Morning Brew Daily - Tech CEOs Try to Charm Trump & Gov. Officials Call for Action vs Drones

Episode Date: December 16, 2024

Episode 475: Neal and Toby explain how CEOs from the biggest tech companies are trying to woo Donald Trump ahead of his presidency. Next up, how Broadcom road semiconductors all the way to $1 trillion. Then government officials sound off against the drones that have been flying around the northeast. Hot Wheels and those who hate daylight saving time are our winners or the weekend, and finally a look at the week ahead. Build your Range Rover Sport at landroverusa.com Subscribe to Morning Brew Daily for more of the news you need to start your day. Share the show with a friend, and leave us a review on your favorite podcast app. Listen to Morning Brew Daily Here: https://link.chtbl.com/MBD Watch Morning Brew Daily Here: https://www.youtube.com/@MorningBrewDailyShow 00:00 - James Patterson Book Donations 03:00 - Tech CEOs Charm Trump  07:30 - Broadcom hits $1T 11:45 - Drone Update  17:50 - Winners of the Weekend  24:10 - Week Ahead  Learn more about your ad choices. Visit megaphone.fm/adchoices

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pwc.com slash US slash brew AI. That's pwc.com slash us slash brewAI Good morning brew daily show. I'm Neil Fryman. And I'm Toby Howell. Today it's not Barbie, it's not Lego. The best selling toy in the world is, yeah, you're going to have to wait for that.

Then it's a bird, it's a plane. No, it's a drone hovering over New Jersey. But in reality, it's probably a plane. It's Monday, December 16th. Let's ride. The holiday season is full of heartwarming stories of generosity and giving back. And I got another one for you right here. Last week, the extremely popular author, James Patterson, handed out $500 holiday bonuses to 600 employees at independent bookstores across the

country. It's a tradition he started in 2015, inviting thousands of booksellers to apply and picking hundreds of winners from the nominees. In a statement, Patterson said, booksellers save lives, period. I'm happy to be able to acknowledge them in all their hard work this holiday season. I mean, it does warm the heart. James Patterson is also a juggernaut. He sold more than 425 million copies of his book. His total income over the last decade, he's estimated at $700 million. That being said, his books have been described as a literary equivalent of Kentucky Fried Chicken, and he's often been criticized for co-authoring a lot of his stories, but a lot of people enjoy Kentucky Fried Chicken, Neil. And it means some of his profits go towards these independent book

sellers, sometimes you just have to tip your cap and say that is a good deed. Now a word from our sponsor, the Range Rover Sport. That's right, Neil. We're finishing off the year in style. Style is a great word for it because the new Range Rover Sport oozes class. Each model offers a sophisticated take on sporting luxury so you can cruise in style but also get a little adventurous with its off-roading capabilities. It's a dual threat, Neil.

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Get the Unreal College deal, everything you need, to study and play with select Windows 11 PCs. Eligible students get a year of Microsoft 365 premium and a year of Xbox GamePass Ultimate with a custom color Xbox wireless controller. Learn more at Windows.com slash student offer. While supplies last, ends June 30th, terms at AKA.m.m.S. College PC. America's top tech moguls are marching one-by-one to Mar-A-Lago, a pilgrimage they hope, will repair a rocky relationship with President-elect Trump and Curry-Favor with the upcoming administration. Last week, it was Google's Sundar P. Chai and Apple's Tim Cook, making the trek from California to Palm Beach.

Before Thanksgiving, it was Meta's Mark Zuckerberg. And this week, Amazon founder Jeff Bezos, will have dinner with Trump. Meanwhile, meta, Amazon, and OpenAIs Sam Altman are writing checks to Trump, with all three saying last week they would contribute $1 million to his inaugural fund. For some historical context, it is not unusual for CEOs to cozy up to an incoming administration. The White House sets policies that will have major impacts on their companies, and they want to make sure their interests are being heard. This has been going on for decades. But for the tech industry in particular, it is a striking reversal.

Silicon Valley and Trump were no fans of each other during his first in the White House and shortly thereafter. It's certainly a sign of the times that Salesforce CEO Mark Beniof, who a few years ago had been a major Democratic supporter said last week, it was a time of great promise for our nation. Yeah, after keeping the Trump administration or the Trump campaign at a little bit of an arm's length during the campaign season, a lot of these CEOs are saying, you know what, I do not want to risk being on bad terms with Trump. Let's go speak with him face-to-face.

Let's go to Mar-a-Lago and just see what he's about and see if we can create this relationship. The thing about some of these Inago Fund donations to is what it does is guarantee you some FaceTime with Trump in advance because donors to the inauguration fund do get invitation to an inauguration ball, access to a candle at dinner with the Trumps, and then they also have a access to reception with a cabinet pick. So what you are seeing is paying a million dollars saying, like, I do want to have more opportunities to have FaceTime with you. And also, one thing about inaugural committees is that they are pretty low stakes in terms

of donations. They are seen as a very normal thing for companies to do. to seek favor. There is a little bit of a guise of patriotism attached to it as well without being seen as overly partisan. So I wouldn't read too much into the fact that they're all donating exactly $1 million because it does give you access to the events. And it is a rather normal thing to do to an incoming administration. I want to talk about one of these tech moguls that is going to Mara O'Lago this week, Jeff Bezos, because I think he is a good example of what can happen when the relationship with the president goes sour during the first administration.

administration, Trump's first administration, he repeatedly bashed Jeff Bezos, who owns the Washington Post for negative coverage. And that did translate to the business world. You know, Amazon contends that they lost out on a $10 billion cloud computing contract with the federal government to Microsoft because Trump did not like Bezos. So that was a big business impact for Amazon because of that rocky relationship. So now you're seeing Bezos make the trek to Mar-a-Lago. He moved to South reportedly he's become friends with Jared and Ivanka down there, and he's hoping to not make amends because he probably thinks he didn't do anything wrong, but trying to reestablish that relationship because the one thing all these guys have in common is they're

catching up to Elon Musk. Elon Musk already has that bromance with Trump, and there is the potential that Trump or Elon Musk could use that power to cut them out of lucrative business deals. Right. He is the other power player that CEOs are also trying to figure out how to navigate the relationship because a lot of those CEOs could be aware that Musk could just punish his business rivals, could push them to the side. Sam Altman is obviously a big one of those. Elon Musk has reputedly sued Open AI saying that it forsoaked or it went back on its promise to be this open company and it now is a for-profit entity. Altman has said that he hopes or he thinks Elon will do the right thing because he said it would be quote profoundly un-American to use political

power to the degree that Elon has it to hurt your competitors and advantage your own businesses. So, I mean, that could be a very optimistic look at the situation, but the reality is that Elon now has a ton of power in the administration. He could wield it one way or the other. In CEOs are trying to figure out how to navigate him as well as navigate Donald Trump. There is a new entrant into the 13-figure club. Chipmaker Broadcom pulled up a chair to sit at the $1 trillion market cap table just before the weekend. After reporting breakout fourth quarter earnings, the stock jumped 24% to creep

into uncharted territory and is now doubled in value this year. Unsurprisingly, it's been AI that has pushed Broadcom into the big leagues. It supplies advanced AI hardware to big tech companies, much like Nvidia, but also has a robust software business as well. AI revenue is up 220% this year, and it's got to the point that when Broadcom does well, shares of Nvidia and competitors like AMD, shrink on fears that incumbent AI stalwart could lose market share to the surging Broadcom. Looking forward, the company CEO, Hawk Tan, expects its AI opportunity to reach $90 billion by 2027, powered by what it calls hyper-scaler customers, which are those companies like meta and Google that require large-scale data centers. Neil, Broadcom is not a name that a lot of

people know off the top of their heads, but they will soon. The last time I will say I thought about Broadcom was six years ago in 2018, and that was when Broadcom tried to buy Qualcomm for $120 billion. It would be one of the biggest, if not the biggest, tech acquisitions of all time. Trump, speaking of Trump, he blocked that deal from going forward because at the time, Broadcom was based in Singapore, and this was blocked over national security concerns. Turns out Broadcom did not name Qualcomm at all. Since 2018, Broadcom shares are up 760% Qualcomm's up 165% and the S&P 500 is up 119%. So Broadcom easily outpacing the other guys.

And that's really because of this AI revolution with ChatGPT in 2022. Sales of its AI chips are up a lot. Sales of its non-AI chips are down. So without AI, Broadcom is probably looking a little more like Qualcomm and now it's in the $1 trillion club. That being said, though, its CEO, Hocktown loves to take these big swings. I mean, it tried to acquire Qualcomm for the biggest tech acquisition ever, but it's also recently bought VMware for $61 billion. VMware helps with server virtualization.

They also, that VMware deal only trails Microsoft's acquisition of Activision Blizzard and Dell's purchase as the biggest tech deals ever. It also agreed to buy this software vendor in 2018 for $19 billion. had another acquisition of a security company for $10 billion in 2019. So Hocktan does like going on these shopping sprees. He does like to acquire as a means to grow Broadcom. But Broadcom is a little bit different than Nvidia in the sense that Nvidia sells GPUs, graphic processing units. Broadcom calls its version of GPUs, XPUs, which are just slightly different.

They are a little bit more advanced. These chips aren't for just your everyday company. they are only for the companies that really want to push to the edge of efficiency and power, 20, 30% faster, 20, 30% less power. So you have to be a Google, you have to be a meta, you have to be a Microsoft to actually find use in that. But luckily, those companies are spending very, very big on AI. And so Brockcom's in a pretty solid position right now.

They're spending $59 billion in the last quarter alone. That's four companies, Alphabet, Amazon, meta, and Microsoft spent $59 billion on capital expenditures. A lot of that is going to InVIDIA. A lot of that is going to Broadcom. That's about 18% of their total revenue over the quarter. So a very concentrated group of customers. You have a talk about having

a very specialized customer base. They have three or four customers. So it really, the fortunes depend on whether these companies continue to spend or they pull back. Now it is $1 trillion. That is pretty crazy because you definitely haven't heard of Brockcom unless you're pretty plugged into maybe the chip

industry, but now it is literally part of that 13 figure club. The rumor mill is still buzzing about the drones flying over New Jersey, with more questions than answers emerging over the weekend. To recap, New Jersey residents have been bewildered over the past few weeks due to drones buzzing over their state. A U.S. Army research facility has reported 11 confirmed instances of drones illegally entering its airspace, while more than a dozen drones have been spotted over a U.S. Naval Weapons Station since early December. Sightings have also been reported in six counties across the state prompting U.S. lawmakers to get more involved. U.S. Senator Chuck Schumer called on the

Department of Homeland Security to deploy recently declassified tech that can ID and track drones back to their landing spots in an effort to get to the bottom of the sightings. As for what we do know, officials from Homeland Security say that the drones don't appear to be linked to foreign governments, while the FBI is pretty sure a lot of people have just been seeing planes. Quote, many of the reported drone sightings are in fact manned aircraft, being misidentified as drones, they said in a statement. Either way, Neil, we're now multiple weeks into these sightings, and still, no one has really gotten to the bottom of things.

No, they don't know what's going on. This really dominated the Sunday talk shows yesterday. Everyone was talking about it. I know you were busy watching Manchester City, Manchester United, but there were tons of lawmakers going on these shows, talking about the drone issue. It is certainly raised to the national level because it's not just New Jersey. It's also Connecticut, New York, and Maryland as well.

on Friday night, they had to shut down Stewart International Airport about 60 miles north of New York City in order to deal with a drone issue. So the question here is, are these benign? Like, what is going on? Are these planes? Are there actual a drone infestation?

Senator Andy Kim, who's from New Jersey, a senator for New Jersey, said he went out on local patrol with police in New Jersey and said that after going out with police to observe reports of possible drones, I concluded that most of the drone sightings that were pointed out to me were almost certainly planes. That said, he criticized information delivery from federal officials saying they weren't being transparent

and that they should, in their public communications, just compare this to a crisis CEO moment, that you want to be as transparent as possible. Explain your reasoning. Because right now, the Pentagon and the FBI are saying, guys, it's not a big deal. Everything's legal. They are planes. You're making all of this up. That's just like not a good, like a good effective communication strategy.

So senators and other state lawmakers are calling on the feds to say, okay, if there is nothing, explain how you found that out and let the people know because they're getting a little frustrated and they're getting a little worried. One thing that could be contributing to this, though, is that even if a lot of the sightings are playing, some people could be actually seeing hobbyist drones because a 2023 FAA regulatory change did allow drones to be flowing at night, which could possibly be. some of the increase in sightings. Plus, U.S. law does really limit how the U.S. military can actually respond to drones.

They're not allowed to just shoot them out of the airs. They do need special authorization. They need to give special authorization to local authorities to deal with drones as well. And so maybe a combination of those two factors is leading to increase in sightings. It could, I mean, we could be talking about literally just a few pranksters or someone flying these drones around because they're allowed to at night, even though they aren't allowed to go into FAA restricted airspace. But still, maybe those are some of the factors that are contributing to this as well. It's completely legal.

Like, there's 800,000 drone registrations now, which is the equivalent of the population of San Francisco. There are a lot of drones flying around. You can fly them around at night. It's legal to fly a drone in most locations below 400 feet. You don't really need anything else to send a drone up there. So, you know, they're like, there's nothing we can do. Like, we can't shoot them down because we're not allowed to shoot down random drones that are flying legally because there's collateral damage over the local area and things like that.

So, you know, we'll see what happens with this story. I think there is a push for more transparency from federal officials to just explain, just show their work essentially. Up next, it is our winners of the weekend. Crispy chicken sandwich from 7-Eleven. People always call me loud. And I'm like, yeah, I know. I'm crispy.

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Please gamble responsibly. Monopoly is a trademark of Hasbro. Hasbro is not a sponsor of this promotion. Welcome to Winners of the Weekend, the segment where Toby and I picked two things that cemented their spot on Santa's Nice List the past couple of days. I won the pre-show Gingerbread Housemaking Competition, so I get to go first. My winner is anyone who hates changing the clocks twice a year because now you have the most powerful person in the world on your side. Friday night, President Elect Trump wrote on Truth Social that

he wants to end daylight saving time, calling it, quote, inconvenient and very costly to our nation. He said he'll work with Republicans to make standard time permanent when he takes office. Just as a refresher, the idea behind daylight saving time is to shift an hour of sunlight from the morning to the evening during the summer months so that people can enjoy the daylight during their time off from work and spend money to juice the economy. It became federal law in 1966. So now every state besides Hawaii and Arizona spring their clocks forward in March and fall back after Halloween every year. Toby, this debate has been raging for decades. And even though Americans say they don't want to keep changing the clocks, there's been a little

political appetite to change it. Maybe Trump getting on board will give it the juice it needs to get across the finish line. You can make a lot of arguments for either side of this, whether you want to stay with standard time or move to permanent daylight saving times. One of them is consumer spending. Most people say that when people spend money after work, it's better to have more sunshine available because you would go to stores because it's still light out. That being said, online shopping is where a lot of people do most of their shopping these days, so does it really matter if it's light or dark out?

Another thing, too, is that daylight savings time is supposed to make your electric bill cheaper, but there hasn't been really any agreement on whether it actually does lower energy use. And then finally, sleep in health is a big one as well. Standard time when it's lighter in the mornings does help your circadian rhythm because getting that sunlight, anyone who listens to, you know, the Andrew Huberman pod knows that daylight exposure, sunlight exposure is probably good for you, provides a better night's sleep because it gets you on that security and rhythm. But also more sunlight in the evenings is probably good for your mental health as well because no one likes it being dark when you when you leave work every day. So for every argument for one

side of the equation, some people have another argument arguing for the opposite. Right, but permanent standard time is just better. Oh, so Neil clearly thinks of one way is better. I'm clearly on that side, more sunlight in the morning. But I want to talk about this discrepancy because Trump said that he wants permanent standard time, which you don't believe because you think he messed up because Trump, because the general political consensus, there have been bills introduced in 2022 and in 2023 by Marco Rubio, a Republican, wanting permanent daylight saving time because that is where you get the most, you maximize the evening sunlight, which seems to be a little more politically palatable. Permanent standard time is the one of, is what people like wonky, you know,

the wanks want the sleep association, the medical health experts. That's, they want permanent standard time. But in terms of, you know, what is more politically feasible, it's daylight saving time permanent. So, Toby, you think that Trump misspoke here. Yeah, I think when he said he wants to end daylight saving, he means he wants to make daylight saving permanent because that is what he expressed support for back in 2019. So I do think that by ending it, he just means we don't want to shift clocks anymore, pick one way or the other. And I think the way, based off his previous statements, is he wants to make DST permanent. My winner over the weekend is Hot Wheels, because they are on fire right now. 56-year-old brand is the best-selling toy in the world, according to the market research firm,

Sarkana, with fans stretching from 3-year-olds all the way up to 63-year-olds. It's one of the standout lines under the Mattel umbrella, going toe-to-to-toe the likes of Barbie and saw its sales grow 14% to reach nearly $1.5 billion last year. At its current pace, Mattel sells 22-5 Hot Wheels cars per second, good for 709 million cars a year. Neil, a lot of trends are kicking Hot Wheels into high gear. One, they are cheap, with most starting at just $1.25 a piece. Two, nostalgia is in right now, and these cars evoke warm feelings of childhood fun. And three, there is a major collector scene with adult fanatics driving about one-third of global revenue, according to the company.

The only way I can describe it, Neil, is Hot Wheels is hot. They are hot. They are also licensing their IP, which you're seeing from Barbie and other toy brands is a great way to maximize revenue. Of course, there's a Hot Wheels movie coming on the heels of Barbie. Mattel is like, oh, well, Barbie sales jumps 16% after we release the Barbie movie. You know, let's do that for Hot Wheels, too. It's already growing at 14% a year. Why don't we juice sales even more? I think, you know, I think they just have so many. We talked about Broadcom having a very narrow customer base. Hot Wheels has literally everybody on the planet

buying Hot Wheels for various different reasons. You have the key. kids that want it just for fun. You have the adults that are literally paying $99 a year for a subscription to get the latest collectible models. That is recurring revenue for a toy company that's kind of unheard of. So this company is clicking on all cylinders and it just goes back to maybe Americans love affair with cars. It really does. I do think you can't overlook price either because selling for $1.25 a piece, that's a big draw in an inflationary environment, especially if you think, if you actually do the mass, the choice costs less today than they did in 1968.

They retailed for about 69 to 89 cents back in the 60s and 70s, but that's roughly $6 to $8 in today's dollars. So it's one of the- I want to know where they're making these. The level of craftmanship cannot be high. Right. There has been a little bit of pushback because people have shown the bottom of Hot Wheels cars and how over time they've been a little simplified because you're right.

They are producing a lot. But one of the things is, I mean, I mentioned that they're selling 22 and a half Hot Wheels toys per second. They're also making 22 and a half Hot Wheels toys per second. So that level of scale allows them to sell them for very cheaply. And maybe it's subsidized by this subscription plan that some people are talking about. One fun story about just the Mattel toy umbrella, whatever you want to call it. The connection between Barbie and Hot Wheels runs very deep because Hot Wheels creator, Elliot Handler, was married to the woman behind Barbie Ruth Handler.

If that isn't Fader, if that isn't just an aligning of these toy forces, then I don't know what is. It's Monday, and as per tradition, here are the events you need to know about for the week ahead. The Fed is holding its final meeting of the year on Wednesday, and it's overwhelmingly expected to cut rates a standard quarter percentage point, the third rate cut this year. Well, that's pretty much locked in. The big question mark is its rate path in 2025. Inflation is proving to be more stubborn than anticipated, hovering above that 2% target,

and Trump's economic policies like tariffs could complicate the picture even more. Economists surveyed by Bloomberg have a median estimate of three rate cuts next year, but we'll see what J-POWs says. This might be the last meeting where we know what's going to happen because there are just so many question marks on the horizon. Does inflation just jump back up, or are these tariffs going to be more of a bargaining chip? If they do go into effect and jack-up prices, that's when the situation becomes a little murky because how can you go ahead with rate cuts if you see inflation starting to creep back

up? You probably can't. Baby it's cold outside. And if you plan on hunkering down, there's plenty to watch on the screen, big and small. Mr. B. Squid Game inspired competition show Beast Games hits Amazon Prime Video on Thursday, offering a grand prize of $5 million. Mufasa, the prequel to 2019's Live Action Lion King arrives in theaters on Friday. And then if you want to impress your film major friends, Go see Oscar contender, The Brutalist, starring Adrian Brody, also out on Friday. I don't know. I mean, the only one I'm interested in is The Brutalist because the Lion King prequel, I just haven't seen much buzz about, even though 2019 Lion King gross $1.7 billion worldwide.

That is a gigantic number. I can't see this. It just doesn't seem like there's been much buzz about it. And then Squid Games, I can't believe we're still doing Squid Games. Well, it's Mr. Beast. I know it's Mr. Beast, but still, like, it feels like Squid Games' World Revolence has passed. did release another season and Squid Games on YouTube, what he recreated did do very well. But I don't know, it's hard for me to get excited about this too.

It's a big, big deal for the creator economy, if you want to call it that, for Mr. Bees to move beyond YouTube to the streaming and TV realm. So we'll see how that goes out. I mean, I'm not going to watch. Let's be honest. In sports, here's an awesome story. The University of Vermont will play in its first ever championship game in any sport tonight when the catamounts take on Marshall for the men's soccer. title tonight. No disrespect to the catamounts, but they eliminated my younger brother in his final collegiate game ever in the NCAA tournament. So I forever have a beef with them. So to see

them doing well, it's a little bittersweet for me. But congrats to the catamount, that is an awesome achievement. And I will be tuning in to watch that. Okay, that is all the time we have. Thanks so much for starting your morning with us and have a wonderful start to the week. It's officially let's circle back in 20, 25 season in your inbox. For any questions, comments, or feedback send an email to Morning Brew Daily at MorningBrew.com. And if you're a satisfied customer and want to help grow this podcast, share it with friends, family, and coworkers who are lacking a solid news roundup in the morning. For everyone with Shareers Block, Toby's got a recommendation.

I want you to share the podcast with someone who has a theory about the drones. I know you got an uncle or a cousin who's been thinking about these things. So share this pod, give them the drone conversation timestamp, and just say thoughts. I think the rest will take care of itself. Let's roll the credits. Emily Milliron is our executive producer. Raymond Loo is our producer. Olivia Graham is our associate producer. Echenawa Ogu is our technical director. Billy Minino is on audio. Hair and makeup's got a dinner down in Mara Lago.

He's inviting anyone. Devin Emery is our chief content officer and our show is a production of Morning Brew. Great show, Daniel. Let's run it back tomorrow. Spring is the season everyone refreshes everything except their blinds. People put it off because they think it's complicated. But at blinds.com, we've spent 30 years proving it's not. Right now, you can save big during the spring Cyber Monday sale. Whether you want to DIY it or have a pro to handle everything from measure to install,

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