Trump's Potential Impact on AI Stocks and Policies: A Mixed Bag of Opportunities and Risks

These Artificial Intelligence (AI) Stocks Have Soared Since Trump Won the Election, but Should You Buy? | The Motley Fool

Donald Trump's election has shaken up financial markets in a way that few elections have. Stocks soared broadly on his victory with financials and energy stocks leading the way, while some sectors fell, including real estate, which is sensitive to interest rates, and consumer staples, which could get hit by tariffs. Bond yields initially jumped, a sign that bond investors anticipated interest rates would stay elevated due to tax cuts and other economic stimulus, as well as the impact of tariffs and larger deficits. Among the winners have been tech stocks, which tend to be cyclical and are expected to benefit from a more lax regulatory framework under the Trump administration. Through Nov. 14, the Nasdaq-100, which is heavily weighted toward the "Magnificent Seven," is up 3.3%. Trump's approach to policies around AI isn't entirely clear, but some individual AI stocks have soared since he won the election. Let's take a look at a few of them. No AI stock has gotten more attention than Tesla (TSLA 5.62%) since Trump's election, and it's easy to see why. CEO Elon Musk fully embraced Donald Trump's campaign, and now he seems set to reap some kind of benefit, having the president's ear to bend when he wants. Investors clearly seem to think that Trump's victory will favor Tesla. The EV stock has jumped 24% since the election, as of Nov. 14, and was up more than 40% at one point. Wall Street is optimistic that the Trump administration will make it easier for Tesla to roll out its robotaxis, or Cybercabs, and the administration could federalize laws regarding the oversight of autonomous vehicles as much of the regulatory apparatus happens at the state level. There are also currently federal restrictions that prohibit companies from deploying more than 2,500 driverless vehicles per year, which would prevent Tesla from a rapid rollout of the newly introduced Cybercab. However, there are also risks to Tesla that didn't exist a few months ago. The Trump administration is planning to eliminate the $7,500 EV tax credit, which is likely to shift some EV sales to gas-powered cars. Musk downplayed the impact of that move, but he's complained in the past about the impact of high rates on Tesla's sales, showing that Tesla's vehicles are price-sensitive and they're competing with gas-powered cars. Additionally, Musk's alignment with Trump could also turn off some potential Tesla buyers as Musk's own brand is now closely tied to Trump. Beyond those political concerns, Tesla stock is also expensive and its growth has been sluggish over the last year. Investors are optimistic that a breakthrough with autonomy will drive the business and the stock higher, but without that, Tesla looks overvalued at a price-to-earnings ratio above 100. Investors are better off waiting on the sidelines for now. Block (SQ 7.70%) isn't an AI stock in the traditional sense, but the fintech company, which owns Square and Cash App, has made leveraging AI a top priority, using technologies like machine learning in sales and marketing, customer service, and engineering. Block also allows Cash App users to invest in cryptocurrency, and the Trump administration is expected to be friendly to crypto. Financial stocks gained broadly on the election as the Trump administration is expected to be friendlier to businesses and more lax about mergers and acquisitions. Block has been a prolific acquirer, taking over businesses like buy now, pay later platform Afterpay and the Tidal music streaming service. The stock jumped 7.3% the day after the election, and since the election, the stock has gained 15.3%, though that period includes the company's third-quarter earnings report. However, the company missed estimates in the report, and the stock fell slightly. Block said in the earnings report it was scaling back its investment in Tidal, and winding down TBD, which was focused on decentralized technology around Bitcoin. However, it said it would step up investments in Bitcoin mining, which it said had a good product-market fit, and its Bitcoin wallet, Bitkey. The company seems to be well-aligned with the perceived priorities of the Trump administration on crypto and deregulation. The stock continues to deliver steady gross profit growth and is on track for more than $1 billion in operating income this year. If investor hopes for the new administration play out, Block should be a winner.

Prediction: This Artificial Intelligence (AI) Stock Will Go Parabolic After Trump Assumes the White House | The Motley Fool

With Trump set to assume office in January, I have my eyes on one particular artificial intelligence (AI) company. After an intense and closely followed election season, former President Donald Trump is headed back to Washington. Since the election, speculation has been about whom Trump will appoint to his cabinet or other senior positions. Chief among those guesses is Tesla (TSLA -5.77%) Chief Executive Officer Elon Musk, who emerged as a critical Trump surrogate during the final months of the election campaign. Whether Musk ends up heading the ill-defined Department of Government Efficiency isn't all that important to me. Instead, I'm focused on the policy agenda under the Trump administration and how the new decision-makers in Washington could bode well for Tesla. Here's why I think Tesla stock is poised for a breakout as Trump's inauguration in January looms. One of Wall Street's most respected technology analysts is Dan Ives of Wedbush Securities. Ives reminds me of Ark Invest's Cathie Wood due to his unapologetic, aggressive calls. During a recent interview with CNBC's Scott Wapner, Ives called a Trump White House a "game changer" for Tesla. That's a bold stance to take, especially before Trump even gets sworn into office. Nevertheless, I think Ives might be onto something here. During the past couple of years, Musk has spent a lot of time explaining to investors that Tesla is in the early stages of evolving from a car manufacturer to more of a robotics and artificial intelligence (AI) company. One of the biggest pursuits in Tesla's AI roadmap is autonomous driving. Achieving widespread autonomous Tesla robotaxis could have enormous implications for the company. For example, autonomous driving could be a technology that other car makers are so far behind that it will be hard for them to catch up to Tesla. In turn, Tesla could witness an uptick in demand for its vehicles on the consumer side. On the business side of the equation, Tesla's robotaxi fleet could spur interest from ride-hailing platforms, car rental businesses, and even delivery services. Without going too far in terms of optimistic projections, it is hard to imagine that Musk's relationship with Trump won't carry some weight as Tesla continues to jump through regulatory hoops to get its full self-driving (FSD) technology commercialized. In the eyes of Ives, the autonomous opportunity at Tesla could be accelerated by two or three years thanks to the Trump administration. To be completely honest, I'm torn on whether buying Tesla stock right now is a good idea. Autonomous driving technology presents an incredibly lucrative opportunity. Tesla's FSD software is a recurring source of sales. In theory, more FSD revenue should result in meaningful margin expansion for Tesla -- thereby bolstering the company's cash flow and profitability. In turn, I could very easily see Tesla's valuation skyrocket under such a scenario. Ives' recent price target of $400 implies about 25% upside from Tesla's current share price. With all of this said, it's important to keep in mind that Tesla stock has gained almost 30% since Election Day (Nov. 5). Investing in momentum stocks is always risky because it's a near certainty that day traders will eventually move on for another opportunity. Unfortunately, this type of dynamic doesn't become clear until an outsize sell-off occurs. So while I think some of the optimism surrounding the Trump-Musk relationship is priced into Tesla stock on some level, there is an argument to be made that investors could still benefit from buying shares today. But I'd encourage investors to do their best not to get caught up in the exuberance. Although I am hopeful that a Trump White House could be positive for Tesla and investors in the company, I think the most prudent strategy is to exercise some discipline and patience for the time being.

What a Trump Presidency Could Mean for AI

Analysts and executives expect Trump's business-friendly approach will accelerate investments in AI. Tech stocks, like much of the U.S. stock market, have charged higher in the week since Donald Trump secured a second term in the White House, boosted by expectations for business-friendly tax policies and gentler regulation. The Roundhill Magnificant Seven ETF (MAGS) -- which tracks the stocks of artificial intelligence (AI) heavyweights Nvidia (NVDA), Apple (AAPL), Microsoft (MSFT), Alphabet (GOOGL), Amazon (AMZN), Meta Platforms (META), and Tesla (TSLA) -- has climbed nearly 7% since Election Day. Tesla stock, up more than 25% in the last week, has had an outsized impact on those gains. Still, most of the group has outperformed the broader market, with the equal-weight S&P 500 up less than 3% over the same period. AI was hardly a blip on Wall Street's radar last time Donald Trump was president. His incoming administration could have a long-lasting impact on how the nascent technology is developed and who benefits. Artificial intelligence got very little airtime during Trump's campaign rallies. Trump has said very little about whether he would encourage investment in AI, regulate the nascent technology, or advance its use in the government. His official platform stated: "We will repeal Joe Biden's dangerous Executive Order that hinders AI Innovation, and imposes Radical Leftwing ideas on the development of this technology. In its place, Republicans support AI Development rooted in Free Speech and Human Flourishing." Biden's October 2023 executive order on AI laid out the guiding principles of his administration's AI initiatives, one of which was that they "must be consistent with my Administration's dedication to advancing equity and civil rights." The order also created the U.S. Artificial Intelligence Safety Institute, an organization meant to evaluate the safety and security of advanced AI models. Dozens of tech companies last month urged Congressional leaders to enact legislation that would formalize and fund the institute before the end of the year. Trump enters the White House with the backing of several prominent tech investors. Among them is venture capitalist Marc Andreessen, who in December 2023 called regulation of AI "the foundation of a new totalitarianism." In a "Techno-Optimist Manifesto" published in October 2023, Andreessen railed against "trust and safety" and "tech ethics" as two prongs of a "mass demoralization campaign" that he said threatened to stifle economic growth and lead to societal decline. But even closer to Trump is Elon Musk, who has taken a more measured stance on AI regulation. He supported a California state bill that, had it not been vetoed by Gov. Gavin Newsom, would have required large language models to undergo safety testing. Regardless of whether Trump prioritizes innovation or safety, his administration is widely expected to encourage investment as part of its pro-growth agenda. The Biden Administration appears to have had a constructive relationship with industry working on AI regulation, but Big Tech is likely to have an even warmer relationship and more sway with a Trump White House. Wedbush analysts expect Trump's administration to launch "significant AI initiatives" within the government and military. Washington's investment in AI could benefit cloud computing giants Microsoft, Alphabet's Google, and Amazon, as well as defense contractor Palantir (PLTR), they wrote.