Prof G Markets - Trump Unveils Steep New Tariffs, TikTok Develops App for U.S. & CoreWeave’s $9B Acquisition

Episode Date: July 8, 2025

Ed breaks down Trump’s latest round of tariffs. Then he and Scott dig into why TikTok is reportedly building a separate app for U.S. users ahead of a potential sale. Finally, Ed unpacks CoreWeave’s $9 billion acquisition of Bitcoin mining company Core Scientific.  Subscribe to the Prof G Markets newsletter Order "The Algebra of Wealth" out now Subscribe to No Mercy / No Malice Follow Prof G Markets on Instagram Follow Ed on Instagram and X Follow Scott on Instagram Learn more about your ad choices. Visit podcastchoices.com/adchoices

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are subjected either to sleep deprivation or to the All In podcast. Welcome to ProfGMarkets, I'm Ed Elson. It is July 8th. Let's check in on yesterday's market vitals. The major indices all fell after Trump renewed trade tensions. We'll talk more about that in just a second. The Dow and the NASDAQ dropped roughly 1%. The S&P fell 0.8%.

The dollar gained and the yield on 10-year Treasuries rose. And meanwhile Tesla shares fell nearly 7%, shedding $68 billion in value after Elon Musk said he was forming a new political party. OK, what else is happening? Trump announced a new slate of tariffs yesterday. Those tariffs include a 25% tariff on South Korea, a 25% tariff on Japan, a 30% tariff on South Africa, and several more tariffs on countries including Malaysia, Kazakhstan, Indonesia and Myanmar. This comes as the 90-day tariff pause approaches its end. As a reminder, the Liberation Day tariffs, which were enacted on April 2nd, were later

paused by Trump and that pause is set to expire tomorrow, on Wednesday. The administration has discussed extending that deadline, but as of this morning, unless new trade deals are reached, the original Liberation Day tariffs will go back into effect. Okay, so we have our first confirmed tariffs of the week. 25 to 40% tariffs on what looks like 14 countries right now, and these will likely be the first of many. Trump said over the weekend, quote, I am pleased to announce that the United States tariff letters and or deals with various countries from around the world will be delivered starting Monday,

July 7. So as of Monday, we are 14 for 14 on tariffs. There was some possibility, based on what he'd said, that we'd get some deals too. But as of right now, no, we're not getting any deals. All we're getting is tariffs or tariff letters, as he put it. And in this case, the tariffs will be applied to two of our largest trading partners. We have Japan, which accounted for more than $200 billion worth of trade last year, our

fifth largest trading partner, and also South Korea, which accounted for more than $200 billion worth of trade last year, our fifth largest trading partner, and also South Korea, which accounted for $180 billion worth of trade, our sixth largest trading partner. So these are two very important players in our economy. In addition, they are also two of our closest allies. I mean, you just look at our military relationship, for example. America has 50,000 troops stationed in Japan, and we also have nearly 30,000 troops in South Korea. So aside from Germany, there is no other nation that hosts more American soldiers than Japan

and South Korea. Meanwhile, these two countries are very important partners in space exploration, in semiconductors, in AI, in clean energy. The list goes on. And now we have decided actually, no, they're not a partner. They are in fact a threat. As he said, a threat to our economy and a threat to our national security.

I'm not going to act surprised here. I don't think anyone's really that surprised. I think we've seen this all before. This is essentially Liberation Day Part 2. But, you know, we did see some market impact. As I mentioned, the S&P fell around 1%, so did the NASDAQ. And there are questions now as to what this will do to America and to our economy. So for more on that, our producer Claire spoke with Barry Appleton. He is the co-director of the Center for International Law at New York Law School. I think the markets have misunderstood what this week's about and what's going on. And I think it's better to get a sense of the context because the markets keep moving.

They keep going ahead and keep pulling back, retrenching. And it's because they don't understand the game. What you need to understand is that, you know, President Trump is a real estate guy and he also runs golf clubs and Mar-a-Lago. Right. Okay. So he understands about, about people wanting to pay for access. So what he's decided to do, disrupt the games.

We had all these trade agreements, all these things that said everyone would get market access for free. And in exchange, the U S would get access for services or access for certain market, you know, and other things, but we didn't ask for money. Now he says, no, you want to come to our game? You want to come to my club? You want to come to Mar-a-Lago and eat the chocolate cake? You got to pay.

The payment's going to be the tariff. And so the question was, everybody had to put in an application. Those applications were due today. And so what he did is he had the first set of letters to people that he wasn't going to give preferential pricing. So he would look at his application and decide, am I going to give you the friends and family rate? Am I going to charge you like the supermarket rate?

Am I going to give you any discount or no discount at all? Right. If you give them an invite to go meet at the palace with the king, then he makes it really cheap. If you're going to say bad things like South Africa, he just made it 30%, right? So that's what's going on. So the applications therein. He then has a series of letters.

So he's decided that he's got at least seven countries out of 70 that say they wanted to deal with things. At least seven he wanted to teach them a lesson. They're the ones that got the truth social tweet today. Okay. So I would, he goes to them, he says, I'm going to charge you with a market will pay and you're going to pay for market access. In fact, you're going to pay surge pricing. It's like going to a Taylor Swift concert. You are paying extra to be able to get those seats. So that's going on and that is supposed to come out on the ninth. So on Wednesday, he is supposed to give all these countries their letters.

So you're going to see what I call a policy strip tease. He's going to take one veil off at a time, letter after letter coming out on through social and each country is going to find out what's going to happen. But markets don't like uncertainty and they actually don't like policy coming in dribs and drabs. Right. So the market doesn't know how to react. But if you understand that's part of a show, it's part of an act, and it's just the first part of it,

then you might react in a different way than if you think it's the end of the game. So the markets didn't like us on the weekend. They started to share what was going on. Then they saw more today and they started selling off again. But there's no difference in the market today than there was yesterday or on Friday. Okay. What you want to know about is what's going to happen at the end of the week and the end of this month. again, but there's no difference in the market today than there was yesterday or on Friday. What you want to know about is what's going to happen at the end of the week and the end of this month. So the first thing is, do you believe that Trump wants tariff revenue? It's pretty clear now after the one big beautiful bill and listening to the Treasury Secretary, he wants some tariffs. So no one's getting in for free. Anybody that thinks they're getting

into Mar-a-Lago for free, is gonna be very mistaken. Everyone pays something now. That was Professor Barry Alphelton, co-director of the Center for International Law at New York Law School. Very chaotic once again. I mean, this whole tariff policy is being played out online on Truth Social.

As he said, these tariff letters aren't really being sent to these countries. These tariff letters are being posted online on Truth Social. They're essentially screenshots and we are watching the show play out in real time. So I think he's certainly correct on that point. One thing is for certain though, and that is that this story is not over yet. July 9th has yet to come. We've still got lots of tariffs in the pipeline, potentially lots of deals in the pipeline.

I don't know. We'll see. We haven't seen that many so far. But we'll be keeping very close tabs on this throughout the week. So stay tuned. TikTok is reportedly building a new app for American users ahead of a potential sale to American investors. The company plans to launch the new app on September 5th, although the existing app will

work until March 2026. This new app is part of a broader effort to make the platform more appealing and ultimately more transferable to a US buyer. As a reminder, TikTok was going to be banned in America unless it was sold by its Chinese owner ByteDance. That was until Trump decided to delay that ban and he allowed TikTok to continue operating. However, he is now reportedly working on a deal to get TikTok into the hands of a US investor.

And the fact that TikTok is now building this US version of the app, well, that is probably more evidence that a TikTok sale may indeed be on the horizon. Meanwhile, the timing of all of this is quite convenient for Trump. As we just discussed, he's working through these trade negotiations with many countries, including China. And according to Alice Hahn, China economist and director at Greenmantle, this deal could be another bargaining chip in those negotiations. The biggest question mark, which is Beijing's reaction function. On that topic alone, I sense that there could be more concessions from China, meaning that they could decide

to allow this subsidiary of a US TikTok to be spun out of ByteDance itself, and that that unit of the business, the US operations that is, could be sold to US parties. I sense that the Chinese at a macro fundamental level want to try to reduce tensions on trade with Trump because they are worried by the erratic nature. Again, we just saw in the last day or so that he's talking about another 10% Briggs tax and so he's applied pressure on transcriptions for a couple of these Southeast Asia countries. So I could see the Chinese potentially offering this as a concession very quietly. That was Alice Han, China economist and director at Greenmantle. Bargaining chip or not, there is a growing sense that TikTok will at some point be sold

to an American investor. And the question then becomes, one, when? Two, how? And three, to whom? Those are all the questions that we're all asking and we can't really answer right now. There have been some rumors. Oracle has been floated as a buyer, for example. So has Amazon.

And there have also been some more outlandish rumors. Kevin O'Leary, for example. Mr. Wonderful. He's been floated as a buyer. And Alexis Ohanian, the co-founder of Reddit. Now, I don't doubt that those guys have made bids. Kevin O'Leary, for example, has spoken about his bid on TV. But I think the question you have to ask is,

do you have the money? And the answer for those guys and for many people is probably no. This deal is going to be a lot. This deal is expected to be north of $50 billion. And there are very few entities out there, let alone people that can actually afford that. So in terms of buyers, no, I don't think Kevin O'Leary is going to own TikTok, but there is definitely a world in which a company like Oracle could own it. And that would be a huge shakeup to the social media economy, which is of course, as of today, totally dominated by meta. So let's check in with Scott on this. As you probably know, he has been calling for TikTok to be banned for several years now.

I'm sure he has some opinions on this. Plus, it's been a while since we've heard from him. He's been off on vacation with his family, but I am happy to report that he is, as of today, back to work. So let's give Scott a call. Hey, Scott. How are you? I'm doing well. How are you? It's been a while. Yeah, it has been a while.

I had a nice weekend and I'm wrapping up our trip. Oh, you're still in Ibiza? Yeah, still here. Okay. Still here. Head to Los Angeles on Wednesday, but yeah, still here. Good stuff. What's the plan for LA?

Well, I don't know if you've heard this, Ed, but I'm working on an original scripted program from a little company called Netflix. Oh, there we go. Little company called Netflix that I bought at $12 a share and then sold at 10 and now it's trading at $1,400. So I want to find a time machine so I can go in that time machine, go back, kill me, and then come back and kill myself. When is that coming out?

It's coming out in fall of next year, fall 2026. Oh, that's pretty soon. That is quite exciting. Okay. Well, we'd like to get your take on this TikTok news. TikTok is building this new app. Probably the best evidence we've gotten so far that they will sell to an American investor. What's your take Scott?

My gut is that it's the mother of all jazz hands. It's a giant's head, but it's essentially bullshit. But if they're going to try and rebrand it, say it's a different app, come up with a bunch of reasons for why it's unique, maybe allow some additional investors, create a new entity. But as long as the algorithm is controlled out of Beijing or there's back doors into the algorithm and they can continue to raise a generation of military nonprofit and business leaders and teach them to basically hate each other and hate America, which is I think too valuable a propaganda

machine for them to give up. I don't think they're going to want to unplug a neural jack from the wet matter of all of America's youth. So, and I think the president has proven himself to that he is not a serious person with regards to threats, to ban things. So I think it's going to be performative and branding. But at the end of the day, I think the CCP will continue to control the algorithm. So for me, it all comes down to ownership. So we'll see. So what would your prediction be?

How do you think this plays out? Are you saying that we'll see a sale of the app, but the CCP will still have control of the algorithm, but the sale will happen or we won't see a sale at all? How do you see this playing out? have control of the algorithm, but the sale will happen or we won't see a sale at all. How do you see this playing out? I don't know if they'll come up with some jazz hands around a new app, new branding, some additional security measures, but I just get the sense that the CCP would rather have a call president Trump's bluff and say, okay, ban the app. And perhaps it was 20% of revenue of which they don't really care,

then give up what has become the most, the propaganda dream of MI6 and Mossad and the CIA. I just don't think, I don't think the CCP is gonna give it up. So that's my prediction that at the end of the day, this thing is either banned because they refuse to give up control of the algorithm or effectively it's performative.

Yeah. I think that basically that Trump's hand, he's overplayed his hand, it's getting weaker and weaker. I mean, just thinking about the Paris ad, I believe and there's evidence that there's been more dollar volume of trade deals done outside of the US between third parties that have been inspired by Trump's threats.

So the EU and Mercosur, the EU and India, Southeastern Asians, African nations are talking and doing regional trade deals. I believe the dollar volume of deals inspired by Trump's hostile rhetoric and threats of a trade war is much greater than the actual deals that have been consummated so far between the US and nations. I think his hand is just getting weaker and weaker. Yeah. I think that makes sense.

Before you go, Scott, can we just get a vibe check on Ibiza and Europe and the Mediterranean? How are things over there? Well, increment equality rages on. I'm with, I'm with, I'm, I'm on an island. They're sort of this. It's fine to say it's nice. Well, yeah. Okay.

It's really nice, but the, the douche circuit lives on whether you're in St. Barthes or a Bitha or a Mykonos, you know, this isn't the real world. This is, this is the 1% and the children are the 1%. So I don't know if this is a decent indication. What I will say is that inflation and nobody talks about this inflation at the high end has been greater than any other segment rich people inflation. Yeah. Because there are these people are pretty much price insensitive and it's not easy

to spin up one of these global hotspots. So, but this is definitely, it reminds me, it's the last 20 years whenever I go skiing, I ask myself, how does a middle-class family afford this? The answer is they can't. But there appears to be no slowdown amongst these very, I don't know, high prestige elite places. What Ibiza has done, and I'm glad you asked,

and I'm sure you're regretting asking, what Ibiza has done that's really interesting is a lesson in branding. And that is they have done a great job of creating a global hotspot or a party island that has the best DJs and residents. So they've become known for having the best DJs in the world. And it's a really interesting brand positioning, which results in great margin, but it's just a super interesting strategy that they've figured out that all right, we're going to be the party place that has the best DJs and residents.

And how does it compare to Mykonos? Uh, well I'm older, so I enjoy Mykonos more because I think it has more character in the individual islands with no cars and more interesting. But if you're your age and you're being overpaid by a boss who has affection for you for no real reason or no real tangible reason, you're going to want to come like you and the team would come to a beat like Greece is Greece is a little bit more interesting, a little bit more classy, which is, you know, you're none of those things.

So I would say a visa. Okay. Noted. Thank you, Scott. Enjoy your night. Thanks, noted. Thank you, Scott. Enjoy your night. Thanks, Ed. After the break, a $9 billion acquisition from CoreWeave. Stay with us.

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I think I just smurfed my pants. That's a little too excited. Sorry! Smurfs. Only dinners July 18th. We're back with Pro Profgy Markets. AI company CoreWeave is acquiring Bitcoin mining company CoreScientific for $9 billion. The all-stock deal will value CoreScientific at roughly $20 per share. That represents a 66% premium to its closing price before the transaction.

The deal is expected to close in the fourth quarter of this year. Just a reminder on CoreWeave. What is CoreWeave? This is the company that went public in March of this year. It was the biggest American IPO of the year. They raised $1.5 billion. And as we've discussed, since going public, the stock is up nearly 300%. So it is absolutely ripping.

Now, what does CoreWeave actually do? Well, put simply, they sell compute. CoreWeave operates 33 data centers around the world, and they have roughly 250,000 Nvidia chips. And they sell access to those chips to tech companies, companies like OpenAI and Meta and Google and Microsoft. People call it an AI company. It probably makes more sense to call it a data center company.

They're not building AI, but they are selling the compute that is needed to build AI. So why would CoreWeave, this data center company or this AI company, why would they want to buy Core Scientific, which is a Bitcoin mining company? Well, the answer actually makes more sense than you might think, because it turns out that Bitcoin mining and AI actually have quite a lot in common, and that is they both require tons of compute. As we've discussed, the Bitcoin network consumes more than 200 terawatt hours per year, and that is more than the annual electricity consumption of Argentina. So if you want to mine Bitcoin, well, basically you need chips, and ideally lots of them.

And that is exactly what Core Scientific offers. They have nine data centers across the US, and those data centers were originally supposed to be used for Bitcoin. But suddenly the AI revolution happened, and then the company realized, well, those same data centers are actually just as useful for AI as they are for Bitcoin.

So the company pivoted, and they started renting out their compute to AI companies and now Core Scientific will become part of this AI company that is CoreWeave. Interesting side note by the way, CoreWeave has a very similar history to Core Scientific. It also started out as a Bitcoin company, but then as AI took over, they suddenly realized, oh, these data centers, they can actually be used for for AI so they pivoted to AI as well So there's a lot of overlap between these two companies They also both have the word core in their names, but to be clear that is just a coincidence

These are two totally separate totally distinct companies Okay back to the deal nine billion dollars all stock deal as I mentioned core Weave is paying a 66% premium for this company and that is pretty enormous. The average premium for a public company acquisition is between 20 and 40%. This acquisition is pushing 70%. So in other words, CoreWeave appears to be overpaying. And that would explain what happened to the stock. CoreWeave stock fell nearly 5% on the news, somewhat significant but also somewhat expected. What was less expected though, was what happened to Core Scientific stock.

You would think that if a company was being bought at this significant premium, then the stock would go up. That is at least usually what happens in M&A. But no, core scientific stock went down by about 15%. In other words, investors seem to think this premium wasn't enough. They wanted more. And the net-net of this transaction is that both companies lost value. And that is quite strange.

So to better understand what is really happening here, we spoke with Gil Luria. He is the head of technology research at DA Davidson. Since the deal is only going to close in the fourth quarter and it's a stock only deal, what this reaction tells us is that the holders of Core Scientific believe that Core Weave's stock will be lower by the time the acquisition closes, which is why the value of shares they get at that time will be lower than the implied stock price at the closing today. So that's the reaction to Core Scientific on the Core Weave side. This is a little bit more financial engineering from their side.

This is a company that really is mostly built around financial engineering. And this is just a little bit more of that. CoreWeave is not using cash, right? They're just issuing new shares, diluting their own shareholders. Is that why CoreWeave shareholders are potentially upset about this acquisition? Yes, that's exactly right. So they're using almost 10% of their shares

to buy a business that is also losing money and also has negative cashflow. So that's a dilutive acquisition, which is why CoreWeave's share is down today as well. Okay. And then basically Core Scientific shareholders are thinking CoreWeave is currently overvalued. That's right. Since the transaction will close in the fourth quarter, a lot's going to happen between now and then. CoreWeave, the share lockup from the IPO will happen. And so a lot more shares will become available,

which will likely reduce the share price for CoreWeave. So by the time Core Scientific shareholders get CoreWeave share, the share price will be lower. And that's what's reflected today. Before I let you go, I'd love to just get your sense of CoreWeave as a business. Our co-host, Ed, he sort of thinks that CoreWeave exists because NVIDIA wants it to exist

and that they have this overreliant sun, NVIDIA's GPUs. What do you think of that? Yeah, NVIDIA created CoreWeave and other Neo clouds such as CoreWeave to put pressure on its largest customers, Microsoft, Google, Meta, and Amazon. And it's continued to prop CoreWeave up all the way through the IPO in order to do that. CoreWeave is really a deal between NVIDIA, Microsoft, and debt holders to build data centers. So this is a much more of an unusual situation where the whole entity was created because Nvidia didn't want to just have four or five customers.

It wanted to diversify its customer base. So instead of selling the chips directly to Microsoft, it sold them to CoreWeave. CoreWeave doesn't have any customers, Microsoft does. So then Microsoft turns around and rents that capacity from CoreWeave. If all that sounded convoluted, it's because it is. And this is financial engineering to serve the purposes of Nvidia. Really CoreWeave in its essence is if you would take a 12.5% margin loan to buy Treasuries, yielding 5%, it's not a good idea.

And eventually the market will figure that out. Well, I have to say, I loved that response from Gil Luria. He's the head of technology research at DA Davidson. Totally agree with his analysis on CoreWeave as a company. But he also mentioned something there that is really important about this acquisition and how the stock reacted to this acquisition. Because this is an example and it's a great example of the market whispering a secret

to us that many perhaps didn't want us to hear. In this case, the secret is being revealed by the shareholders of Core Scientific, who by selling their stock after they had received this pile of CoreWeave shares that as I said were worth 66% more than the current value of their company. By selling, they essentially told us that they do not believe in the current valuation of CoreWeave. They believe that by the time this deal closes, in Q4 of this year, CoreWeave will be worth significantly less than it is now, and they will be left with a pile of shares that they

basically just don't want. So put another way, this is about as good of a sign as you could get that CoreWeave is indeed overvalued. And this is something that I have pointed out before and that is partly why I like this story. Because yes, CoreWeave was the hottest IPO of the year. Yes, it is part of the AI story. Yes, it's quadrupled since the IPO. It looks

great. But when you look beneath the hood, what you discover is a business that is fundamentally quite weak. It's way over-dependent on Nvidia. It's got way too much customer concentration in Microsoft. And it's also got $8 billion worth of debt. As Gil said, it's essentially a practice in financial engineering. And as I've said before, the only reason this company exists is because Nvidia wants it to exist.

But if that changes for whatever reason, well, then you don't really have much of a company left. So that's the concern that I have flagged, but what we are learning with this transaction and specifically with what happened to Core Scientific stock is that other investors, the shareholders in that company, they are concerned about this too. And that is why you saw this enormous drop in this company you've probably never heard of because the investors in Core Scientific believe that despite that 66% premium, which

seems great, despite that the current valuation of Core Weave is too high. The company is over sensationalized, it is overhyped, and they believe that come Q4 when the deal closes the hype will have run out. It sounds like Gil Luria agrees with that thesis, and in this case, I agree with that thesis too. Okay, that's it for today. Thanks for listening to ProfD Markets from the Vox Media Podcast Network. I'm Ed Elson. I'll see you tomorrow. Lifetimes You held me in kind Reunion As the world turns