Closing Bell - Closing Bell Overtime: Elon Musk Round 2; Zimmer Biomet CEO On Health Care Changes When We Live Longer 5/20/25

Episode Date: May 20, 2025

Elon Musk returns for unexpected second sit-down with our David Faber. The wide-ranging interview touches on xAI, securing power for AI, the battle for chips supremacy and more.  We have instant takeaways with Walter Isaacson, author of Elon Musk, for a deeper look at the man behind the headlines then Roth Capital’s Craig Irwin breaks down the stock implications for Tesla and the EV space. Plus, market sentiment check with Wells Fargo’s Scott Wren and Payne Capital’s Courtney Garcia and Zimmer Biomet CEO Ivan Tornos from the CNBC CEO Summit.

That now marks the end of regulation, but guess what? Surprise, Elon Musk just sat back down in front of our cameras. Let's get back to our David Faber with Elon Musk. John, thank you. And yes, it is a rarity to have sort of a twofer, a nice little intermission. Elon Musk joining me again here at the Gigafactory in Austin. Thank you for coming back. So many things we didn't get to.

We were discussing Tesla, obviously. It's rare that I get this sort of interregnum. Gigafactory in Austin. Thank you for coming back. So many things we didn't get to. We were discussing Tesla. Obviously, it's rare that I get this sort of interregnum. So let me just come to a question some people started to have after our last conversation seemed to come up. Why doesn't Tesla buy Uber? There's no need because we have a large number of cars, we have millions of cars that will be able to operate autonomously. And I should say that it's a combination of a Tesla-owned fleet and also enabling Tesla owners to be able to add or subtract their car to the fleet. So that existing Tesla owners will be able to earn money by adding their car to the fleet for autonomous use. And I think it's maybe possible for Tesla owners

to make more in allowing their car to be added to the self-driving fleet, then they cost them in the lease. And that's why I consider it sort of a business model. It's some combination of Airbnb and Uber. Just like Airbnb, you can rent out your spare bedroom or your house if you're not using it, and make money on it. And that's what we expect

to Tesla customers to be able to do. Right, and as this scales up, you obviously, you said earlier, you feel like you have the logistics ability and the ability to create the app as well, of course, and anything else around that that needs to occur. Yeah, I don't think we're missing anything. It tells us all the ingredients necessary to offer a vast self-driving fleet overnight.

Yeah. While I'm on the subject of deals, and this will take me actually to XAI, I'll go a few places, but I did note earlier in an interview you did earlier today not with me you're busy man you do a lot of different media during the day sometimes yeah a lot going on yeah you'd indicated that you would like more control at Tesla yes I mean really just enough control to not get ousted by activist investors at some point in the future yeah so that So that's what I've said is like something. You've said that before. Yeah, no, I've said it's nothing new,

which is that around the sort of 25% level, you know, that means I can certainly be thrown out if I go crazy. But it really requires, you know, you know, like, that's the number that I feel comfortable at because that's where I have some control but not so much control that I can't be thrown out. Right, I understand.

You want 25 is like negative control. There's no real way at that level that you could be. No, you can if you're terrible, and if I'm destroying the value of the company, or I've just gone flat out crazy. But if you say, it's not real control. I mean, real control would be like, say, Larry and Sergey at Google.

Anyone who has majority voting control, which I wouldn't have. No, understood. Zuckerberg's got it, Larry and Sergey, I know. Yeah, yeah. There are a number of these companies where there is absolute voting control. You can commit murder and be in prison and control the country. Your economics are the same as your vote, by the way.

In this case, yes. But I'd be happy to separate that, but the exchanges that I'm not allowed to. I know, I know they do. You know, you mentioned destroying the company, and obviously you're not doing that, but to sort of finish where we were talking about earlier, you don't feel like you've damaged the company though. You know, again, I come back to,

I wanna move on to XAI as well, but 14 billion in EBIT in 2022, last year was 7.659 in EBIT. Your gap operating margins obviously are down. Sales in all the markets last quarter were down. Do you see a turnaround coming? Do you look at yourself in the mirror and go, man, you know, I got to do better? I got to be better? Look, I think one can sort of look at individual quarterly results and that's neither here nor there.

As I mentioned earlier, we did a massive global retooling of all the factory lines for the Model Y, which is almost, it's the majority of our vehicle sales is the Model Y. And Model Y is the best selling car on earth of any kind. So obviously, you know,'re retooling the factories. And a nice looking new model here too, right? Yeah. It looks like a transformer, actually. I know.

Of course, our camera can't capture it. Sorry. That's the shot. There it is. Optimus subprime. So really, the best indicator of the Ford value of the company is the share price of the market cap. And that's very strong right now.

No, and it's rebounded to over a trillion dollars, obviously, it's up sharply over the last year. A lot of it has to do, though, as we said earlier, with Autonomous, the Robo taxi, and I keep pointing behind me, our viewers can't see it, but Optimus, the robot. Yes. You said recently tens of billions of robots,

but that's decades away. At least one decade away. It's got to be more than that. It's gonna grow very fast. Why do you think that? I think I think humanoid robots will be the biggest product ever. The demand will be insatiable. You said that. Everyone's gonna want one. It's like, who wouldn't want their own personal C3PO R2D2? Everyone's going to want one. You've said that and your goal, you've also said it's to produce a million robots, I think by 2030. That's what I had you on the record as saying.

I think that's a reasonable target. And then start towards sustainable abundance, which you can get into. But I wonder, we've been talking about autonomous and how long it takes to train the automobile to be able to be the equivalent of it or exceed human capabilities. But what about these robots to the extent that how much training are they going to need

to actually be able to do various different types of tasks? Is that, isn't that something that's going to take a long time? Yes, it's going to take a lot of compute resources and it'll take time. I think there's certain threshold breakthroughs that we think we can achieve where if optimists can watch videos, YouTube videos or how-to videos or whatever, and based on that video, just like a human can, learn how to do that thing, then you really have task extensibility that is dramatic. Because then it can learn anything very quickly.

So I think we'll get there in the next week. We're not there yet, though. We're not there yet though. We're not there yet. You're relying on a significant uptick in terms of learning and training and computing. That's why I'm calling it a very significant threshold would be the ability to learn from watching a video. Right. As opposed to watching a human, right? Or having a human sort of train it right now with the

Yeah, I mean Right right now. We're really we're training optimists to do like primitive tasks where a human in a kind of a what's called a mocap suit is And sort of cameras on the head is Moving in the way that the robot would move to say pick up an object or open a door or the basic tasks, throw a ball, dance. And we need to, I think that's needed to sort of bootstrap the intelligence so you can have the basic functions.

Then where I think it gets very interesting, and very much like humans, is that you want the robot to self-play. So you say, how does a child learn? Well, a child has toys, a child plays with the toys, plays with the blocks, at some point figures out how to put the triangle

in the triangle hole, and the circle in the circle hole, by doing it over and over again. this is the self play. Once you have a lot of robots you can do this self play which is that you just put the robot in a room with toys and and have the robot play with toys. And it will learn. Yeah and and you have to have a reward function say like okay the goal of the robot is to put you you know, that classic child's toy, you put the circle in the circle hole, the square in the square hole, triangle in triangle hole, and keep doing it until it works. And the reward function is succeeding.

And there are no advances needed to accomplish that now? I mean, no advances in AI or just compute and things of that nature that can happen? There are some advances needed, but I don't think these are insurmountable. I think we can solve these things in the next few years. Okay, so at that time when millions of these things are coming off of a line like we just saw with cars, they're gonna be fully autonomous. They're gonna come off, and I mean, the way you've described it,

they're gonna be able to come in my house and I'm gonna be able to say, all right, do the dishes. Now I need you to be fully autonomous. They're going to come off and I'm going to be able to say, the way you've described it, they're going to be able to come in my house and I'm going to be able to say, all right, do the dishes. Now I need you to walk the dog. Absolutely. Hold the baby. In fact, it'll figure out what you probably want and do what you probably want without you even having to ask. How many GPUs are you going to need for that?

Well, quite a few GPUs. We do have our own program called Dojo for training, which I think will be helpful. Right now it's contributing about 5% towards self-driving, right? Yeah. Is that the one in New York, in New York State? Yeah, it's in New York. So, we expect to still buy a lot of GPUs from Nvidia, some from AMD and maybe from others. And as long as Nvidia is better than what we make, we'll keep buying from Nvidia.

Is that the case right now? It is, yeah. Yeah, I mean you're obviously buying them for XAI, the Memphis. Big time. Big time, right? Yeah, XAI is building the most powerful training cluster in the world right now, which is over 200,000 GPUs training coherently. You're at 200,000 already now, there in Memphis, that facility that you put together.

Yes. And where are you going? And the, well, we'll be at the million GPU level in a location just near Memphis. Wait, a million GPUs for a new location or 800,000 additional GPUs? A million of the next generation GPUs. So Blackwell? Well, yeah. Wait, are you building that now? Yeah. How are you powering that? It's a gigawatt class system. What, do you have the power lined up for that? Yeah. You do? Natural gas? It is a hard problem. Which is the hard problem?

Getting a gigawatt. Bringing a gigawatt online and actually having the gigawatt of power be reliable because you get the power fluctuations in the grid and that what not. So we're using, actually I just posted something online today which is a whole bunch of Tesla

MegaPaks batteries that are important for power conditioning the grid. So the GPUs do not like power fluctuations. They like a power steady. So and then if there are sometimes there's slight brownouts or if there's a blackout you want to be able to carry through that like an uninterruptible power supply. So we've got a lot of mega packs there to support that. It'll be the first gigawatt class training cluster in the world and the most powerful training cluster. When's that going to be done?

Hopefully in about six months, maybe nine months. And that's largely powering ROK? Yes. It's just powering Grok. Yes. It's just powering Grok. Which continues to advance. I mean, I use it frequently. I saw you using that on the joke,

was it with Rogan when you were using that mode? What is that mode where it's all sassy and curses all the time? I mean, if you want to have fun at parties, Grok unhinged mode is pretty funny. Yeah. It's next level, yeah. Is power gonna be the gating issue for our ability to continue to advance in AI?

Yeah, I think we're I mean a few years ago I made a very obvious prediction which is that the limitation on AI will be chips And it's still chips kind of chips today Then it will be electrical equipment chips today, then it will be electrical equipment because you need to take power that might be at 300,000 volts all the way down to 400 volts for the computer. So you need step-down transformers and a lot of them and a lot of cabling and wiring and fuses and a lot of transformers essentially. The electrical transformer industry is not used to big changes in demand.

No, there's a shortage of transformers. Literally, there's a shortage of transformers. Then, funnily enough, the AI algorithm is called a transformer. Then our Optimus robot is named after Optimus Prime. That's a transformer robot. It's a lot. We have transformers for transformers for transformers Right, right, but it's the one the one transformer is the one in shortage that the others need And then and then as we solve the transformer shortage, there will be the fundamental electricity generation shortage

And are we there yet? Or are we going to be there soon? We're getting there soon. We are. My guess is people are gonna start hitting challenges with power generation maybe by middle of next year and next year. Even with deregulation and an effort being made to perhaps move permits along more quickly. Yeah, see like how many power plants are getting built and how fast can you build a power plant? Right. China seems to be building them pretty quickly. China is building... China has so many power plants that have been built and are being built. I don't think people quite realize this. I posted on my account just the graph of US power generation versus China power generation. China power generation looks like

a rocket going to orbit and US power generation is flat. So I think by the end of this year, China will have about two and a half times the power output of the United States, and it's headed towards maybe three or four times the power output of the United States. It's funny when you think about China, I mean, EVs, autonomous, we talked about batteries, solar, power generation, by the way, even biotechnology recently, I don't know if you saw Pfizer's licensing cancer drugs.

Yeah. They seem to be, I don't know, I'll ask you the question. Are they ahead of us in certain areas that are important? The United States still has an advantage in breakthrough innovation, But so it's the United States and I think it's it's somewhat of a cultural thing which is that to have breakthrough innovation you have to question authority. That fundamentally you're questioning the conventional wisdom when you do a breakthrough innovation. And in China that they don't generally like to question the authority. It's not as encouraged as it is in the US, questioning authority.

No, but they do seem to be good at finding something and then making it better. Yeah, I do want to emphasize that the sheer number of smart, talented people in China who work very hard is amazing. There's just the sheer quantity of talent. I'm an admirer of China's capabilities. I think most people outside of China do not understand the power of China. It really is something special. Yeah, yeah. You know, in the time we have left, I would like to sort of keep the focus on XAI. First of all, you spoke earlier about wanting more control at Tesla. Would you ever

consider merging XAI into Tesla? It would be a way, obviously, they could issue shares to you and conceivably would increase your overall economics. Is that a possibility? Well, I guess anything is possible, but it would be difficult to speculate about something. You know, Tesla is a publicly traded stock. I would think to get a majority of the minority vote or whatever you might need might be not easy. Yeah.

It's not out of the question, but that would have to be something that the Tesla shareholders would vote would want to vote for you. Understood. So, but it's not something you the question, but that would have to be something that the Tesla shareholders would want to vote for you. Understood. So, but it's not something you're thinking about doing. It's not currently, it's not currently, there are no plans to do so. It's not out of the question, but obviously would require Tesla shareholders' support for that. Another way you could obviously increase your control would be to get that comp plan passed

in Delaware or through the Delaware Supreme Court or a new one. You haven't been paid, I believe, since 2018. So where are you on it? Seven years. Yeah, where are you on it? Seven years with zero pay. Although to be fair, if it goes through, you're going to have an enormous payday.

It'll be fine. It'll be more money than everybody's ever made. Yeah, I suppose so. But I mean, let's just say that if any CEO of the Fortune 500 were to agree to a plan like the one that I agreed to, you should buy the stock of that company immediately. Yeah. No, I remember it at the time. To be fair, the stock was so far, the targets were so far above where the stock was and obviously they were met. Is the board working to your knowledge on another potential plan if in fact the one never gets out of Delaware, the Supreme Court rules against the Chancellor's ruling?

I mean, I don't want to speak on behalf of the board, but I'm sure it's on their mind, but I can't comment on Tesla board deliberations. You said earlier, I mean, you want to stay as CEO. Why not? I've wondered, Elon, given all the heat you've gotten in a lot of ways, why not sort of become like an Ellison-like figure at Tesla? Obviously, you're a lot younger, but still, he's very influential at Oracle. But he's not CEO, and he doesn't get the attention.

He isn't the CEO? No, he's not CEO and he doesn't get the attention. He isn't the CEO? No he's not. Safra's the CEO. Oh okay. Yeah. At least not in title. That's what I'm doing. I think maybe a better term for, I'm a huge fan of Larry Ellison, he's a good friend of

mine, owner. Say again? Owner I think would be, he's the owner of Oracle. Yes he is and he has a lot of it. Finally, I want to... So, the CEO, he's just the owner. He's the owner. Yeah, it's a big percentage.

A lot higher than yours, actually, at Tesla. Yes, a impressive percentage at Oracle. Finally, I want to, I mean, so many things we haven't gotten to, but we're trying to keep to your time. Are we ready for the changes that AI is going to bring to this society? I try in my job every day to sort of follow them. Obviously, they've been pushed aside to a certain extent

by issues of the day, but it's coming fast. It's coming very fast. I mean, I feel like we're in the big bang of the intelligence explosion. Like we're in, we're watching, we have court-side seats to the big bang of intelligence explosion. One thing's for sure, it won't be boring. No. So if it's...

You don't seem to be saying there's a 20% chance of annihilation as often anymore. I, I, well, I think we should always consider that there's some chance of a bad outcome to try to protect against the bad outcome. We don't want to be complacent and say that everything's just going to be fine, there's no chance of a bad outcome. You know, I sort of think of this maybe in movie terms as like, are we in a Star Trek movie or like, are we in a Gene Roddenberry movie or a James Cameron movie? Which movie are we in here? And you could either have a Roddenberry or a Cameron outcome and let's I think in this case

we want the Roddenberry outcome. Yeah and the abundance that may come with it. Elon we got to stop there I certainly appreciate your coming back obviously there's so much more we can talk about so I hope we'll see you again soon. Thank you for your time. Thank you. Elon Musk, CEO of Tesla, still the CEO wants to be. CEO of an insert company name. You're going to be back here more often now?

No, I mean this is mainly, Austin Tesla headquarters is where, is my main residence. You're going to miss the White House at all? My rough plan on the White House is to be there for a couple days every few weeks and to be helpful where I can be helpful. Thank you. All right. That does it from the Gigafactory in Austin. Back to you guys. All right.

David Faber, thank you. That interview with Elon Musk literally going into overtime. Let's talk about what we just heard. Joining me now is Walter Isaacson, Tulane University professor, advisory partner at Pirell & Weinberg Partners, CNBC contributor. He's also the author of the bestselling 2023 biography

of Musk, Elon Musk, many other biographies as well. Walter, welcome. Thank you, John. Good to be with you. Well, uniquely, Walter, welcome. Thank you, John. Good to be with you. Well, uniquely, Walter, after Musk has brought electric vehicles mainstream, pioneered, reusable rocket boosters, revolutionized satellite usage, anything he says sounds possible.

But in 2025, he's also one of the most controversial people on planet Earth. So you've written a lot of biographies about Iconoclast. What's the challenge that Elon Musk faces now as he's arguably more powerful than he's ever been, also more controversial, trying to change driving and the economics of car ownership? I think the big news in the past few days

and especially today with your interview on CNBC, the Qatar Investment Conference, is he's going all in on Tesla now, on Optimus, and also on XAI, on Grok. He's back to his basic companies as opposed to this six-month detour with Doge. And I think that you're seeing a major push all around autonomy, whether it's a robot, whether it's the artificial intelligence being trained in this amazing center that they're building in Memphis, or whether it's the car and full self-driving

and robot taxi. So I think the big news is he's back to being focused on his basics. Walter, in your view, has part of this detour of Musk's, as you put it, been to set the conditions for success in the areas where he's trying to go because regulation, certain kinds of opposition, might have stopped him otherwise.

You know, that's a good question, John, and you get it pretty well, which is that, you know, his big aversion is to regulations and things that are going to stop progress. His rule number one is question every regulation and every rule, and it was during the time of COVID and many things happening that he thought that he had moved from a society of being risk takers to being a society of referees and regulators.

And I think he felt that needed to be blown up, that we needed to clear the arteries of that or we would never innovate. I don't think his detour into government ended up helping his companies, but it did push this idea that we have to have less regulatory inhibitions about innovating, which, by the way, can cut both ways. That can be a bad thing if you go too far. Walter, you spent a lot of time with Elon Musk

as you were writing this book over a couple of years you talked about practically morning noon and night he's someone who bought Twitter now X is seemingly because he recognizes the power of mass communication but yet at the same time he seems like somebody who's willing to say he doesn't care what people think at the same time he's talking about market cap being a big influence over the value of Tesla. A lot of Tesla's market cap,

total value of all the stock is driven, not just by the financials of the company, but what people think, isn't it? Yes, yes, and in some ways he has a superpower, which is he doesn't mind if he's really criticized and vilified. I know that in the interview he talked about how painful it was. But if you look at other people like yourself and myself and maybe Elon's brother Kimball,

you really care about what people are thinking about you. I think that he sort of is defiant, wearing his shield when people are attacking him. And I do think it certainly hurt, in my opinion, the Tesla brand and the Tesla market cap some, but I don't think that really concerned him. Interesting moment to me, many throughout that interview of David Faber's excellent interview but toward the end we're talking about Larry Ellison and Elon Musket said earlier that he wants about a 25% stake in Tesla not enough to have technical control but enough to be very difficult to oust that seems in a lot of

ways to be modeled after what Larry Ellison has at Oracle though I believe his his stake is quite a bit higher than 25%. Is that the way you view it as well, kind of the Larry Ellison, as Elon put it, owner model? Yeah, I think that Elon Musk is a bit of a control freak. I mean, he wants to make sure he has control. And what he's doing is wrapping together his entire ecosystem in this notion of machine

learning, whether it's a robot or the car or XAI. I think it was a really good question that David Faber put of, where are you going to put XAI at some point into Tesla? And he said, well, that's up to shareholders or something. So I think as he pulls all that together, he has said that he is very afraid to have an AI company that could just barge ahead unless he felt he had some control over it. I mean, look, it is a fight with Sam Altman when it came to OpenAI, which they co-founded, I think Musk is creating a huge AI company, a machine learning company, with enormous amounts of data, from the cameras, 8 billion frames from cameras of Tesla, every tweet or ex-posting that goes out, all that

data, and I think he is dedicated to keeping control of the company. Musk was making the argument that we need a nationwide standard in self-driving. Now states' rights have traditionally been popular in the Republican Party. Federal control regulation has not. But in a way, this is a case where Elon Musk wants some centralized decision making, wants something different than a patchwork of state decisions about how self-driving will work. Is that going to be an interesting minefield, you think, or no? Not really. I think whether it be Republicans or Moscow,

probably Democrats as well, you kind of force states' rights until you're against it for some reason. I think that there's probably arguments why states should maybe set their own speed limits, but also we do have federal control even over something like that. I don't see that as being one of the grand philosophical fights of our time

Walter we didn't talk About the satellites and the importance of that from the global technological Perspective how much is that an important piece or not of Elon Musk's? global standing right now and the influence that he has? It's huge. And next week he's standing up Starship, the biggest movable object ever made by humans, for the ninth time. And it will, by an order of magnitude, increase the amount of satellites he can put up. As he said, 90% of all payload to orbit comes from his rockets, and the rest, the other 10% is divided by China, Russia, United States, Europe, NASA, Boeing.

So he has recreated the internet in outer space, and that is a huge part, I think, even when it comes to the ecosystems he's going to create in his other companies. Even when it comes to the ecosystems he's going to create in his other companies Nobody has been able to land rockets upright You cannot actually have a great payload system if you have to throw away the rocket every time you use it once So he's five ten years ahead of others on this one for sure Walter Isaacson. Thank you All right, well let's zero in now on Tesla's stock. Joining me now is Craig Erwin, Roth Capital Senior Research Analyst. He's got a buy rating, $395 price target on the stock.

Craig, I want to play a sound bite for you from the earlier part of, we don't have it? Alright, well one of the things that Elon Musk talked about was a model for self-driving and a service along with it that's a combination of Airbnb and Uber. In other words, people would be able to lease or buy their car and then rent it out to self-drive and drive people around.

How likely is that in the way that you're modeling? And how big of a disruption to the entire industry would that be? So it's in the hopes and dreams. It is not in the financial models. So that would be tremendously disruptive. That would be a straight path to wild success of his autonomous initiative.

So it's something he's working on. It's something he's put a lot of passion into and a lot of engineering dollars behind. But I don't think Wall Street's expecting that before the end of 26 or probably even before the end of 2030. Maybe, maybe 2030, some people are expecting it, but I think consensus expectations are that we have a car that actually works better than Waymo on the road pretty soon, right?

Small number of weeks. And he set the expectation, hundreds of thousands of cars by the end of next year. I don't think anyone was expecting that. I think tens of thousands is probably more in the range of what Wall Street's been looking for, which would be a fantastic success. So the whole idea of an Airbnb-like app, that's Musk stepping into the picture pointing at really where he wants to go and where he's spending his time to actually handle the problems to get there. And my understanding of what he said was hundreds of thousands of cars that would be full self-driving

capable not necessarily in that network and doing rides. But in your view, I know you got a $395 price target and a buy on Tesla right now. I think that's right. Is Tesla better off now than it was before November, based on these moves that Elon Musk has been making in government? So I will say today you had Elon Musk at his very best twice, right? You got to see very clearly why the investing public

is a big believer in what he reaches for. This is a man that's done it successfully, transform the future of transportation check. So now everybody knows PayPal and his other success is behind him. But when we look at his vision of Occupy Mars, heck, people forgot that this is the guy that rescued our astronauts from the space station after another launch partner had actually failed to pick them up for what? Many months.

So people are starting to see his vision, how he's stepping into it. This is very good for Tesla. It's good for the overall enthusiasm around this company, and it's an emerging growth type valuation on this stock, given the massive size of optimists and AI and autonomous. And that means we need communications like this. What about the way investors should measure robotaxi success?

I believe what Elon is saying is 10 Teslas in Austin operating a robotaxi test network by end of June ramping quickly from their Waymo at the same time as authorization now to move down the Bay Area from San Francisco through the peninsula into San Jose, which is a huge population by comparison. How much is that comparison going to start coming into play in the rates of expansion rides done once a robotaxi does kick off? It's hugely important. You're spot on the money.

So the analysts that follow Google, you know, that look at Waymo, say the valuation there is in the tens of billions. They've only got a thousand cars on the road. You know, people don't talk about it, but they have two to three teleoperation engineers on every vehicle. That's three guys in the back seat with a joystick making sure your ride is safe. So it's not a driver, quote unquote, but you know, Tesla has said today that yes, they will have remote operators on their vehicles. They're going to have zero tolerance for their vehicles. They're gonna have zero tolerance for failure.

They're gonna have zero tolerance for accidents. And they're gonna do this in a safe way for the public. So I think Tesla can surpass Waymo very quickly, given their experience of having millions of vehicles on the road with lower levels of autonomous and the complete control over the integration of the cars. And the fact that there's been years of planning that have gone into this.

What's gone in recently in this last year is more of an aggressive push and that was what was needed. So. Yeah, well that's gonna be the benchmark then. Craig Irwin, thank you. Thank you. Well, if you missed any of David Faber's

Sit Down with Elon Musk, either part, part one or part two, you can watch the interview tonight, 7 p.m. Eastern, right here on CNBC. Now, Palo Alto Networks earnings are out. The stock is initially lower. Pippa Stevens has the numbers, Pippa. Hey, John, well, Palo Alto Networks is under pressure despite topping estimates in Q3.

EPS coming in at 80 cents adjusted. That's a three cent beat, while revenue was largely in line with estimates at 2.29 billion, up 15% year over year, although margins were a bit light. Now in terms of guidance, perhaps not blowing investors away, the company sees Q4 EPS between 87 and 89 cents

a bit better than forecasts, with its revenue guide toward the higher end of estimates, the stock now down 4%. John? All right, Pippa, thank you. Also don't miss Jim Cramer's exclusive interview with Palo Alto Network CEO, Nikesh Arora, that's coming up at 6 p.m. Eastern on Mad Money.

Well, stocks giving back some of the recent rally, S&P 500 snapping a six session winning streak. Six of the mag seven names, aside from Tesla, closing lower, so have those big names run too far too fast. We'll talk about it over time comes right back Welcome back to overtime toll brothers earnings are out Diana Olek has the numbers Diana Well, John the luxury home builders had a nice beat on the top and bottom lines EPS came in at three dollars and fifty cents a share versus estimates of $2.83. Revenue of $2.71 billion versus estimates of $2.48 billion. Adjusted gross margins at 27.5%. That was

about in line with expectations. Deliveries were ahead of estimates and net signed contracts were down 13%. Now the CEO, Doug Yearley, did say that there was a softer demand environment but he said given the shortage of housing and favorable demographics we continue to believe the long-term outlook for the new home market remains positive particularly for the luxury niche. Now of course we've seen most of the activity in the housing market on the higher end that's where Toll Brothers lives. They did not say anything about lowering prices or mortgage buy downs but we'll see in the conference call tomorrow morning. But again, a nice beat for toll brothers, John.

Indeed, Diana. It's up a little more than 5% and over time. 110 shares is a level it hasn't seen since March. Thank you. While the major average is finishing the day in the red tech, the worst performing sector on the S&P 500 today, but still up 10% month to date. So is the uptrend still intact, or have the markets, and especially big cap tech stocks gotten too expensive? Well, Scott Wren of Wells Fargo Investment Institute and Courtney Garcia of Payne Capital Management, a CNBC contributor, are here to talk about that.

Scott, you say that we're due for a bit of a slowdown in the back half, is that priced in overall and is that more about the mega caps adjusting, if not, or the rest of the stocks? Well, John, I think when it comes down to it, the mega caps, their earnings growth is going to slow and you're probably going to get some broader participation, at least from an earnings standpoint, probably from an individual stock standpoint outside of the MAG-7, as we move certainly late this year and into 2026.

So, technology, those stocks have obviously ruled for most of the last, let's call it 18 months or something like that. But I think right now, we blew through the 200-day moving average in the S&P 500 pretty easily. We're far above that right now, we blew through the 200 day moving average in the S&P 500 pretty easily. We're far above that right now. You really hit, if you're a chart watcher,

we stopped yesterday, basically at another resistance level where beyond that, the next level's the record high. And so it just doesn't make a lot of sense to us that we'd rush to get to the record high. There's still plenty of uncertainty out there. We don't think there's going to be a recession, but there's certainly going to be a slowdown. We certainly think you're going to get an opportunity to step into some stocks at lower levels than where they are right now.

Okay, Courtney, though, I just heard Elon Musk tell our David Faber that he's buying a staggering number of Blackwell from Nvidia. In that kind of a situation, it's kind of hard to bet against the MAG-7, isn't it? It is, and clearly you're seeing investors are catching on to that. You actually pointed out here that the MAG-7 is at about 10% months to date. If you just back out that a little bit to the last four weeks, it's up over 25%. It is still down though since the beginning of the year. And this is actually something that I think we've really been looking at is the fact that these companies are getting very expensive.

So as much as artificial intelligence is the story, it's going to continue to be the story. The question is how long until all this CapEx actually comes to hit the bottom line of these companies. And right now you're paying like 27 times forward earnings for the Mag-7. But if you look at the other 493 stocks, it's much more reasonable at 18 times forward earnings. And that's where you do want to own these companies. They're not going anywhere. AI is going to be the big story over the next couple of months, years, decades. But a lot of that growth might come from your better valuations. So this is why as an investor, you want to own them. Just don't over-own them. And a lot of people who haven't made changes

in their portfolio have much more weighting than I think they realize. So it's just a good time to say, okay, I don't wanna be over-exposed to these because some of these other areas in the economy might start to outperform. Kind of hard to do that though, Scott. When people are trying to time exactly

when to get out or when to get in, if your time horizon is more than, say, three years, do you bet on AI despite a digestion period, just sort of expect a one? What do you do? Well, I think you do, John, and that's, you know, we cater to retail investors here, and if you have time on your side,

three, four, five plus years, you know, you need to be buying on these pullbacks. Now, granted, we're only a few percent away from the record high, but you know, when stocks, when you don't think there's going to be a recession and stocks are down 10 or 20 percent, I mean, you need to be stepping in here. And that's what we've been trying to talk to our clients about. But certainly when you have time on your side, AI is going to be a big, a big component of what's going on. Industrial power, you know, the electrical grid right now can't handle what's gonna happen down the road.

And I think stocks in general, when you have that kind of timeframe on your hands, you know, right now, certainly technology, communication services, financials, I mean, we're buying all of those sectors. And I think you really have to take advantage of pullbacks when we have them. Alright, we've got to leave it there.

We spent a lot of time with Elon earlier. Scott, Courtney, thank you. Hard act to follow, John. Indeed. Well, as we just talked about, the big MAG-7 names have led a huge stock market rally over the past month or so. Our CNBC MAG-7 index is up 25% since then. But another group has been almost as magnificent, but hardly anyone is paying attention except for our Mike Santoli.

He's next on overtime. Welcome back. We've got breaking news on Alphabet's Waymo self-driving car unit. Deirdre Bosa has the details. Dee? Hey, John. So Waymo has just surpassed 10 million fully driverless rides that doubles its lifetime total in just the last five months. The Alphabet unit hit

5 million rides at the end of last year in total and now that trajectory is set to accelerate as it expands into new cities like Atlanta and Miami. This is a major milestone for the Robo taxi race. It's also a direct challenge to Tesla ahead of its own autonomy push. I just sat down exclusively with Waymo's co-CEO, Tequidra Mawakana, who said that every trip at this scale is accelerating the rate at which the driver is learning. Now Elon Musk, of course you guys all just heard it, just slammed Waymo's approach calling it unnecessarily complicated that multiple sensors like lighter create more confusion not less. But M Mamakana pushed back on that in our interview saying that their goal isn't just to assist the driver,

it's to replace them entirely. You have to be able to see at night. You have to be able to have this vision that's better than humans. Right? Like what we're doing is we're replacing humans. We're not asking you to sit behind the wheel and take over the vehicle at a really vulnerable moment. Instead, we're inviting you to sit in the back seat, relax and unwind, and get safely to your destination. That's a very different value proposition, but it's one that requires belts and suspenders, and that's the approach that we've taken. So very interesting contrast in this race that is heating up. Musk is promising scale at the speed of a software update. Waymo is betting that

safety and trust will win in the long run and now with 10 million driverless trips already on the road Waymo is making the case that that strategy is working so far, Don. Yeah maybe the highest stakes technology rollout in my lifetime. Dee, thanks. Well, cyclical sectors have gotten a boost in this market comeback. The move provides some insight into what investors think about the current state of the U.S. economy. Senior markets commentator Mike Santoli,

here now to explain, Mike. Yeah, Jonathan, implied vote of confidence in the resilience of the economy once we got the sort of rollback in expected tariff rates and broader trends like lower oil prices. Here's the S&P 500 industrials ETF, XLI, relative to the S&P 500. This is on a one-year basis.

What's relevant to me is the industrials basically at their old highs, even with the S&P a few percent below it right there. A slight little note there, a wrinkle in terms of what's driving the industrials. Yeah, sure, it's Caterpillar and GE Aerospace. Also, though, Uber is in there. It's 4.5% of the XLI, and it's up 50% this year. Financials, it's a similar story. Not just pure banks, but overall financials

pretty clear outperformance, also close to their high. So we'll see if it's a head fake for the cyclicals, or if this is really a good message for the economy, John. All right, Mike, wouldn't be the first head fake this year. That's right. Thank you. Well, coming up on Overtime, the CEO of Zimmer Biomet is going to join us. While some health insurance companies are struggling as more people are getting hip

and knee replacements, his company makes those hips and knees. Be right back. Welcome back to Overtime. Well, while I'm here at headquarters, Morgan is at the CNBC CEO Council Summit in Arizona. Let's get to Morgan now with the CEO of Zimmer BioVent. Morgan. John, well, Arnold Schwarzenegger was on stage at the CNBC CEO Summit with me last night.

He was sharing his insights on how business leaders can navigate an uncertain and evolving government policy landscape. Take a listen. I think that the environment always changes. I mean the key thing is to understand that for every attack there's a defense. And so instead of whining, I think you got to go and move forward and figure out and get creative and navigate those kind of things. So the actor, the bodybuilder, the former governor of California

is also a health and wellness advocate. Most recently partnering with medical device makers, Zimmer Biomet, as chief wellness officer. They're actually on CNBC to announce this partnership, but sitting with me here now is Zimmer Biomet CEO, Yvonne Tornos. Yvonne, it's great to be speaking with you. And that's exactly where I wanna start with you,

is I wanna start with what it means to be navigating the policy landscape right now, as Arnold Schwarzenegger just laid out there as a medical device maker. Great to be here, Morgan. Thank you for having me. I cannot fake the thick Austrian accent, the Terminator accent,

so I'm gonna stick to the Castilian Spanish. Look, policy can be a company killer when you don't have a resilient strategy and a resilient purpose. And we have both. We've been in business since 1927. For context, Calvin Coolidge was the president of the United States. Seventeen administrations later, we had Republicans, we had Democrats. We've gone through all of it.

We've seen recessions, a Great Depression, we've seen World War II. We've seen all kinds of it. We've seen recessions, a great depression, we've seen World War II, we've seen all kinds of changes in economic climate. But our purpose, alleviating pain for others, or a strategy about innovation has kept us through. Tariffs is the big topic these days. We're manufacturing Warsaw, Indiana, a small but mighty town in Indiana. We've been doing that for 100 years

and we're just getting started. So we pay attention to policy, but we pay attention to patients. And the innovation that we're enlisting is gonna take care of those patients and we're gonna be here for the next 100 years. So given the fact that you have been here 100 years, knee and hip replacements,

why do a partnership with Arnold Schwarzenegger? Why do it now? How does it speak to the interface you're looking to do or the awareness you're looking to raise more with consumers and patients directly? So I'll start with the problem we're trying to solve and then I'll talk about the why now. So 600 million people on earth suffer from some sort of arthritis with osteoarthritis being the lion's share of that patient population and less than 5% will do something about it. So you can do the math that's fine and 70 million people living in pain. They're not aware that they are minimally invasive

surgeries. They're not aware that they don't need to go to a hospital. They can do the surgery in some cases in an ambulatory surgical center. They're not aware that physical therapy is not what it used to be. So in the partnership with the Terminator, we want to bring awareness. You don't need to live in pain. You can get back to exercising. You can restore the joys of life. And that's what Arnold is doing with us. Why now? Look, we've gone through some challenges in the past as a company. Those are behind. We're moving from remediating the company to innovating. And again, launching 50 new products that they are bold in AI, in robotics, next generation implants. And if you're going to go bold, you got to go with the Terminator.

So that's the time, that's the now, I was super excited about the partnership. To your point, I mean, my mom had hip surgery, hip replacement surgery a couple months ago, she was in and out the same day, she was walking within 24 hours. I'm not sure people fully appreciate the innovation cycle a company like Zimmer Biomet is in right now.

How is new technology, how are things like AI coming into this industry? It's changing everything. So we collect more data than any other company in the space before surgery, during surgery, and after surgery. The data we collect in our partnership with Apple enables us to predict the type of surgery you need to have. To predict the type of physical therapy

you need to have once you leave the surgery. Smart robotics continues to capture data and we have the only smart knee implant in the world. That is a knee, a fairly dumb device made out of metal, that has a sensor that will track your mobility for the rest of your life. So this is not your grandmother's company, this is not a legacy medical device company, this is a ball solutions provider. And we just getting started. 50 new products, I mentioned that in the next 36 months, and most of them will have some sort of data capturing capability embedded in the device. Whether it's from a tech standpoint, whether it's from a policy standpoint, how is the

concept of healthcare and with it longevity changing? We are smarter as consumers and patients. We're living longer. And we want to know what is the pathway for us to have a better lifestyle. So again, another reason why we got Arnold Schwarzenegger. People are getting educated, they want to know what it is that we need to do to live longer. And I do think going back to policy, that logic prevails.

Both sides of the aisle want to make the world a better place. We've been making America and the world healthy for 100 years, so again, super excited about innovation, paying attention to policy, but above everything, paying attention to those patients' problems. All right, Ivan Tornos of Zimmer Biomet. It's great to be with you here at the CEO Council Summit.

Great council, thank you for having us. Thank you, Morgan. And I will tell you, John, it is very hot here. It's 90 plus degrees in the mountains, in the suburbs of Tucson, but it's quite a heck of a council. A lot of conversations, a lot of big topics that are being carried through different panels, different discussions, different industries

over these past two days and counting. Well, you wouldn't know it from looking at you. You look pretty chill. What was that old commercial? Never let him see you sweat. But also, we started the hour with Elon Musk talking to our David Faber. I gotta go back there because this talk

of self-driving taxi service, highest stakes technology rollout in my lifetime because it's tons of metal moving on the roads of American cities, we'll see how it goes. We will see how it goes and certainly we saw Tesla move in response to that. I also thought his comments about breakthrough innovation being a product of questioning authority were super fascinating as well as we do talk about innovation here at this summit.

Yes indeed. And this was a day where the major averages were all lower though just fractionally after quite a run that's going to do it for overtime.