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Fri, Jun 6, 2025|Whitney Tilson
Whitney Tilson

Updates on AI, China, and Elon Musk/Tesla

In today's e-mail, let's discuss some recent developments with three topics I've written about many times...

I'm talking about artificial intelligence ("AI"), China, and Tesla (TSLA) and its CEO Elon Musk.

1) Up first is AI...

Last week, in an interview with Axios, Dario Amodei shared a scary warning about AI. He's the CEO of Anthropic – one of the world's most powerful AI creators. And he sees AI coming for a lot of white-collar jobs.

Here's the Axios article with highlights from the Amodei interview: Behind the Curtain: A white-collar bloodbath. And here's an excerpt:

  • AI could wipe out half of all entry-level white-collar jobs – and spike unemployment to 10-20% in the next one to five years, Amodei told us in an interview from his San Francisco office.
  • Amodei said AI companies and government need to stop "sugar-coating" what's coming: the possible mass elimination of jobs across technology, finance, law, consulting and other white-collar professions, especially entry-level gigs.

The article continues with three steps on how Amodei and others think this will play out:

  1. OpenAI, Google, Anthropic and other large AI companies keep vastly improving the capabilities of their large language models (LLMs) to meet and beat human performance with more and more tasks. This is happening and accelerating.
  2. The U.S. government, worried about losing ground to China or spooking workers with preemptive warnings, says little. The administration and Congress neither regulate AI nor caution the American public. This is happening and showing no signs of changing.
  3. Most Americans, unaware of the growing power of AI and its threat to their jobs, pay little attention. This is happening, too.

At that point, the end result looks ominous – and when folks realize what's happening, it'll be too late. Here's more from the article:

And then, almost overnight, business leaders see the savings of replacing humans with AI – and do this en masse. They stop opening up new jobs, stop backfilling existing ones, and then replace human workers with agents or related automated alternatives.

This is a scary scenario, but my friend Doug Kass of Seabreeze Partners isn't convinced (curmudgeonly, old-school investor that he is!)...

He kindly gave me permission to share excerpts from his recent missive with his response to the Amodei interview and Axios article. In it, he writes:

These are the types of comments that just beg for extreme government oversight and regulation, globally, if anyone really believed them. As an executive of a business, who would want that?

This may fall into the "he doth protest too much" bucket – just like Elizabeth Holmes at Theranos. The more it was clear Theranos was failing and could not do what people (investors, partners, the public) were told, the more grandiose Holmes' claims became.

All of these businesses are incredibly capital consumptive – they lose money like nothing ever previously known to mankind. They are in constant fundraising mode. "Hey guys, the technology isn't working and scaling like we thought it would, can I have another $100b at a 2x markup to the last round we just did 3 months ago" is just not that compelling of a pitch to investors. But what he is saying now, boy, if it could just do 25% of what he claims, well then you are on to something.

Doug also notes that buy-now, pay-later company Klarna is ripping out AI:

This of course comes at the same time as the CEO of Klarna telling everyone he is firing the AI he put in place, and hiring the humans back, because the AI is failing so badly at even the simple use case job.

Thank you, Doug!

(For more on his bear case on AI, see my May 20 e-mail.)

Regular readers know that I remain more optimistic than Doug. However, I recognize that there will be plenty of booms and busts in this emerging space.

2) Let's next shift gears to China...

Though I have long viewed China as uninvestable for outsiders like me, I'm fascinated by the country and continue to follow it closely.

Here are four insightful articles that have caught my eye...

The first is by Louis-Vincent Gave of Gavekal Research, who makes a compelling case that China "is only just beginning to leapfrog the West in a whole range of industries": Prejudice And China. Excerpt:

This vision is starting to show up itself in the perception of Western brands in China, and their sales. For example, Apple's iPhones no longer figure in the five best-selling smartphone models in China. And Audi's new electric cars made and sold in China will no longer carry the company's iconic four-circle logo; the branding is now perceived to be more of a hindrance than a benefit.

To put it another way, following years of investment in transport infrastructure, education, industrial robots, the electricity grid and other areas, the Chinese economy today is a coiled spring.

And here's a New York Times article from last month: There Are Two Chinas, and America Must Understand Both.

As the article notes, one of these "Chinas" is a leading tech and manufacturing superpower... and the other is an economy on the brink of collapse. As the article says regarding the former:

One China – let's call it hopeful China – is defined by companies like the A.I. start-up DeepSeek, the electric vehicle giant BYD and the tech powerhouse Huawei. All are innovation leaders.

Jensen Huang, the chief executive of the Silicon Valley chip giant Nvidia, said China was "not behind" the United States in artificial intelligence development. Quite a few pundits have declared that China would dominate the 21st century.

But as the article continues, the latter is vastly different:

The other China – gloomy China – tells a different story: sluggish consumer spending, rising unemployment, a chronic housing crisis and a business community bracing for the impact of the trade war.

President [Donald] Trump, as he tries to negotiate a resolution of a trade war, must reckon with both versions of America's arch geopolitical rival.

The stakes have never been higher to understand China. It's not enough to fear its successes, or take solace in its economic hardships. To know America's biggest rival requires seeing how the two Chinas are able to coexist.

Finally, below are two articles from the front page of the Wall Street Journal recently... neither of which bodes well for the trade war between our countries – or the stock market.

Here's the first: China's New Trade Negotiator Is Ready to Play Hardball. Excerpt:

In Geneva in mid-May, [China's Vice Premier] He Lifeng extracted a 90-day trade truce from a Trump team that had until then declined to pause a tariff blitz on China the way it had for other countries. The deal calmed the nerves of investors and markets around the world.

Now, after both sides have complained that the other wasn't upholding the terms of the deal, that trade truce is teetering, once again jolting global investors and businesses...

During the Geneva talks, He had removed a final sticking point by agreeing to U.S. demands that China resume rare-earth exports. Yet since then He has dug in his heels, slow-walking approvals of licenses to export the minerals critical in the manufacturing of modern cars and other products.

And here's the second: The Fortress That China Built for Its Battle With America. Excerpt:

China has raced ahead in many strategic sectors – and in some cases is catching up with the U.S. Its electric-car companies are among the world's best. Chinese AI startups rival OpenAI and Google. The country's biologists are pushing the boundaries of pharmaceutical research, and its factories are being filled with advanced robotics.

At sea, Chinese-made cargo vessels dominate global shipping. In space, the country has been launching hundreds of satellites to monitor every corner of the Earth. Beyond frontier technology, Beijing is pursuing greater self-reliance in food and energy, and has bulked up its military.

But as the article concludes, China also has many challenges:

For all of China's technological progress, it still faces enormous economic challenges, with sluggish growth and mounting fears domestically that standards of living might not catch up to those in the U.S.

One explanation, economists say, is that structural issues such as high debt levels and tanking real-estate prices are overriding gains from technology improvements.

The WSJ article also notes that China's "state-led model" is another possible explanation for the problem. China's government spending has suffered from plenty of financial waste and fraud. And as the article says, inefficient spending could mean slow growth:

The inefficient allocation of money has contributed to slowing productivity growth. Absent reforms, China may be able to sustain GDP growth of just 2.8% on average from 2031-2040, according to economists at the International Monetary Fund, compared with an average of around 6% over the past decade.

I don't think we're out of the woods with the economic impact of the Trump administration's tariffs and potential trade wars – especially with China – so I expect markets to be volatile.

To be clear, I'm not bearish on stocks...

But I have modest (mid-single-digit annual growth) expectations for the S&P 500 Index over the next five years – especially after it has ripped upward from its early April lows and closed yesterday only about 3% below its all-time high, which it reached on February 19.

3) Finally, turning to Tesla and the big news with its CEO Elon Musk bickering with Trump...

Longtime readers know that I have been fascinated by Tesla over the years. And while I've been more content to watch the stock from the sidelines rather than make a long or short call on it, Tesla has been a popular topic in my daily e-mails.

I also try my best to avoid politics in these e-mails. So that makes it a bit hard to comment on the recent blow-up between Trump and Musk without wading into some degree of politics.

But Tesla is one of the most widely held stocks in America – and the implications of this kerfuffle could significantly affect the future of the company...

You've surely seen in the media by now that Musk recently turned against Trump's tax and immigration bill. In posts on social platform X, Musk even called it "a disgusting abomination" that would burden the country with "crushingly unsustainable debt."

As you would expect, that didn't go over well with Trump. In a post on his Truth Social platform yesterday, he even threatened to "terminate Elon's Government Subsidies and Contracts":

The public clash took a toll on Tesla's stock... It dropped more than 14% yesterday on the news.

For more details on Trump and Musk, here are a few recent articles from different media outlets:

This certainly won't be the end of the story. And you can expect new developments on the relationship between Trump and Musk – positive or negative – to move Tesla's stock accordingly.

With the recent feud, my gut is that Musk has made a terrible mistake in needlessly poking the bear... and his companies – and Tesla's stock price going forward – will pay a steep price.

Overall, this drama helps reinforce why I haven't recommended going long or short Tesla. I still believe you're better off staying on the sidelines with a bowl of popcorn rather than trying to be a hero in picking a side with the stock...

Best regards,

Whitney

P.S. I'll give a hat tip to Doug Kass in regard to Musk and Trump – he saw a split coming.

In his "15 Surprises for 2025," which he published on December 23, he predicted that "President Trump begins to be openly critical of Musk and finally abandons him entirely." Doug also took it a step further:

Musk lashes out and retaliates by forming his own party and has a nervous breakdown...

Musk grows ever more unhinged throughout 2025 – his mother attempts a family intervention.

We'll see whether this prediction from Doug in that post comes to pass: "All these factors cause the shares of TSLA to drop to $100/share."

P.P.S. I welcome your feedback – send me an e-mail by clicking here.

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