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How a Trump or Biden presidency could affect tech stocks

Published 07/10/2024, 08:19 AM
Updated 07/10/2024, 09:05 AM
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With only five months left until the much-anticipated US presidential election 2024, investors must be keen to know how a Biden or Trump presidency might impact tech stocks. 

The tech sector, which has been the star market performer in recent years, could see different shifts, even if not massive ones, depending on whether Joe Biden or Donald Trump occupies the White House.

During Donald Trump's previous term, the stock market had an impressive run. The Dow Jones Industrial Average returned 56% during Trump's presidency, the best performance for any Republican president since Calvin Coolidge. 

While both Trump and Biden have shown support for advancing US tech capabilities, their methods and focal points differ significantly. Here’s how tech stocks can perform under their presidencies: 

How tech stocks can perform under Trump 2.0?

Trump's policies usually favor rapid industrial growth and less regulatory oversight, which could benefit large-cap tech stocks in the short term. 

Stocks particularly within the tech sector also gained a lot during the former President’s tenure. The Technology Select Sector SPDR Fund (XLK), which includes major pure-play tech stocks, gained 179% during his time in office. 

A second Trump term is expected to improve domestic semiconductor manufacturing, an area of intense competition with China. UBS noted that companies such as Applied Materials (NASDAQ:AMAT), KLA Corp, Intel (NASDAQ:INTC), and Texas Instruments (NASDAQ:TXN) could see increased support. 

The potential backing of such companies could be a part of a broader Trump strategy to improve the nation’s self-sufficiency in critical tech sectors. 

Moreover, reshoring initiatives would likely continue, with a focus on tariffs to negotiate better deals for US products.

However, UBS pointed out that Trump might favor tax policies to incentivize private investment over direct government funding for tech R&D.

How tech stocks can perform under Biden 2.0?

In contrast, Joe Biden's approach has focused on regulation and strategic partnerships while looking for sustainable growth and technological safety. 

To begin with, Biden made significant legislative efforts to push the pure-play tech industry, particularly through the CHIPS and Science Act. This act, which was designed to better domestic chip manufacturing, has funneled millions into building new facilities. 

Biden could also focus on export controls and regulatory oversight, especially regarding AI and antitrust issues. His policies could also challenge US tech companies on antitrust issues and lead by example on AI safety development by requiring federal agencies to follow guidance on AI use.

What about big tech stocks? 

Companies like Amazon (NASDAQ:AMZN), Apple (NASDAQ:AAPL), Microsoft (NASDAQ:MSFT), Meta (NASDAQ:META), and Alphabet (NASDAQ:GOOGL) have seen strong returns under both administrations, but the approach to regulation and support has differed markedly.

While Trump's administration might ease regulations on technologies like AI, leading to rapid advancements but potential oversight gaps, Biden's approach has been to partner with tech companies to ensure safe AI development. 

Coming to chip makers; Nvidia’s impressive stock gains, often cited as a benchmark, have largely been driven by the company's strategic business decisions and innovations rather than specific White House policies. 

However, the broader tech environment shaped by presidential policies does play a significant role in the operations of chip manufacturers which have grown tremendously in the past one and half years. 

Portfolio Wealth Advisors strategists predicted more aggressive trade restrictions with China, potentially leading to supply chain disruptions, in case of a Trump presidency. 

His unpredictable nature could result in abrupt policy changes, such as halting Nvidia (NASDAQ:NVDA)'s sales to China, which could have far-reaching implications for the tech sector.

Regardless of the election outcome, the next U.S. president will need to guide the country’s digital technology policy decisively. Former FCC chairman Tom Wheeler warned that without strong US leadership, Europe could dominate the technology regulatory landscape. 

The European Union has already implemented the EU AI Act and is progressing with the Digital Markets Act and Digital Services Act, setting stringent standards for digital platforms, as per Wheeler.

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