Yahoo Finance What a Trump Win Could Mean for Tech and AI Stocks
Following former president and Republican presidential nominee Donald Trump’s recent comments about increasing China tariffs and his stance on Taiwan — who, per Trump’s statement in a Bloomberg interview, “did take about 100% of our chip business” — tech and artificial intelligence (AI) stocks were sent on a roller coaster.
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As Dan Ives, Wedbush Securities analyst wrote in a subsequent statement, the tech sell-off was “brutal” and Trump’s comments “catalyzed a Street panic for semis, AI Revolution names, and Big Tech.”
These sectors have since recovered but Nvidia stock, for instance, was knocked down that day, as well as Taiwan Semiconductor Manufacturing Co. — “the world’s biggest contract chip maker,” according to The Wall Street Journal.
Nvidia for instance was down 0.29% midday July 23, yet is up an eye-popping 155.7% year-to-date.
“Trump’s ominous China comments this week sparked major worries that a looming semi/tariff battle is on the horizon with China that will stop the music at the AI party,” wrote Ives in the statement. Yet Ives added that this won’t stop the “AI party.”
Now whether this was just a blip or a harbinger of things to come and of the future direction of said AI and tech stocks remains to be seen and could hinge on other factors, several experts said.
“The main driver has less to do with the election and more to do with expectations for the Fed’s next interest rate cut,” said Vijay Marolia, founder and chief investment officer of Regal Point Capital Solutions.
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Could a Trump Win Ruin the “AI Revolution” or Further Bolster These Sectors?
According to Peter C. Earle, Senior Economist of American Institute for Economic Research, the first and most important factor to mention when considering what will happen to U.S. stocks if a particular candidate gets in office is to note their current position.
Earle argued that even having pulled back a little over the past month, stock prices and valuations are very high right now, so there’s a growing chance that the market needs a breather before it can resume rising.
“That’s even more likely to be the case considering that a large part of the recent rise has been on the backs of six or seven stocks, with a large portion of the universe of equities having prices that are flat or slightly lower than they were at the start of 2024,” he said.
Yet, he also added that the tariff talks and protectionism that are a main feature of the Trump campaign does put future gains in AI stocks somewhat into question.
“To the extent that at the core of the AI market are chip manufacturers, some of which may be in China, there will be lots of tensions there,” Earle added.
AI Innovation Won’t Stop No Matter Who Wins — But Expect Some Volatility
As Ives noted, the “Trump trade” does not ruin the AI Revolution thesis and tech bull market and to some extent it’s just a negotiation that will be a long and drawn-out process.”
Several experts agreed with this premise, saying that the momentum in tech and AI is going to be hard to stop, no matter what happens in November.
“While a few big names in the tech community started publicly backing Trump over the past few weeks, the tech world also has been thriving under the Biden-Harris administration,” said Blane Sims, Head of Product at Truebit. “So outside of some very specific regulatory questions, it’s hard to make a case that tech is going to go in a different direction based on the election.”
BlackRock analysts also noted in a July 22 commentary that “any trade or regulatory policy changes after the U.S. election in November that restrict the AI buildout could hurt tech, too.” Yet, they also added that they remain “overweight the AI theme — and for now see sudden pullbacks as an opportunity to dial up risk-taking.”
“This environment requires a new investment playbook,” they added.
What Should Investors be Mindful Of?
As Regal Point Capital Solutions’ Marolia said, “trees don’t grow to the sky so I would continue to expect volatility in the short term.”
“But as we get closer to having certainty about another Trump presidency, I think stocks will rally, including tech and AI,” he said. “I think an investor with a long-term horizon will be able to scoop up shares of Nvidia, Super Micro Computer, Broadcom and others at attractive prices over the next few days and weeks.”
Other financial experts — such as Michael Collins, CFA, Founder and CEO, WinCap Financial — echoed the sentiment, noting that with a Trump win, tech and AI stocks may be at risk in the short-term due to potential changes in regulations.
“However, their long-term momentum should not dissipate as the demand for technology and AI solutions is expected to continue growing,” he said. “It could be a great buying opportunity for investors who believe in the long-term growth of the sector and are willing to ride out any short-term volatility.”
Collins also said that investors should be mindful of any changes in policies or regulations that could impact the sector in the long-term, as well as potential economic downturns that could affect consumer spending on technology products.
Editor’s note on election coverage: GOBankingRates is nonpartisan and strives to cover all aspects of the economy objectively and present balanced reports on politically focused finance stories. You can find more coverage of this topic on GOBankingRates.com.
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This article originally appeared on GOBankingRates.com: What a Trump Win Could Mean for Tech and AI Stocks
