President-elect Donald Trump’s return to power next month promises upheaval in business-as-usual in Washington, D.C. From sweeping executive orders to firebrand appointments to lead government agencies, there is likely no area that won’t be impacted by Trump 2.0.
That includes the semiconductor industry. Although the Biden administration seems to have come to a workable framework on imposing restrictions on Chinese chip suppliers, it’s possible Trump takes a scorched-earth stance once ensconced in the White House.
Yet would the once-and-future president prove a threat to the leading chipmaker Nvidia (NASDAQ:NVDA | NVDA Price Prediction)? While it’s possible there could be retaliatory strikes against the tariff threats Trump has lobbed at foreign markets in a bid to bring parity to trade barriers, there are also significant tailwinds that could launch the artificial intelligence chipmaker further into the stratosphere.
24/7 Wall St. Key Points:
- Nvidia (NVDA) is the premiere AI stock and Donald Trump’s second term as president is like to provide a mix of headwinds and tailwinds to the chipmaker.
- Trade tariffs could lead to retaliatory actions, but Trump’s support of AI, along with Elon Musk overseeing appointment of an AI czar, could tip the balance in favor of Nvidia.
- If you’re looking for some stocks with huge potential, make sure to grab a free copy of our brand-new “The Next NVIDIA” report. It features a software stock we’re confident has 10X potential.
What have you done for me lately?
Nvidia is an AI powerhouse, but the market has been expecting more the more it does
It is getting harder for Nvidia to impress the market. Despite recently reporting stellar third-quarter results, NVDA stock fell and is now down 10% from the all-time high hit just a few weeks ago.
The more Nvidia does, the more investors want. The chipmaker reported revenue surged 94% year-over-year to a record $35.1 billion while data center revenue — that’s where Nvidia’s AI business is housed — more than doubled from the year-ago period to $30.8 billion. That was a 17% increase from what it saw just last quarter.
Although I have said investors should be cautious about an AI-spending slowdown as businesses take a breather from implementing AI-backed projects to assess whether they are getting their expected return on investment, that hasn’t materialized yet. And though it remains a possibility still, it seems there are stronger currents pushing the industry forward.
AI all the time
Elon Musk’s embrace of AI, and Nvidia’s AI chips particularly, could be the tipping point for NVDA stock
Trump is expected to appoint a new AI czar for his administration to help shape policy positions on the technology. Elon Musk and Vivek Ramaswamy, who are heading up Trump’s Department of Government Efficiency (DOGE) are likely to have a lot of input into who is appointed.
That’s significant because Musk is deeply involved in AI, especially through his xAI company. X (formerly Twitter) has its own AI chatbot called Grok. Musk also recently engaged in a round of fundraising to raise as much as $6 billion so xAI could purchase 100,000 Nvidia chips for his new data center called the Memphis Supercluster. It will be a massive AI chip training center.
Trump himself is seen as being more open to keeping the use of AI deregulated, compared to the Biden administration, which was moving towards greater control and regulation of the technology.
The combination of Trump, Musk, and Ramaswamy positions Nvidia for significant future growth, let alone all the other tailwinds the chipmaker has behind it. They seem to far outweigh the potential issues it might face from Trump’s trade policies, which could turn out to be little more than a negotiating tactic.
Key takeaways
A lot of Nvidia customers seem to chafe at having to rely upon the chipmaker for their AI chips, with both Alphabet (NASDAQ:GOOG)(NASDAQ:GOOGL) and Meta Platforms (NASDAQ:META) hinting they may have overspent on AI.
While they still currently rely upon Nvidia and are awaiting delivery of its Blackwell chips, the chipmaker has pushed back delivery times until early 2025. They were previously expected to ship in the fourth quarter of 2024. Yet there is no other place to really turn to to buy such powerful chips.
Advanced Micro Devices (NASDAQ:AMD) is probably closest to Nvidia, yet it remains a generation or two behind its rival. Of course, for the vast majority of companies, they don’t need such massively advanced chips as Nvidia’s Blackwell and could easily go with AMD’s simpler and cheaper chips.
Yet data center demand from hyperscalers like Alphabet, Amazon (NASDAQ:AMZN), Meta, and others is only expected to grow. That suggests next year will see NVDA stock grow.
It’s difficult recommending a stock trading at nosebleed valuations like Nvidia, but Trump’s second term could be enough to overcome the froth and buying before Inauguration Day on Jan. 20 seems smart.
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