The re-election of Donald Trump infused record highs in technology and cryptocurrency markets, with the artificial intelligence chip giant NVIDIA NVDA and Bitcoin cryptocurrency seeing remarkable surges. Similarly, the Tesla TSLA stock soared due to CEO Elon Musk’s all-in support for Trump.
Overall, the technology industry is preparing for potential shifts in policy as Donald Trump prepares to take office in January. His administration is expected to address issues like antitrust, AI regulation, and the CHIPS Act, with major implications for Big Tech.
Antitrust Regulation: Shift Away From Biden's Approach?
Under the Biden administration, antitrust measures targeted big players like Google, Amazon, and Apple, with the FTC attempting to curb their market dominance. Trump, however, has indicated a more lenient stance on breaking up Big Tech. This could affect ongoing cases against Big Tech, including efforts to break up Alphabet’s Google GOOGL due to its dominance in online search.
While Trump is likely to continue several antitrust cases against major tech companies — many of which began during his first term — he recently expressed skepticism about a potential Google breakup. In October, Trump questioned whether dismantling Google would harm the company too severely.
A Boon for Artificial Intelligence?
Generative AI has surged in relevance since Trump’s first term. The Trump administration had previously made concerted efforts in promoting artificial intelligence (AI). He signed the American AI Initiative executive order on Feb. 11, 2019. The order pledged to double AI research investment and established the first set of national AI research institutes.
The order also included a plan for AI technical standards and established guidance for the federal government’s use of AI. Trump also signed an executive order on Dec. 3, 2020, promoting the use of trustworthy AI in the federal government. It shows that AI stocks and ETFs should have great days during Trump’s ruling (read: 4 Sector ETFs to Gain on Trump's Triumph).
Tech companies are increasingly calling for standardized regulation to avoid a confusing patchwork of state rules. The Biden administration’s recent executive order sought to balance AI growth with safety measures. In contrast, Trump’s deregulation tendencies could mean fewer restrictions on AI development. However, Elon Musk, who expressed concerns about unchecked AI growth, may encourage Trump to consider some form of flexible regulation.
The CHIPS Act and Potential Tariffs
Biden’s CHIPS Act, which provides $52.7 billion for domestic semiconductor production, may face scrutiny. Though Trump is unlikely to repeal it, he might streamline funding and reduce regulatory hurdles. However, he’s also suggested imposing tariffs on imported chips to spur domestic production, a move that could increase the cost of goods with imported chips and impact various tech products, from consumer electronics to enterprise AI hardware.
Any Threats for Big Techs?
Consistent Antitrust Enforcement Expected
While Trump may revise some policies, a full-blown reduction in antitrust enforcement is not likely. Note that the Trump administration brought a comparable number of merger cases to the Biden administration during his first term, according to an analysis by the Sheppard Mullin law firm, as quoted on Yahoo Finance.
China Plays a Crucial Role in Big Tech’s Fortune
Trump’s first term is famous for slapping tariffs on China. He’s threatened to slap China with 60-100% tariffs on goods, so the risk of a global trade war looms. Any trade war with China is a negative for big techs. Apple and Tesla, especially, depend a lot on the Chinese market and supply chains. Apple’s manufacturing relies heavily on Chinese facilities, while Tesla considers China as one of its fastest-growing markets.
Tech ETFs in Focus
In a nutshell, the scenario is mixed-to-bullish for big tech stocks. Investors may continue to play top-ranked technology-based exchange-traded funds (ETFs), including VanEck Semiconductor ETF SMH, First Trust Cloud Computing ETF SKYY, iShares Expanded Tech Sector ETF IGM and First Trust Dow Jones Internet ETF FDN. All these tech ETFs hold a Zacks Rank #1 (Strong Buy) (see all technology ETFs here).
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