especially as you are looking to determine if there are other players who haven't received their AI premium yet.
That ticket hasn't been stamped yet. So as you're looking around to the next Nvidia, it's important to get under the hood of these companies and see where they are situated in the market.
RS: Along with the tech sector, another thread that has been pretty consistent has been the retail space, and we've been talking about it for the past couple weeks more prominently. But a lot to be uncovered around the tariff conversation.
And a stock that reported this week that saw a nice rise post earnings was Dollar General (DG). What would you say about what they have going on, what their earning showed?
We had some recent news with China and the US today. What would you say about the tariff conversations, the retail picture, and what Dollar General may have showed investors this past week?
BS: So Dollar General jumped 16% on Tuesday on earnings news.
It's interesting just because retailers don't tend to to move like that, especially an old school one like Dollar General. So it's kind of a tech move for a non tech company.
The company beat expectations, raised its forecast. It would talk specifically about the tariffs as you had pointed out, noting that it's still an uncertain situation, but it's taking steps to lower its reliance on China.
The stock had dropped last August and in the wake of a disastrous earnings report, it had lowered guidance at that point and fell precipitously.
It's still below where it was before that earnings report came out, but the gains recently plus the improvement that it's been seeing in the past few months has put Dollar General stock back to where it was for the first time since that August decline.
I think if we're looking more broadly, a takeaway from it, whatever dislocation has come from the the tariff discussion and wherever we land on the final tariffs, it might be healthy for these companies to diversify their supply chains to some extent.
So a company like Dollar General going forward might keep in mind that it faces these international threats, whether it be from trade wars or, something like a COVID that would break down supply chains.
And COVID's a bad example because it broke down all supply chains, but imagine if there was an outbreak of a COVID like virus in a particular country that might affect some companies more than others.
And so I think having a little bit more diversity might be helpful. So it might be a sign that retailers are adjusting to the new environment and adjusting to the new environment in such a way that the uncertainty becomes baked in.
So they are creating supply chains that are more flexible, supply chains that aren't structured around any one particular country or any one particular region.
So you might end up with even among these seemingly, boring, for lack of a better word, stocks like Dollar General, you're getting to the point where they're becoming more nimble in response to these headline risks.
RS: And any other stocks you would add to the conversation around market movers this week and what it may portend for investors?
BS: This one's a little old at this point, but I just thought it was interesting to point out Zscaler (ZS). It was up about 10% last Friday on earnings.
It's also continued to rise since that rally. It's up again today as we're talking, and that would be five days in a row of gain. So it's seen a lot of follow through after that post earnings pop.
The upside's also helped it reach new highs. It's up about 68% year to date and 84% since it hit its April lows. It's a cloud security company, and it's been boosted by the rollout of its of new AI security offering.
It's just been a theme of the conversations we've been having the last few weeks of these next stages in the AI trade and the way that specific companies are applying AI to their products and the way they're interacting with customers.
And so it's just another example of a company that was able to leverage that innovation and see some benefit from it from the stock price.
RS: And macro wise, what are you most focused on or what have you been most focused on this past week, and what do we have to look forward to?
Obviously, as I mentioned, we had some news out of China today. I don't know how much that is figuring into things, or it's still a wait and see part of things. But where where are you at macro wise?
BS: I think the tariff conversations and the international situation are obviously going to be huge deciders in the near term day to day trading.
Like I said before, the Dollar General case, there are signs that companies are becoming more well tuned to the uncertainty. So not just not being as reliant on these these headlines to move around.
So you might see the market start to ignore some of these headlines or have more muted responses to them just with the understanding that they might not be indicative of of major macro changes and just become kind of a bit of the background noise.
Looking further ahead, next week we have CPI data coming out. This will be the latest in inflation. We talked about Trump versus Musk earlier, so we also have Trump versus Powell. Trump's been putting a lot of pressure on Fed Chairman Jerome Powell to lower interest rates.
Powell has obviously been quiet about it. He's not gonna get into a public spat with the President. But there were rumors earlier this week that the pressure might get so much that Powell will be forced to resign.
That hasn't happened yet. As I've said before, Powell is pretty good at ignoring the outside pressure from the to do things. Whatever criticisms people might have about Powell, they're not gonna say that he's overly responsive to either the market or public pressure.
So if anyone is well situated to ignore pleas from the President of the United States, I think Powell is that person.
Just checking the Fed generally, the meeting later this month, so in a couple weeks from now, there's a 97% chance of no cut based on market trading at this point.
Looking further along, there's a July meeting and there's a 69% chance that that rates are gonna stay the same through that meeting. So there's a consensus building now that September is the the most likely time for a cut though there's a reasonable chance that there might be one in July.
That keeps getting pushed back, like earlier this year, I think the expectation was we'd be significantly lower in rates by now than we are.
So there's still the expectation that rate cuts are coming, but over the course of, 2025 so far, that prospect is getting further pushed back based on the idea that that inflation might be stickier than we thought.
And so that makes the CPI report pretty important for sealing in that timing and that expectation just because any sign that inflation has finally tamed to the degree that the Fed doesn't have to think that hard about it, would open the door for those rate cuts to come sooner.
RS: There's been some rumors about Powell resigning before his time is up. Do you have any sense or anything worthy to note around when Powell may or may not be out of his role?
BS: I think that in in a lot of ways, that's a personal decision on his part. The Fed chairmanship isn't a political position the way a senator is or a governor, and I don't just mean that they're not directly elected.
Typically, after becoming Fed Chairman, former Fed Chairs just go to academia or write books or open up consulting businesses. Janet Yellen is an exception to that. She became treasury secretary, but by and large, Powell's not putting political capital in his back pocket for some later use, most likely.
So I don't know how much political pressure a President could put on him unless Powell himself chooses to receive that pressure. But that said, I could see how it would weigh on somebody to constantly be in the spotlight and constantly have that.
The burden of responsibility, again, Powell was Fed Chair during COVID, and I can't imagine more pressure and more responsibility than that. So my general feeling and again, this is completely outsider, I've no information whatsoever about his personal feelings on this, is just this does not seem to be the peak of pressure that Powell has felt in his career so far.
I just think this is most likely just roll off his back. That said, he's been chair for a while. It's a tough job. He might be getting to the point of his career where he'd rather, like I said, sit in a nice, cushy endowed chair at a high prestige college and books from there. So it really is gonna come down to where he stands and and what his personal goals are.
RS: Maybe he starts leading meditation courses in Bali. Who knows?
BS: Sure. That actually sounds nice. I think we pitch that to him. That might make his decision.
RS: Honestly, look at what he's survived and somewhat thrived through. It might be nice for him to give lessons on how to maintain your sanity through some insane situations, I would say.
BS: Yeah. I mean, Fed chairmanship is a tough gig. I mean, I'm thinking about just going through the names of Greenspan or Bernanke to Yellen, Powell.
There's never not a crisis. There's not a boring time to be Fed Chair, and you're the public face of this institution that I think most people don't even understand.
The rate cut debate is a good one. Whatever you think he should be doing, it's pretty easy for politicians to always want lower rates. I mean, that's what everyone - it's like giving out candy to kids. No kid's gonna say no. Please, let's have some carrots first.
And so, you're kind of the the bad parent in that way. You're more likely in the situation to say no, we have to have dinner first, and then we can have some dessert. So I don't know. It feels like it's a powerful job. In that respect, I can see why people are drawn to it, but it also feels thankless and just difficult.
Just like having to pick your words in public the way that a Fed Chair does and a way the Fed Chair no other position has to to do it. I mean, you can move markets just by leaving out a word that you had included in a similar phrase six months ago.
And there's just a lot of even moment by moment, like if he's in public and he's speaking, he has to literally think about every word that comes out of his mouth. He can't, just, in a public sparring match with Donald Trump, it's a difficult position to be in because Trump can say whatever he wants. Meanwhile, Powell has to be extremely precise about what he's saying.
And again, not that any Fed Chair would ever publicly speak out against the the sitting President. I can't remember something like that ever happening. If I was sitting down for a beer with Jerome Powell, I might tell him, yeah, maybe go do some meditation in Bali. That might be nice.
RS: Anything to highlight about what's coming up next week in terms of earnings or some stock specific news?
BS: So a couple big names coming out next week. We have Oracle (ORCL). It's up about 44% since its April low. However, it's still below its fifty two week high. It would need about another 15% rally from here to reach its previous 52 week high.
It's a company that's gotten a lot of attention for the extent to which it's rolling out AI powered products and using AI in its business. So, more commentary from that will be interesting.
This is kind of I think in the Zscaler camp and that camp of next wave AI winners. I mean, Oracle's already on that list, so that's already been talked about. But it'll be interesting to see where they stand.
On the same theme, Adobe (ADBE) is reporting next week as well. It's up, not as much as as Oracle, but up 26% from its April lows. There has been concerns about the monetization of its AI products.
So look for commentary about that, the extent to which the the AI innovations that it's putting into place, how directly and when are those gonna directly impact the bottom line?
Online retailers and the online commerce space. So just on that front, Chewy (CHWY) is reporting next week and so is Stitch Fix (SFIX). So if you've got an eye on on that sector, I think those are gonna be interesting stocks to talk about.
