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.
Image source: Getty Images.
1. Tesla
No AI stock has gotten more attention than Tesla (NASDAQ: TSLA) 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.
2. Block
Block(NYSE: SQ) 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.
Where to invest $1,000 right now
When our analyst team has a stock tip, it can pay to listen. After all, Stock Advisor’s total average return is 875% — a market-crushing outperformance compared to 172% for the S&P 500.*
They just revealed what they believe are the 10 best stocks for investors to buy right now… and Tesla made the list -- but there are 9 other stocks you may be overlooking.
*Stock Advisor returns as of November 18, 2024
Jeremy Bowman has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Bitcoin, Block, and Tesla. The Motley Fool has a disclosure policy.
