Who Will Replace Jerome Powell? Tesla Hit with Securities Fraud Suit & AMD’s Q2 Earnings

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Speaker 13 Today's number?

Speaker 13 54.

Speaker 13 That was the percentage return of Nancy and Paul Pelosi's investment portfolio last year, more than double the return of the S ⁇ P 500.

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Speaker 13 Welcome to Profit Markets. I'm Ed Elson.
It is August 6th. Let's check in on yesterday's market vitals.

Speaker 13 The major indices declined after weaker than expected data showed growth in the services sector flatlined in July.

Speaker 13 The data stoked stagflation concerns and further complicates the Federal Reserve's path forward. Oil also fell as Russia weighed an air truce with Ukraine.

Speaker 13 And finally, snap shares tanked 15% in post-market trading after reporting earnings that missed expectations, particularly on the global average revenue per user metric.

Speaker 13 Okay, what else is happening? Who will be the next Fed chair?

Speaker 13 That is the question that Wall Street is asking this week as Trump continues to complain about Jerome Powell and the Fed's decision to hold rates steady.

Speaker 13 With Powell's term ending next May, Trump is expected to select the next chair, quote, soon.

Speaker 13 There's been much speculation over the potential candidates for the job, many from within the current Trump administration.

Speaker 13 However, in a CNBC interview yesterday, Trump confirmed that there is a list of four candidates for the job, and Scott Besant is not one of them.

Speaker 13 Trump explicitly mentioned, quote, both Kevins, referring to Kevin Hassett and Kevin Walsh, but he left out the names of the two others on the list.

Speaker 13 It has been widely rumored that Christopher Waller, a current Fed governor, is one of the other candidates running.

Speaker 13 So

Speaker 13 who are any of these people? And why should we care now?

Speaker 13 Well, apparently Trump is weighing whether to install his pick to replace Powell in a soon-to-be vacant Fed governor seat.

Speaker 13 That move would effectively create a shadow chair, someone auditioning for the top job, turning up the pressure on Powell to cut rates and giving Trump a preview of his next Fed chair without the hassle of a full confirmation just yet.

Speaker 13 So let's go through these candidates and let's start with Kevin Hassett.

Speaker 13 So Kevin Hassett's history with the Fed dates back to 1992, when he first started as an economist in the research and statistics department.

Speaker 13 From there, he also served as a consultant to the Treasury Department under Clinton and Bush.

Speaker 13 Around this time, in 1999, Hassett co-authored a book called Dow 36,000, The New Strategy for Profiting from the Coming Rise in the Stock Market.

Speaker 13 The book argued that equities were significantly undervalued and predicted that the Dow would more than 3x by 2004. Ironically, this came out right before the dot-com implosion.

Speaker 13 We, of course, did not see a 3x in the Dow. Instead, it created about 25%.

Speaker 13 And the book was ultimately described by Fortune as the, quote, most spectacularly wrong investing book ever. So not a great start.
I'm sorry to lead with that, but that is what happened.

Speaker 13 And it was a really bad book. He basically claimed that stocks were way undervalued at a time when they were basically the most overvalued they had ever been.
in the history of the stock market.

Speaker 13 So he got that one very wrong. Anyway, what else did he get up to? Well, he was later nominated by Trump to lead the Council of Economic Advisors.

Speaker 13 One of his highlights in that role was a challenge he made to a BLS report. Hassett claimed that wage growth under Trump was actually higher than had been reported.

Speaker 13 And now we're starting to get a sense of why Trump likes this person. A year later, he stepped down from this position.
He laid low for a while. And then COVID hits.

Speaker 13 And Hassett is tapped again by Trump, this time to deal with the pandemic. His job specifically was to help figure out how many people are going to die from COVID.

Speaker 13 Did he have any experience with infectious diseases? No. Did he know anything about pandemics? Probably not.
But anyway, that was his job.

Speaker 13 So he does his research, he builds his model, and he ultimately concludes that COVID deaths will peak in April and then zero out. by May of 2020.

Speaker 13 It obviously turned out to be completely incorrect. And then when this model was released to the public, he again became embroiled in controversy for being so wrong.

Speaker 13 So, anyway, after that, Trump reappoints him to lead the National Economic Council again, this time as director. And now he is one of the frontrunners to be the next chair of the Federal Reserve.

Speaker 13 So, that is Kevin Hassett, the author of Dow 36,000 and the creator of the model that said that COVID would basically end by May of 2020.

Speaker 13 Next up, we have the other Kevin, Kevin Walsh, who is also no stranger to the Fed.

Speaker 13 He served as a member of the Federal Reserve Board of Governors from 2006 to 2011 after being nominated during the Bush administration.

Speaker 13 Before that, Walsh worked at Morgan Stanley in the M ⁇ A division for seven years. He is most known for the role he played in response to the financial crisis.

Speaker 13 In 2008, when the markets crashed, he was known as the liaison to Wall Street. He was essentially the guy who communicated between the Federal Reserve and the big banks.

Speaker 13 He's also been described as the bridge between Ben Bernanke, who was the former Fed chair, and Wall Street. And according to most reports, he did that job pretty well.

Speaker 13 His big mistake, though, was his prediction on inflation. Throughout 2008, he kept predicting that inflation was going to explode.
And instead, the opposite happened. We had deflation.

Speaker 13 And a lot of economists have argued that it was partly our failure to recognize that that contributed to the crisis. Anyway, he finishes up his Fed career.

Speaker 13 He goes to the Hoover Institution to be a lecturer. He joins the board of UPS, and he also joins a business forum to advise the Trump administration on economic policy.
Fast forward to 2025.

Speaker 13 He's now on the Fed chair shortlist, and he definitely knows it.

Speaker 13 He's been very quick to criticize Jerome Powell, to criticize the Fed. Here is what he said on CNBC just a couple of months ago.

Speaker 16 If I were the president, what I'd be worried about is a central bank that is stuck with models from 1978, governance from a prior period, and don't recognize we could be at the front end of a productivity boom.

Speaker 16 And if I were the president, I'd be worried that they might not see it. And they might think economic growth is somehow going to be inflationary.

Speaker 16 I think we were probably in the early innings of a structural decline in prices. Ken sees it on the front lines of real businesses.

Speaker 16 And I think if you look over the period of the next year or two, it's a pretty special moment.

Speaker 13 So that's Kevin Walsh, definitely more qualified than the other Kevin, but definitely a bit of a panderer too. I mean, that is exactly what Trump wants to hear right now, especially on TV.

Speaker 13 And I'm sure Kevin Walsh knows it. Final detail.
He's also married to Jane Lauder, who is the heiress of the Estee Lauder fortune. I don't have much to say about that, but do with that what you will.

Speaker 13 Okay, final candidate, Christopher Waller, who currently sits on the Fed's board of governors, not officially confirmed by Trump, but he is widely regarded as a top contender.

Speaker 13 So why does Trump like Waller for this job? Well, this should give you an idea.

Speaker 17 What does it mean to wait six weeks? Is it that critical? And the answer is probably not. It could be, but it's also the reverse.
Why wait till September if it's just six weeks?

Speaker 19 Right now, now the data the last few months has been showing that trend inflation is looking pretty good even on a 12-month basis so uh i've labeled these good news rate cuts when if inflation comes down to target we can actually bring rates down i've been saying this since about november of 23.

Speaker 19 so i think we're in that position

Speaker 19 that we could do this and as early as July.

Speaker 18 I've always said if you worry about long and variable lags, which everybody always talks about, the whole point of that is to get ahead of it, not wait for it to happen.

Speaker 18 And then take a policy action that takes quarters or months down the road to actually have any impact.

Speaker 13 So there you have it. Christopher Waller, he's basically been going on Bloomberg and CNBC and taking pretty much any TV hit saying that we should lower rates for months now.

Speaker 13 He was also one of the two governors that dissented on the Fed's decision to hold rates last week. And so this, of course, will very much put him in the running in Trump's book.

Speaker 13 As for his resume, before joining the Fed, he was a research director at the Federal Reserve Bank of St. Louis.
And before that, he was a professor.

Speaker 13 He taught at Notre Dame, the University of Bonn, Wash U St. Louis, and Indiana University.
So those are your candidates. Kevin, Kevin, Christopher, and someone else.
We don't know who.

Speaker 13 The two Kevins are the front runners. Christopher is just a rumor right now.
Our pick would probably be Kevin Walsh right now, the second Kevin. He's probably the most qualified.

Speaker 13 Yes, he is a sycophant,

Speaker 13 but you know, they're all sycophants. That's sort of the job here.
If you want to get the job, you don't really have much of a choice. But we'd also like to hear what you think.

Speaker 13 Who do you think the next Fed chair should be? Let us know in the comments.

Speaker 13 Tesla just got sued for securities fraud.

Speaker 13 The claim, led by shareholders, is that Elon Musk and Tesla knowingly overstated its RoboTaxi's abilities and concealed major safety risks, all to prop up the stock price.

Speaker 13 They say Tesla sold the idea that its RoboTaxi service was fully autonomous and ready to scale. In reality, the vehicles still required a safety driver and the public launch was filled with failures.

Speaker 13 And according to the complaint, when those failures were exposed, Tesla's stock dropped more than 6%.

Speaker 13 So.

Speaker 13 Another shareholder lawsuit filed against Tesla. This is becoming something of a theme for the the company.
Tesla's been involved in roughly 2,000 lawsuits all around the world now.

Speaker 13 Here we have another once again being filed by a shareholder. This time it's not about Elon's compensation.
This time it's about the Robotaxi or perhaps the lack thereof.

Speaker 13 As I said, the claim is that Elon and Tesla misled investors. They're saying that Elon overstated the capabilities, understated the safety risk.

Speaker 13 They said it was fully autonomous when it wasn't, et cetera, et cetera. And as a result, shareholders got burned.
Those are the allegations, at least.

Speaker 13 The question, however, the question we would like to answer is whether or not those allegations are valid, whether or not they will actually hold up in a court of law.

Speaker 13 So to help us answer that, our producer Claire spoke with Professor John C. Coffey Jr.
at Columbia Law School. They're suing for an immense amount of money, multiple, multiple billions of dollars.

Speaker 13 There are many obstacles to a successful suit. First of all, we should recognize this case has been brought in the Western District of Texas as part of the Fifth Circuit.

Speaker 13 And the Fifth Circuit is a little bit notorious for being the most hostile circuit in the country to securities fraud litigation.

Speaker 13 They very much are skeptical of securities plaintiffs, and they dismiss a significant percentage of those cases at the outset.

Speaker 13 To get further, it's not hard here to say that these facts might be material, but that's not enough.

Speaker 13 You have to show to succeed not only that material misinformation was misstated or omitted, but you also have to show that it was done with an intent to defraud.

Speaker 13 And that requirement of showing an intent to defraud, or sienter in lawyer's language, is very difficult and is usually the primary obstacle.

Speaker 13 What shows that they just weren't careless? You have to show more than that. You have to show that they had

Speaker 13 clear evidence of an intent to cause damage and injury to the planters class.

Speaker 13 That's usually the death kneel for those suits that are dismissed. I'm not saying they can't succeed, but that's their principal challenge.

Speaker 13 They also have another problem. The stock price after this demonstration was given in Austin only fell about 6%.

Speaker 13 Let's assume that the stock, the demonstration, was something of a disaster, But the stock only fell 6% in many stocks, rise or fall 6% in a single day or two.

Speaker 13 So there is not clear that that decline was caused by the Austin demonstration or that the demonstration really shows that the market was totally displeased and totally giving up on the company.

Speaker 13 It may be that a variety of factors, economic conditions, and other factors relating to Tesla, could have caused that relatively modest 6% percent decline.

Speaker 13 So if you had to put money on it, I think you'd probably bet that this lawsuit isn't really going anywhere. Yes, Elon hyped it up.
Yes, he probably over promised.

Speaker 13 But to Professor Coffey's point, there is a line between over promising and defrauding.

Speaker 13 And in the eyes of the law, it really all comes down to intent and also the plaintiff's ability to prove that intent.

Speaker 13 So can they prove that Elon was was actively lying about the Robotax's capabilities to defraud the Tesla investor base? Probably not.

Speaker 13 This was another case of Elon making vague promises about what is probably possible or potentially achievable. It's the same language he's used throughout the years about many of his other projects.

Speaker 13 It's a vision about what might happen,

Speaker 13 but it's also, you know, hard to say with any real certainty. That's always how he's pitched his ideas.
And that's how he's pitched this one too.

Speaker 13 Now, having said that, the lawsuit does draw attention to a larger point that investors should probably think about. And that is, so far, this robo-taxi has been really underwhelming.

Speaker 13 I mean, to the plaintiff's credit, there is no question. This was one of the most hyped vehicle events of the year.

Speaker 13 And yet, as of today, as of August 6th, we're six weeks into the Robo-Taxi launch in Austin. We've still got fewer than 20 vehicles on the ground.

Speaker 13 They're still only available to a very select group of fans and influencers. And most importantly, they're still being supervised by safety operators that sit in the front seat of the car.

Speaker 13 So put another way, they're not actually autonomous. They still require a human.

Speaker 13 And we know that because we can just look at the vehicles in Austin, but we can also look at Tesla's own user-submitted data, which tells us that the Tesla system still requires human intervention at least every 340 miles.

Speaker 13 So sure, no one is sitting behind the wheel, but someone is sitting in the front seat. And the same can't be said for Waymo.
And why are they sitting in the front seat?

Speaker 13 Well, because someone needs to be there when things go wrong, which by the way, they have.

Speaker 13 You know, we haven't seen any real crashes yet, at least not in Austin. We haven't seen anyone get hurt.
But we have seen these issues that were stated in the lawsuit.

Speaker 13 Speeding, driving over curbs, stopping in the middle of an intersection, breaking foreshadows, etc., etc. All of those complaints are real.

Speaker 13 Now, the Tesla bull might say, oh, you're nitpicking,

Speaker 13 you're arguing over nothing.

Speaker 13 And, you know, maybe that's true, but I would also argue that when you're at 20 vehicles and your competitor is at 1500 vehicles, or when you're in one city and your competitor competitor is in five, when you're doing a few hundred rides a week and your competitor is doing a quarter of a million rides a week.

Speaker 13 I would argue that under those circumstances, yeah, it's okay to nitpick. It's okay to look at what's happening and say, you know, this isn't that impressive.

Speaker 13 What is the plan here? What is the path forward? So look, this lawsuit probably won't go anywhere. It's probably just a money grab, to be honest.

Speaker 13 But it does raise a valid point about Tesla, which is that the robot taxi simply has not lived up to the hype. And that isn't a value judgment.

Speaker 13 All you have to do is look at the numbers or look at the videos or just look at the safety operators in the front seat. And it will be very clear to you that that is simply the truth.

Speaker 13 After the break, a look at AMD's second quarter earnings. Stay with us.

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Speaker 13 We're back with Prof Dew Markets. Chipmaker AMD delivered mixed results in its second quarter earnings report.
The company narrowly missed on EPS.

Speaker 13 However, revenue was a beat, up 32% year over year, with data center sales up 14%

Speaker 13 to $3.2 billion. That is solid growth, though also modest when you compare it to NVIDIA's $80 billion in data center revenue last quarter, up 73%

Speaker 13 year over year.

Speaker 13 US restrictions on advanced chip exports to China also impacted gross margins, leading to $800 million in inventory-related charges.

Speaker 13 As we previously discussed, those restrictions have been lifted, but AMD's application to resume selling into China is still under review.

Speaker 13 Looking ahead, AMD offered a strong forecast, guiding revenue nearly 5% above estimates, and that's excluding any sales of advanced chips to China.

Speaker 13 However, it warned that its access to the Chinese market remains uncertain. The stock is down around 3%

Speaker 13 after hours at the time of this recording. For context, AMD is the best performing chip stock of 2025, up 45% year to date.
Prior to these earnings, it's outpaced NVIDIA's 30% rise.

Speaker 13 Still, it's got a long way to go. NVIDIA has roughly 95% market share in the GPU market.
AMD is just 5%.

Speaker 13 So joining us now to break down these earnings and what they tell us about AMD's path forward is Patrick Moorhead, founder, CEO, and chief analyst of More Insights and Strategy.

Speaker 13 Patrick Moorhead, thank you for joining us.

Speaker 15 Great to to be here. I did your show, a long version of the show, Profity Markets, and it's great to be back.

Speaker 13 It's great to have you back. We loved having you, and

Speaker 13 we're glad you're coming back. So we wanted to get your views on these AMD earnings, which just came in.

Speaker 13 Let's just start with your initial reactions. What did you think of the report? What jumped out to you?

Speaker 15 Yeah, I think the biggest things that jumped out is, first of all, they beat on the revenue side by about $300 million.

Speaker 15 It's interesting,

Speaker 15 depending on whether you're using FactSet or LSEG,

Speaker 15 they either hit or missed on EPS, but they upsided on the guide. So I think all in all, a really good quarter.

Speaker 15 And, you know, I think, you know, the challenge and the opportunity for AMD is that everybody's comparing you to

Speaker 15 NVIDIA.

Speaker 15 But I mean, listen, revenue is up 32%.

Speaker 15 They had record CPUs across Epic and Ryzen, which is on the client side. They had game console growth, which that has been elusive, right?

Speaker 15 There was this huge buildup prior to the pandemic and inventory is being burned off.

Speaker 13 You mentioned that it's being compared to NVIDIA, and that's certainly what I do. I think of AMD as the other chip company.
Yeah. Is that a mistake? Should we not be comparing it to NVIDIA?

Speaker 13 That's certainly how I think of it.

Speaker 15 I mean, listen, when it comes to data center AI GPUs, there are two players. There's NVIDIA and there's AMD.

Speaker 15 Absolutely, we should be comparing. And then on gaming GPUs, an AMD is

Speaker 15 more successful on the console side. NVIDIA is more successful on the discrete GPU side.
But when it comes to the CPU business, which is very,

Speaker 15 very much still an important and growing business,

Speaker 15 NVIDIA is kind of in that market related to

Speaker 15 the ARM-based processors that they put up

Speaker 15 in their GPU racks. But there isn't as much overlap from a business point of view as most people would think.

Speaker 15 But when it comes to markets, absolutely, because everybody wants to talk about hyperscaler, CapEx, and GPUs for AI.

Speaker 13 Yeah, it sounds like we're getting so obsessed with GPUs, we're forgetting that there is this other thing called the CPU, which is also pretty important in our economy. Having said that, though,

Speaker 13 you know, I just look at the

Speaker 13 valuation of AMD. One, best performing chip stock of 2025.
It's actually outperformed NVIDIA. Yeah.
And two, trading at a higher forward PE multiple. It's at 45, compare it to NVIDIA at 40.
So

Speaker 13 even if they're behind in terms of the GPU and even if their growth on the data centers is slower and they're doing a lot less in revenue, Wall Street still is very excited about this company.

Speaker 13 So what is that all about? What are all the investors so excited about when it comes to AMD and seemingly more excited about than they are when it comes to NVIDIA?

Speaker 15 Yeah, I think it's from a growth perspective. The big pop from AMD came after their advancing AI event that

Speaker 15 I had attended personally, where they came out with not only gave more details on this MI350 and MI355,

Speaker 15 but they also gave more details on them entering what's called the rack scale. So where instead of a fungible unit of sales being a GPU block,

Speaker 15 it is actually a complete rack, which, you know, about one generation behind NVIDIA, but investors got super excited about that.

Speaker 15 The one thing that was weighing on the stock prior where it saw the big bump is

Speaker 15 before the big bump was AMD stopped distinctly calling out the size of their data center GPU business. So in 2024, they went from pretty much zero to about 5 billion.

Speaker 15 And, but there was nothing else. There were no details for 2025.

Speaker 13 So

Speaker 15 people were a little hesitant to go in it. And, you know, from a revenue perspective,

Speaker 15 well, a market cap perspective, NVIDIA is more than 10 times the size of AMD,

Speaker 15 but the revenue disparity is lower,

Speaker 15 which just, let's let's say you're doing uh valuations on a multiple of revenue or or momentum. You can make the case that AMD still has some room to grow.

Speaker 13 Is is a trillion-dollar market cap in the cards with AMD?

Speaker 13 Is that something that investors are thinking about? Is that the idea to become uh and join the leagues of NVIDIA, or is that too far off?

Speaker 15 So, I'm sure it is, but to do that, uh, AMD would need to. So just in terms of raw numbers, AMD is about 5% market share of the enterprise data center, either GPU or accelerator market.

Speaker 15 Right now, it looks like this year AMD is putting enough capacity in to get about 10, 11%

Speaker 15 market share.

Speaker 15 And even though NVIDIA is still growing, I believe that

Speaker 15 they are planning to take market share.

Speaker 15 But to get to that trillion dollar mark, I believe that not only would the market have to grow, which I do think it's going to grow for the next 18 months within hyperscalers, but it would have to take additional market share away from NVIDIA,

Speaker 15 which would likely have to happen in the 2026

Speaker 15 timeframe when AMD is bringing these rack scale solutions to the table that not not only contain the CPU, but CPU, GPU,

Speaker 15 networking, and all of the racks, the rack

Speaker 15 to go with it in a very similar way that NVIDIA is doing today with Blackwell.

Speaker 13 Just before we wrap up here, I'd like to get your thoughts on the CEO that we don't hear as much about. We hear all about Jensen Huang all the time.

Speaker 13 We hear a lot less about Lisa Su, who is the CEO of AMD. She's She's been the CEO since 2014.

Speaker 13 I'd love to just hear more from you about who she is,

Speaker 13 about the direction she's taking the company. And final thing that I want to get your reaction to, which I also learned recently, is that Lisa Su is Jensen Huang's cousin.

Speaker 13 What is that about?

Speaker 15 Yeah, so yeah, there's a lot of market cap in that related family

Speaker 13 tree, right?

Speaker 15 Okay. And here's the thing.
Lisa, I've known Jensen since, let me see,

Speaker 15 1998, and I've known Lisa for about 15 years.

Speaker 15 And

Speaker 15 Lisa is very conservative.

Speaker 15 She is a show-me person, meaning she's not going to make boisterous claims that she doesn't have a very high confidence. And this is why, quite frankly, I think that

Speaker 15 she's not giving

Speaker 15 a specific number for GPUs in 2025 because she doesn't know for sure yet.

Speaker 15 And there are these bake-offs, right, with the hyperscalers. She's very execution-oriented.

Speaker 15 And this is this, I think, her and Jensen are very similar in that. And she's very command and control, meaning

Speaker 15 she will very quickly make decisions

Speaker 15 that are important.

Speaker 15 Now,

Speaker 15 very disciplined. You must execute in the Lisa Sue world.
And this is why, quite frankly, one of the reasons that AMD went from almost bankrupt, okay, with three months cash.

Speaker 15 The story said six, but I'm here to tell you it was three months cash. They came out with an architecture called Zen Architecture on CPUs that literally brought them them back

Speaker 15 from the dead.

Speaker 15 They used to just have a game console business. Servers, they stopped selling those chips.
GPUs were nominal, but

Speaker 15 she was the leader who brought this company back from the dead. And

Speaker 15 a lot of people don't remember that side of AMD. They much rather say, well, wait a second, why aren't they up there with NVIDIA?

Speaker 13 Well, when NVIDIA was developing cuda for the past 15 plus years amd was was trying to uh survive yes exactly and i think we're gonna have to have another conversation at some point about what this cousin relationship is i'm still suspicious i don't understand how that's possible but for now we'll table it lisa's a great person and we love her and jensen um thank you very much uh for joining us again patrick hope to have you on again soon thanks bye bye bye Bye-bye.

Speaker 13 That was Patrick Moorhead of More Insights and Strategy. Okay, that's it for today.
Thanks for listening to Prof View Markets from the Vox Media Podcast Network. I'm Ed Elson.
I'll see you tomorrow.

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