Pilot reported traffic in close proximity was turned by Tower resulting in an NMAC and requiring evasive action.

Narrative

The aircraft departing was an Aircraft Y; and overtook us on our left. He was doing a Coyote Hills Departure; and we were on a Hillsdale Departure. After a Foreflight alert of traffic; we saw him out our left wing way too close; and maybe 100 ft. above (in our blind spot).He was turning towards us during the exchange; (I took controls and dove down when we realized how close and his right turn intention).There's a back and forth on the radio of Tower chewing him out for overtaking on the left when he needs a right turn. I pretty much stayed silent except to say something like 'Aircraft X just noticed someone off our left wing; but no longer have them in sight.' The rest was between the Tower and the other guy. Tower then apologies to Aircraft Z; which I assume was meant for us.I think the Aircraft Y pilot was originally trying to find out from Tower what we were doing (Hillsdale Departure); and the Tower didn't answer him initially. A few minutes before my call; he asks something like 'What should I do about the Aircraft A;' and Tower doesn't reply. Later; Tower tells him to turn right (which was into me!!); and that's when I dove down concerned for a collision.