Why Elon Musk’s Rivals Worry About His Power in the Trump Administration

Summary

WSJ What’s News: Detailed Summary

Episode Title: Why Elon Musk’s Rivals Worry About His Power in the Trump Administration
Host: Tracy Hunt, The Wall Street Journal
Release Date: December 2, 2024

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Introduction

In this episode of WSJ What’s News, host Tracy Hunt delves into several pressing topics that are shaping the business and political landscape. The primary focus centers on the potential influence of Elon Musk within the incoming Trump administration and the concerns this raises among his rivals. Additionally, the episode covers significant movements in the stock market, particularly concerning MicroStrategy’s ETFs, updates on the U.S. manufacturing sector, Texas’s role in immigration enforcement, and recent developments in the tech industry, including Intel’s leadership changes.

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MicroStrategy ETFs and Market Volatility

Reporter: Jack Pitcher
Timestamp: [00:36] - [02:54]

Tracy Hunt opens the discussion with an analysis of the financial market, highlighting investor enthusiasm for two new turbocharged exchange-traded funds (ETFs) linked to MicroStrategy. These ETFs aim to amplify the daily returns of MicroStrategy’s stock, which has surged following the company’s aggressive investment in Bitcoin.

Key Points:

• MicroStrategy’s Bitcoin Investment: MicroStrategy has significantly increased its Bitcoin holdings, now exceeding 402,000 bitcoins valued at over $38 billion, pushing the company’s market value to nearly $90 billion.
• ETFs’ Performance and Risks: While investors are flocking to these ETFs, they have recently underperformed. Jack Pitcher explains that these ETFs utilize leverage and derivatives to target double the daily return of a highly volatile stock tied to Bitcoin’s price fluctuations.
• Market Risks: The inherent volatility of both MicroStrategy’s stock and Bitcoin poses substantial risks, potentially leading to severe losses if Bitcoin's value declines.

Notable Quote:

“We’ve seen several people call these funds the most volatile ETFs in the entire market, just at their base level.”
— Jack Pitcher [01:44]

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U.S. Manufacturing Sector and Steel Tariffs

Reporter: Bob Tita
Timestamp: [04:24] - [05:35]

The episode transitions to the U.S. manufacturing sector, which has experienced an eighth consecutive month of contraction in November, according to the Institute for Supply Management. Despite a slight improvement from October, the Purchasing Managers' Index remains below the 50-point threshold, indicating ongoing challenges.

Key Points:

• Manufacturing Contraction: The PMI fell to 48.4 in November from 46.5 in October, reflecting persistent struggles in the industrial sector.
• Steel Industry’s Stance: Many U.S. steel manufacturers support President-elect Donald Trump’s tariff policies and are advocating for additional tariffs on steel imports from countries like the UK, the European Union, and Japan.
• Historical Context: Drawing parallels to the 2018 tariffs imposed by Trump, Bob Tita explains how these measures previously boosted steel prices, profits, and domestic production.

Notable Quotes:

“What they would like is tariff extended to some of the countries that had their tariffs scaled back under the Biden administration.”
— Bob Tita [04:47]

“Steel in particular has become sort of a preoccupation for both the Trump and Biden administration.”
— Bob Tita [05:08]

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Elon Musk’s Influence in the Trump Administration

Reporter: Keech Hagee
Timestamp: [06:27] - [09:35]

A significant portion of the episode is dedicated to discussing Elon Musk’s burgeoning influence within the incoming Trump administration and the concerns it raises among his business rivals. Musk’s substantial financial contributions to Trump’s campaign and his appointment to the Department of Government Efficiency position him as a powerful figure with the potential to impact his competitors.

Key Points:

• Musk’s Political Connections: Musk has invested $200 million in Trump’s campaign and holds a key role in an advisory panel, granting him unprecedented access and influence.
• Rivals’ Concerns: Prominent figures like Sam Altman (CEO of OpenAI), Bill Gates, Mark Zuckerberg, and Jeff Bezos are apprehensive about Musk’s potential to leverage his political connections to disadvantage them.
• Potential Impacts: Musk could influence cabinet appointments and regulatory actions that may target his competitors, such as pushing for antitrust scrutiny against companies like Google and Facebook.

Notable Quotes:

“He loves talk about enemies. He’s very energized by having enemies.”
— Keech Hagee [00:31]

“Musk has been sleeping at Mar-a-Lago. He is in the inner circle.”
— Keech Hagee [07:53]

“He has the ability to enrich himself and hurt his rivals.”
— Keech Hagee [08:48]

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Texas’s Blueprint for Border Enforcement

Reporter: Elizabeth Findell
Timestamp: [10:19] - [11:24]

The episode highlights Texas’s proactive measures in immigration enforcement, which could serve as a model for the Trump administration’s policies. Texas Governor Greg Abbott has spearheaded extensive initiatives to tackle illegal immigration, positioning the state as a key player in the federal administration’s plans.

Key Points:

• State Initiatives: Texas has deployed thousands of National Guard members and state troopers to the border, implemented misdemeanor trespassing charges for migrants, and constructed various barriers, including walls and buoy barriers in rivers.
• Financial Commitment: Over the past three and a half years, Texas has invested more than $11 billion in these border enforcement projects.
• Collaboration with Federal Government: Texas is offering 1,400 acres of land to the federal government for deportation facilities and is open to providing additional support, showcasing a willingness to collaborate closely with the incoming administration.

Notable Quote:

“The state has spent more than $11 billion on this over the last three and a half years.”
— Elizabeth Findell [10:19]

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Business News: Intel’s Leadership Change and Super Microcomputer’s Audit

Reporter: Tracy Hunt
Timestamp: [11:24] - [12:56]

In the business segment, Tracy Hunt reports on significant developments in the tech industry, focusing on Intel’s abrupt CEO departure and Super Microcomputer’s resolution of its audit issues.

Key Points:

• Intel’s CEO Departure: Pat Gilsinger steps down after four years as Intel’s CEO. Interim co-CEOs, CFO David Zinsner and Michelle Johnston Holthaus, have been appointed to steer the company forward as it grapples with its missed opportunities in the AI sector.
• Super Microcomputer’s Audit Resolution: Super Micro has concluded a thorough review, finding no evidence of fraud or misconduct related to recent accounting issues that affected its stock. The company plans to appoint a new CFO to enhance corporate governance and support future growth, following the resignation of Ernst and Young as its auditor.

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Conclusion

Tracy Hunt wraps up the episode by summarizing the key stories covered, emphasizing the significant political and economic shifts underway. The discussions provide valuable insights into how industry leaders and political figures are navigating the complexities of power, market volatility, and regulatory challenges.

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Produced by: Pierre Bienname and Anthony Bansi
Supervising Producer: Michael Kosmitis
Host: Tracy Hunt

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For more updates, tune in to WSJ What’s News twice daily on weekdays, with special editions on Saturdays and Sundays.

Transcript

[Cushman and Wakefield Representative]

When we never settle for the world that's been built, that's when we drive it forward. At Cushman and Wakefield, Better never settles.

[Tracy Hunt]

How Texas could offer a blueprint to the incoming Trump administration's plans for a mass deportation of migrants and why rivals of Elon Musk worry about the power he'll have in the new administration.

[Keech Hagee]

He loves talk about enemies. He's very energized by having enemies. That's what people close to him say.

[Tracy Hunt]

Plus, Intel's CEO is stepping down after four years. It's Monday, December 2nd. I'm Tracy Hunt for the Wall Street Journal. This is a PM Edition of what's the top headlines and business stories that move the world today. Investors have flocked to a pair of turbocharged exchange traded funds that seek to amplify the daily return of MicroStrategy even as the risks aren't widely understood. You might remember us telling you about MicroStrategy last week, the software company that has turned itself into a bitcoin buying machine. Well, today it announced that it snatched up another $1.5 billion of bitcoin last week. It now holds more than 402,000 bitcoins worth more than $38 billion. Bullish investors have swelled the company's market value to almost $90 billion, or more than twice the value of the IT holds. But these ETFs haven't been working as intended in recent days. Jack Pitcher covers markets for the Wall Street Journal.

[Jack Pitcher]

These are new products that first got approved by regulators about two years ago, and they use derivative bets or borrowed money to try to achieve a target leverage on the underlying stock. What's different here with these microstrategy funds, which are new, they just launched a couple of months ago, is that the dealers that these fund managers use aren't offering them swap exposure for them to get the return that they're targeting. There's risks involved with the fund managers and some of the big banks that often provide this kind of exposure aren't willing to do so. So I've seen several people call these funds the most volatile ETFs in the entire market, just at their base level. Even if they are working as intended. We're looking at a product that is trying to double the daily return of an extremely volatile stock that itself trades related to how Bitcoin is trading. And Bitcoin is a very volatile asset that's not backed by any hard assets. And all of this is leading to a very volatile asset that could get completely wiped out if Bitcoin started to fall a little bit.

[Tracy Hunt]

US markets were mixed today. The S&P 500 closed about 0.2% higher and the Nasdaq was up about 1%, kicking off the first trading session of December on a high note. After November's hot streak, the Dow ended the day down about 0.3%. US manufacturing activity contracted for an eighth straight month in November, albeit at a less sharp pace. Reflecting the challenge for the incoming Trump administration to revive the struggling industrial sector, the Institute for Supply Management today said its purchasing manager's index of manufacturing activity remained in contraction territory. It was 48.4 in November, up from 46.5 in October, which marked a low for 2024. A value under 50 indicates a contraction. Some US steel manufacturers are not only backing President elect Donald Trump's plans for tariffs on Mexico and China, they want him to go even further. The Steel Manufacturers association today called for tariffs to be reimposed on steel from the UK The European Union and Japan. Bob Teta covers manufacturing and the metals industries for the Wall Street Journal. Bob, why are so many steel makers in the US So enthusiastic about getting more tariffs on more countries?

[Bob Tita]

Back in 2018, then President Donald Trump imposed tariffs on imported steel and aluminum. The steel industry credits those tariffs with helping them boost profits, boost steel prices, expand payrolls, and ultimately expand production in the United States.

[Tracy Hunt]

So what do steel makers want the new administration to do?

[Bob Tita]

What they would like is tariff extended to some of the countries that had their tariffs scaled back under the Biden administration. They would like those countries to be sort of reinvestigated or renegotiated those quota amounts.

[Tracy Hunt]

And is the industry hopeful their calls will be answered?

[Bob Tita]

The steel industry and the aluminum industry to a lesser extent have both been kind of favorite industries of the previous Trump administration, and there's some expectation that they will be again. Steel in particular has become sort of a preoccupation for both the Trump and Biden administration, something that the steel executives are basically tuning into.

[Tracy Hunt]

That was our reporter Bob Tita. Coming up, why rivals of Elon Musk fear he will target them with his new power in the incoming Trump administration. That and more after the break.

[Cushman and Wakefield Representative]

There are bigger problems to outthink, greater challenges to outdo. When we never settle for the world that's been built, that's when we drive it forward towards better outcomes and better futures for our clients and our communities. At Cushman and Wakefield, better never settles.

[Tracy Hunt]

After plowing $200 million into President elect Donald Trump's campaign and being appointed to the newly created Advisory panel, the Department of Government Efficiency. Elon Musk is poised to have significant influence not only over how his six companies interact with the federal government, but also over how the new administration treats his business rivals. These rivals are now concerned that as Musk has reached an unprecedented level of power for a private citizen, he continues to nurse his own private business grievances. WSJ reporter Keech Hagee covers media and marketing. Keech who's on the Musk enemies list?

[Keech Hagee]

Well, the list is long, but these days near the top of it is OpenAI CEO Sam Altman, who Musk Co founded OpenAI with and who has been suing him over this year after things went sour. Also on the list are folks like Bill Gates and Mark Zuckerberg and Jeff Bezos, all billionaires that he has tussled with over the years, as well as rival car companies and space companies who are really stressed out about this new position he holds.

[Tracy Hunt]

He posted on X that he's President Elect Trump's first buddy. From his position as first buddy, how can Musk potentially hurt some of these companies and these individuals?

[Keech Hagee]

Musk has been at President Elect Trump's side almost nonstop since the election. So he is sleeping at Mar a Lago. He is in the inner circle. And so at this moment, during this transition, he's a very influential voice that other folks are having to go through in some cases to get to President Elect Trump. So just being influential about what kind of cabinet picks or other kind of administrative appointments are happening is a big part of it. He's publicly pushed for folks like Brendan Carr to lead the fcc, which does have dris over some of his companies. And longer term, there are concerns across rival tech companies that he is going to invite antitrust scrutiny against folks like Google and Facebook rivals to X and use the levers of power across many federal agencies to perhaps at least he has the ability to enrich himself and hurt his rivals.

[Tracy Hunt]

So a Trump campaign spokesperson said the president will serve all Americans, and Musk himself did not respond to requests for comment. But he has said on X that he hasn't asked Trump for any favors, nor has he been offered any. But I'm sure his rivals are still concerned. So what are they doing about it?

[Keech Hagee]

Well, number one, they are trying to back channel and form relationships with the Trump inner circle that do not necessarily involve him. We've reported that since the election, Sam Altman, through a friend, has had a meeting with Howard Lutnick, who is the head of Trump's transition team and who has been tapped by him to to lead the Commerce Department and then, of course, hiring lobbyists to try to build power and influence in Trump circle.

[Tracy Hunt]

That was our reporter Keech Hagee. Thank you so much, Keech.

[Keech Hagee]

Thank you.

[Tracy Hunt]

As president elect, Donald Trump is preparing for border restrictions and deportations, which were the bedrock of his election victory, Texas, the state that has pioneered extreme immigration crackdowns, is reaching out to lend a hand. In recent weeks, Texas leaders offered some 1,400 acres of land on the border to the federal government for construction of deportation facilities and said the state was looking to offer more. Elizabeth Findell, a WSJ reporter based in Texas, says the state could provide a model for the Trump administration in 2021.

[Elizabeth Findell]

Texas Governor Greg Abbott started this very sweeping project to address illegal immigration at the southern border and also to challeng federal government's authority over border and immigration issues. The state has done that on a number of fronts. They have surged thousands of National Guard and state troopers to the border for long deployments. They have started this system of arresting migrants on misdemeanor state trespassing charges. They have started programs to build state barriers from border wall to these buoy barriers in the river itself. And all told, the state has spent more than $11 billion on this over the last three and a half years. You know, it has created some things that the Trump administration could use, and the state has shown that they are eager to work with them.

[Tracy Hunt]

In business news, Intel CEO Pat Gilsinger has departed abruptly after four years at the helm. Intel was once a dominant name in the semiconductor space, but it largely missed out on the AI boom. While rivals like Nvidia and Advanced Micro Devices have zoomed ahead. The company named CFO David Zinsner and Michelle Johnston Holthaus, general manager of Intel's client computing group, as interim co CEOs. And server maker Super Microcomputer said a final review showed no evidence of fraud or misconduct by its management or board relating to accounting issues that have dragged on the stock in recent weeks. In October, Ernst and Young resigned as the auditor for Supermicro, saying it could no longer rely on management's representations. In response, the company created a special committee which completed the review on the committee's recommendation. Supermicro will also appoint a new CFO to strengthen corporate governance and support the company's growth. And that's what's news for this Monday afternoon. Today's show was produced by Pierre Bienname and Anthony Bansi with supervising producer Michael Kosmitis. I'm Tracy Hunt for the Wall Street Journal. We'll be back with a new show tomorrow morning. Thanks for listening.

[Cushman and Wakefield Representative]

There are those among us who never run away from problems. Instead, they run to them. They may not always appear where we might expect, but they touch almost everything we do, turning obsolescence into opportunity, driving success at every twist and turn, and solving problems for communities big and small. But now is no time to settle. The world needs these people more than ever because there are bigger problems to outthink, greater challenges to outdo. When we never settle for the world that's been built, that's when we drive it forward towards something better. Better outcomes for clients, better opportunities for colleagues, and better futures for our communities. At Cushman and Wakefield, better never settles.