Morning Brew Daily - Tesla Sinks After Musk-Trump Beef & Can the Switch 2 Save Nintendo?

Episode Date: June 6, 2025

Episode 599: Neal and Toby dive into the messy breakup between Elon Musk and President Trump after publicly throwing verbal jabs each other, causing Tesla shares to sink. Then, Nintendo’s Switch 2 has arrived after much build up – can the follow-up save Nintendo’s sagging sales? Also, crypto firm Circle has its shares soar powered by FOMO, making it our Stock of the Week. And the EU wants to crack down on Shein, making it the Dog of the Week. Meanwhile, the Tony Awards are coming up and industry experts are noticing some added Hollywood star power on Broadway.  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. LinkedIn will even give you a $100 credit on your next campaign so you can try it yourself. Go to LinkedIn.com/MBD  Terms and conditions apply. Only on LinkedIn Ads. 00:00 - What a news day  02:40 - Trump and Musk Fallout 07:00 - Switch 2 Hits Shelves 11:40 - Stock of the Week  16:20 - Dog of the Week 19:40 - Tony Awards 23:00 - Headlines Learn more about your ad choices. Visit megaphone.fm/adchoices

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Good morning brew daily show. I'm Neil Fryman. And I'm Toby Howell. Today, Elon Musk and Donald Trump broke up with everyone watching what it means for Tesla and SpaceX. Then Nintendo's Switch 2 is already selling like hotcakes, but can it live up to its predecessor's legacy? It's Friday, June 6th. Let's ride. Happy Friday, everyone.

Toby, that was jaw-dropping yesterday. It's been a while since we had this amount of chatter, jokes, memes, I told you so's about one big news story. But it makes sense because the drama does strike to the heart of unchecked money and power in this country. But now, the big question is, where do we possibly go from here after the dust has settled? It's anybody's guess. I know. I, too, cannot believe that Aaron Rogers is going to the Pittsburgh Steelers. Crazy day indeed.

And okay, I guess we'll talk about Elon and Trump, too. But before that, a word from our sponsor, LinkedIn ads. Neil, some people don't know this, but you were actually the person that originally hired me at Morning Brew. I did. Saw the potential early, and I knew that job description would attract the right sort of people. Who knew that one day submitting that application would lead to this wild sleep schedule. But yes, part of the reason why I'm sitting here today is because of your ability to target well, Neil, something that LinkedIn ads can provide to B2B marketers. It lets you target the professionals who actually matter to your business and want to buy your product.

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saying he was very disappointed in Musk, accusing him of flipping on the bill he supposedly helped shape. Trump also said, hey, you want to know where we could cut billions and billions of dollars the federal subsidies and contracts the government has with your companies, Elon? Of course, Musk owns a massive social media platform, so he took things very public, claiming he never saw the bill, accused Trump of ingratitude, then dropped a bombshell. Trump hadn't posted the Epstein files because he's in them. He also threatened to halt development of the dragon spacecraft used by NASA, though he later

walked that back. While all this was going down, so was Tesla's stock price, which finished the day losing 15%, shaving over $150 billion off its market cap its biggest single day loss ever. Neil, many forecasted this day would come, but the decoupling of Musk and Trump was perhaps even more explosive than expected with billions of dollars of market cap and government credits caught in the crossfire. Yeah, even if you predicted this breakup, watching it happen as spectacularly as it did was something to behold. I mean, here are the two, the world's two most powerful men along with maybe Jerome Powell and Xi Jinping with significant ability to inflict financial

pain on each other. We know that Elon Musk bankrolled Trump's presidency bid with $250 million, the biggest political donor out there. And then Trump's threat against Musk, about these government contracts and just the overall looming threats of what Trump could possibly do to Musk, should he pursue those things as president, was a major drag on Tesla's stock price down over 14 percent, the biggest one-day wipeout in its history. There are many levers that Trump could pull to inflict pain on Musk. I mean, Musk, both his companies, or he has many companies, these two biggest companies, Tesla and SpaceX are very much ingrained with the federal government.

SpaceX is a huge contractor, and Tesla gets a lot of its sales through things like the EV tax credit, which this bill would remove. Yeah, let's talk precisely dollar amounts of how much these companies benefit from U.S. government contracts and subsidies. The Washington Post has put the figure at $38 billion. SpaceX's own president and CEO, Glenn Shotwell, estimated the company alone's benefits from $22 billion in federal spending. Reuters just said the figure is classified due to the relationship between, Musk and the federal government. Tesla, meanwhile, has benefited from around $11 billion in total regulatory credits, which is, again, the kind of the issue that Trump has spoken to that Elon is most mad about is the fact that this bill would strip away some of those. So everywhere you look at

Trump and Elon and the federal government and Tesla and SpaceX are all intertwined, which is why this made was such a messy day yesterday because of the billions of dollars that is on the line. And Musk also has some cards to play as well. You mentioned that he threatened to stop development or the government's use of the dragon spacecraft. Right now, that is the only way that U.S. cargo and astronauts can get to the international space station. So he was basically doing, you can't fire me, I quit. He later backed that down. There were other signs that maybe there was some thawing out between these two guys.

And we'll see what happens because there is so much at stake. Bill Ackman, who is his head fund manager, tweeted, You, hey, guys, please calm down. Like, you need to buddy up again because there's so, these things are bigger than you. And Musk replied, you know what, maybe you're right. I'm going to take a chill pill. Tesla stock is up about 5% this morning. So we're going to see how this plays out.

But truly a wild day yesterday. And I don't think we've seen the last of these two guys talking to each other. Yesterday also felt like a throwback to a different era where people lined up at stores for as long as 20 hours to get their hands on a shiny new electronics gas. That gadget is the Nintendo Switch 2, and it was the star of the biggest console release of all time. Retailers across the world opened at midnight so that fans could buy the new Switch, but many were left empty-handed when stores ran out of inventory, especially in Nintendo's home base of Japan, where the hype registered at Shohei Otani levels, and that's because the Switch 2 represents a bridge between the past and future of gaming.

The OG Switch released in 2017 was a stunningly successful hardware innovative, allowing gamers to play on their screens at home, in addition to taking it on the go with them. Over its eight years in service, the Switch sold more than 152 million units to become the third best-selling video game console in history. Nintendo has reaped the rewards with its stock price nearly quintupling since the Switch's release. So an almost impossibly high bar has been set for the Switch 2, but Nintendo is ready to vault over it by taking what people loved about the original console and souping it up. The Switch 2 is more powerful, has a bigger screen, and arrives with more modern controllers than its predecessor.

It also costs way more at $450, up 50% from the $300 price tag for the first version. So far, Toby, it seems like people are more than willing to pay up. Yeah, the Switch 2 is looking like it's off to a flying start, though I do have to say, I feel bad for Nintendo because you go back to April 2nd. That was when the Switch 2 was unveiled. That was the same day that Trump unveiled these global digital. tariffs on Liberation Day. What happens on Switch to Release Day, June 5th?

The Trump and Elon Beef explodes overshadowing it once more. So Nintendo has just this bad luck when it comes to interacting with Trump's various things that he kind of dominates headlines with. So I think they'll do okay, though, because Nintendo really has a different strategy with this release than past console releases. They've had a bit of unluck with their follow-up consoles. Like if you go back to the Wii, the Wii U after it was just an absolute flop, it sold way less than the original Wii. It sold 13% of the Wii sales.

Then you even go back further. The GameCube didn't follow up the Nintendo 64 very well. 34% decline compared to its predecessor. So they have this much more conservative design push. It very much is almost like a Switch Pro that they're releasing where they just souped up the processing, added a few gadgets and gizmos here and there. The main core function is pretty much the same as the Switch one. And so analysts are actually pretty bullish on that because they're just going off what they know it works and just making it a little bit better, which will probably not lead to that second console jinx that they've been plagued by over their history.

And one reason why people might spring for the Switch 2 when you can get your hands on it is the game that is being released alongside it, which is Mario Kart World, which is Mario Kart. But you can kind of go anywhere you want. It's more of an open world system, which a lot of people were talking about and getting super excited about. The one thing about Mario Car World is it is $80. So we've kind of hit the $80 threshold here with video games that has never been breached before. So you buy a much more expensive console, a much more expensive game. You're seeing a little bit of significant inflation here in the video game industry. Nintendo thinks it has a differentiated product, hardware product, but also in terms of its games, it's making things that people absolutely love.

And that's really what was the reason for the Switch's success was Nintendo's exclusive games that it made for this particular system that people were just so obsessed with. They love Mario. And then one final reason to be even more bullish about the Nintendo Switch is that a lot of gamers are playing fewer titles every single year. And they're actually playing more older titles. For instance, in 2024, 45% of gamers on PlayStation platforms were playing games that were more than six years old. That was up from just 25% a few years ago. Totally different story for Nintendo, though. They do shell out for these $80 new Mario Kart games

because they have this deep well of IP that people love. I mean, you know all the characters in the Nintendo universe, and it does look like they can rely on these new games who drive sales, whereas other consoles can't because they don't develop the IP in-house. So just one more reason why you should be potentially bullish on Nintendo, specifically the Switch 2, because they have just this great archive of games that constantly updated and attract new fans even to this day.

It's Friday, and y'all know what that means. Stock of the Week, Dog of the Week, the segment where Toby and I pick one stock that's dipping out early for a summer Friday and another that has a 4 p.m. meeting. I won the pre-show Cherry Pit Spitting Contest, but did not manage to break the world record of 93 feet, six inches. Either way, I get to go first. And my stock of the week is Circle because it just elicited a lot of, ooh, with its public listing yesterday. The stable coin issuer popped 168% in its IPO. The best one day

pop for a large IPO since 2021. It shows that investors are foaming at the mouth over the potential of stablecoins to revolutionize financial transactions. A stable coin is a cryptocurrency that's supposed to be, well, stabilized by being pegged to another asset, typically the US dollar or treasuries. That's the case with Circle Stablecoin, USDC, which is pegged to the dollar and has a market cap of about $62 billion, good for the second biggest stable coin in the world after Tether. There's loads of excitement over the promise of stable coins to make things like remittances, business to business payments, and e-commerce faster and cheaper. And they're already huge for trading on crypto exchanges. And I mean huge. The total value

transacted through stable coins was higher than Visa in 2024. That's according to estimates from ARC invest. With legislation regulating stable coins, advanced. through Congress, there appears to be growing conviction that the stable coin economy is about to crash the party with Circle as one of its biggest players. Yeah, I think that was the reason we saw so much enthusiasm for this is that stable coins traditionally were just used by crypto people. It's kind of the lubricant that allows you to interact in the crypto ecosystem, but it was very crypto-focused for a long time. But this idea that banks and other e-commerce companies are going to get in on the party is why there's so much enthusiasm behind it, because if

Congress does go through and pass legislation that regulates these things, then it could be a new era of like the financial system that crypto people have talked about for a long time where it breaks free from just a specific niche of the financial world and just starts dominating the entire financial world writ large. So that's just been a massive government or massive tailwind. The other thing that's a tailwind as well is that some people argue that using stable coins pegged the U.S. dollar keeps the U.S. dollar strong because most are backed by U.S. government. So that's like another aspect of this that if you are concerned about, you know, the U.S. dollar losing its hegemony over the global financial system, Circle could come along and resemented as one of those, as, you know, the de facto currency of the world.

And meanwhile, after a long time of just kind of being frozen, the IPO market is heating up a little bit. And these companies that are listing this spring are doing really well. We haven't talked about core even a while, but that AI company is. on a very much a hot streak. Circle popped 168%. And overall, shares of companies that went public in the U.S. this year are up 15% on average from their IPO prices. That's through Tuesday. Compare that to the S&P 500's 1.5% gain.

So if you're getting it on these one-day IPOs, you're doing pretty well in your portfolio. All right. Don't go anywhere. Dog of the week is coming up right after this. Own it all. Pay off your home. Travel for life. Drive a Ferrari.

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The numbers for these once high-flying companies are uglier than some of their clothes right now. Tammu's U.S. daily active users dropped 52% in May compared to March, while Sheehan's fell 25% according to sensor tower data. Both apps have plummeted down the App Store rankings. Temu is now mired in the mid-100s after consistently being ranked in the top three last year. Part of that fall is due to an advertising pullback.

In May, if you felt like you hardly saw some TAMU ads anymore, you were right. Its ad spend fell 95% year over year, and Shan wasn't far behind with a 70% reduction in spending, targeting U.S. users. Neil, if you could handpick two companies who would be most affected by Trump's attempt to remake global trade, Asia-based fast fashion giants would be the top two picks.

earned the title of dogs of the week and maybe even dogs of the year so far. Analysts say that the 50% tariff is effectively the rate where these companies stop being competitive with other e-commerce firms and their low prices. That competitive edge kind of goes away. Right now they're being hit with a 54% effective tariff rate on bringing those products into the United States. So you can see they're raising prices. And the U.S. market has just kind of been closed off to them.

And they spent years building up these operations to drop ship parcels less than $800 worth to the United States under this zero tariff regime. Now they're getting hit with 54% tariffs. And they're saying you're seeing from the ad spend numbers, they're just saying, I don't think we can play in this market anymore. It's just not a competitive thing for us. Yeah. Luckily for TAMU's parent company, PPD Holdings, their non-U.S user base is very robust.

They said that 90% of the company's 405 million active users, come from non-US users. So they are starting to retarget some of their efforts towards Europe, for instance, shifting a lot of ad spend over to that market. But Europe is a difficult market to enter as well because they have a lot of regulation. They have their own sort of day minimis loophole as well with an even lower threshold than the $800 in the U.S. So Europe is not a one-to-one replacement for the United States,

but that is where they're kind of putting their ad spend right now because they need. need to try to attract new business in other markets. These guys hate selling in Europe. Here's a quote from one guy who sells smoke detectors. I realized I entered a hell mode. I now deeply understand why everyone loves starting their overseas business in the U.S. market because to sell in Europe, he had to register for a value added tax, which they have in each individual country, offer a wide variety of plugs, and then translate his instruction manuals into at least five different languages. So for a business owner that does sound, like entering hell mode.

So there's not so many amazing options now that they're being priced out of the U.S. market. They're trying gear up. So as you can see, there's a lot of red tape to wade through. Next up, the Tony Awards are Sunday night, and there's nothing miserable about the business of Broadway. This season, Broadway shows grossed more money than any other in history, bringing in $1.89 billion from May 2024 to May 2025, topping the previous record of $1.83 billion in 2019.

the last full season before COVID shut down theaters. Why is Broadway more popular than ever? Hollywood stars don't hurt. Good night and good luck, which stars Toby's doppelganger, George Clooney, repeatedly set new records for the highest weekly gross for a play at its peak, bringing in $4.2 million at an average ticket price

of $337. Other A-listers on Broadway this spring included Denzel Washington, Jake Gyllenhaal, Bob Odenkirk, Kieran Culkin, and Sarah Snook. But there may be another reason Broadway is getting its groove back. It's winning over the use. Gen Z has been a force this theater season heading in droves to plays like John Proctor is the villain starring Sadie Sink

and a Brooklyn rave retelling of Romeo and Juliet with music by Jack Antonoff that speaks directly to young people's experiences and talks their language. Toby, a well-deserved curtain call for Broadway Sunday night. Yeah, they're going after the young people and I think part of it that they, one, got a lot of famous actors and young people like famous actors, but also they've been incorporating more pop music into plays. I mean, John Proctor is the villain actually needed the showrunner of that said, we need Lord's Green Light to, you know, land this final act. And Lord said, sure, go use it. And then also you look at Romeo and Juliet retelling. Jack Anoff got involved in that too. Jack Anonoff is involved in everything these days, it seems like. So all these shows share

similar DNA. They have a focus on pop music. They have Hollywood stars coming in with established fan bases. And they're also just retelling stories of the complexity of young adulthood, which is just pretty much a timeless institution at this point or timeless storytelling at this point. So I think you are seeing Broadway hitting all the right notes right now. I mean, the numbers for Romeo and Juliet specifically about, you know, whether you go into these theaters and in the population you're seeing, typically you go into a theater, you're like, oh, wow, you know, this is not necessarily the younger generation, but for Romeo and Juliet, which stars Kit Connor and Rachel Ziegler, 14% of ticket purchasers were aged 18 to 24. That's compared to the industry average of 3%. This is the

youngest ticket buying audience ever recorded on Broadway. So there is certainly a Gen Z upswell leading Broadway to record heights this season. Yeah, it does feel a little counterintuitive to market pricey Broadway tickets to the younger people, but you can't survive if you don't attract a younger generation. So it is like a very savvy marketing opportunity. If you look at Romeo and Juliet tickets, they gave out cheaper tickets to students to bring them in. So that's part of the reason why you saw just a record young crowd, even though it's not that big of a percentage of the audience actually, that's the record size. It is still a lot of, you know, older, wealthier people going to Broadway, but at least they're making strides in this department. And one more thing that

should get maybe some people excited about Broadway is Tom Felton, who played Draco Malfoy in Harry Potter films is going to come back in that particular role with Harry Potter and the Curse Child on Broadway starting in November. So if you are a Malfoy fan, you can see him as Malfoy in November. Let's sprint to the finish with some final headlines. The robot revolution is coming to your doorstep, literally. Amazon is reportedly testing out human-like robots to serve as delivery workers and spring out of its vans to drop off your packages. To get the bots ready for the mean streets of suburbia, the company has built a top secret humanoid park in San Francisco, which I'm imagining as an American Ninja Warrior-style obstacle course intended to test the

humanoids for the range of situations they'd face going from van to porch. Toby, if these humanoid ever get deployed, it could lead to a lot of delivery workers losing their jobs and a lot of dogs being very, very confused. How confusing would that be? It's like, hey, I'm barking at this thing. It's not giving me anything in return. But yes, this last, mile delivery has always been something Amazon has been trying to solve. And they kind of envision this as there is a human delivery driver potentially driving a Rivian van. And then these robots jump out of the back and just carry it to the porch, which at the moment doesn't seem quicker than the human doing it, but they are testing it. They are thinking theoretically they could speed up drop off times by

visiting one address and just fanning some robots out and then having them come back. It's something that Amazon is working on in a variety of different ways as well. Remember, they've been giving test flight permission to try to fly drones and drop them off last mile as well. So clearly something that they've been interested in solving for a long time. But, yes, scary robots jumping out of the back of Rillion vehicles is going to be a sight to behold in suburban America if they can make it work. Finally, if you were in the market for a new purse, consider going to Paris next month to

see if you can stack the original Hermes Birken bag, which is up for auction. This bag, which was inspired by the actor and singer Jane Birken, is the first version of the luxury staple that has since spawned into an empire. Birken bags can range in price from $10,000 to over $2 million and occupy the arms of everyone from the Kardashian to Simone Biles. The original bag was created specifically for Birken, an on-the-go actor and singer who in 1984 told the chair of Hermes that she needed a bag to accommodate her lifestyle.

She wanted a purse half the size of my suit, case, Birkin said, and then sketched out what she was looking for on the back of a sick bag you find on airplanes. That sketch ended up as a one-of-a-kind prototype that is as tall as it is deep and wide with the cross-body strap and, of course, the initials J.B. on the front. Neil, most of those features never made it into other Birken bags, but it is fashion history that is up for sale right now. The origin story of the original Birkenbag and how this was created is actually fascinating. She, this actress, was

on an Air France flight. She had, from London to Paris. She happened to get upgraded to first class. Who does she sit next to is the Hermes CEO. They get to talking. All of the stuff is spilling out of her bag. She can't keep it in her bag and she starts complaining. She's like, can you design me a bag?

So they work together, put their heads together. She sketches what she wants on that vomit bag in the airplane. And the rest is history. We don't know how much. much this is going to go for. They're staying very tight-lipped about it, but they did say we foresee it as being as unique as the princess Diana jumper or a worn jersey from the NBA. So a piece of memorabilia that is truly historic in value. And, you know, besides its monetary, you know, besides what it fetches monetarily, it is symbolic of what it means to be wealthy in the world right now.

Yeah, one of these days I'll get a burq. Probably not. You can't even go and buy one. Even if you walked into an Irma, as stores, you can't just say, I would like a burkin. I have a million dollars here. They won't even give it to. You have to create a rapport and a relationship with a sales associate, which usually involves spending a lot of money first. And then do you get the privilege to buy a burken bag and shell out hundreds of thousands of dollars?

They're also like appreciating assets, which is something I'm often told by my own girlfriend and saying, like, hey, look at the price of this burqabag. It's outperforming the S&P 500 over this era of time. So something to think about if you are in the market for a new handbag, maybe getting an appreciated asset like a broken bag. All right, that is all the time we have. Thanks so much for starting your morning with us. Have a wonderful Friday and an even better weekend.

If you have any thoughts on today's episode, send an email with questions, comments, or feedback to Morningbrewdaily at morningbrew.com. Let's roll the credits. Emily Milliron is our executive producer. Raymond Loo is our producer. Our associate producers are Olivia Graham and Olivia Lake. Hair and makeup. Just hopes everyone gets along.

Devin Emery is our president and our shows of production of Boring Brew. Great show today, Neil. I wish you all well. Ryan Reynolds here for MintMobil. I don't know if you knew this, but anyone can get the same premium wireless for $15 a month plan that I've been enjoying. It's not just for celebrities, so do like I did and have one of your assistants assistants to switch you to MintMobile today. I'm told it's super easy to do at mintmobile.com slash switch. Up front payment of $45 for three-month plan equivalent to $15 per month for

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