Trump 2.0 Playbook – Winners, Losers and What It Means for Big Tech

Key policies on watch

• Trade: Introduction of a 10% tariff on all countries, with 60% on specific nations, and a potential revocation of China’s PNTR status, along with ongoing industrial subsidies.
• Fiscal: Reduction in income and corporate taxes, higher personal deductions, a doubling of repatriated profits, and increased estate taxes.
• Monetary: Possible continued interventions in Fed policies.
• Immigration: Stricter border controls, deportation of illegal immigrants, and reduced immigration-related spending.
• Foreign Policy: Efforts to broker Russia-Ukraine negotiations, increased pressure on Iran, and reduced participation in multilateral organizations. 

Potential Winners of Trump 2.0

• Energy: Deregulation and an emphasis on energy independence could favor traditional energy sectors, boosting oil and gas stocks. However, mixed performance is likely for oil prices which could dip lower amid increased US supply risks, but risks are counterbalanced by higher odds of stricter Iran sanctions and a slower Fed rate cutting cycle.
• Banks: Financials may benefit from rising yields and deregulation, with potential improvements in net interest margins and profitability. Reflation risks are also supportive of the banking sector.
• Defense: Higher defense spending could drive growth for defense contractors, as geopolitical tensions may intensify.
• Small Caps: Domestic-focused policies and tax cuts could support growth in U.S.-centric sectors, benefiting small-cap stocks.
• Gold: Gold may gain as a safe-haven asset and inflation hedge, especially amid potential trade frictions and stagflation risks. However, risks could be seen in case of excessive USD strength and if the FOMC slows its pace of rate cuts.

Potential Losers of Trump 2.0

• China and Hong Kong Stocks: Tariffs and increased geopolitical friction could put sustained pressure on these markets, likely diverting capital flows to regions like India and Japan.
• Consumer Discretionary: Tariffs raising import costs could impact consumer spending, weighing on consumer-focused sectors.
• Renewables and EVs: Policies that prioritize traditional energy could negatively impact renewables, electric vehicles, and battery production, which rely on government incentives.
• Europe: European markets may face headwinds due to trade tensions, with export-heavy economies like Germany particularly vulnerable.

What does Trump 2.0 mean for Big Tech?

Deregulation as a Positive Force

• Trump’s commitment to reviewing and reducing “unnecessary regulations” on AI would likely benefit Big Tech's AI initiatives, reducing compliance burdens and potentially fostering faster innovation.
• Big Tech companies with data center exposure could see significant gains if energy capacity is expanded to support AI growth. This could boost stocks tied to AI infrastructure, as the demand for data processing and storage rises.

Tariffs as a Potential Headwind

• Trump’s economic nationalism and preference for self-sufficiency might challenge multinational tech companies. Replacing Biden’s subsidies under the CHIPS Act with tariffs on imported components could pressure tech firms to relocate production domestically, especially in semiconductors.
• Without the incentives provided by the CHIPS Act, high tariffs may raise costs and complicate supply chains, potentially impacting profitability and competitiveness for tech firms heavily reliant on global manufacturing networks.

It is clear that the impact of Trump 2.0 on Big tech is more nuanced, and we will need to stay on alert for any announcements. Key things to watch could be:

• Tesla: Elon Musk’s close advisory role could position Tesla to gain from favorable government policies, potentially securing contracts and regulatory advantages over competitors in the EV space. However, Musk’s influence may also attract scrutiny if policies seem to favor Tesla too heavily.
• Meta: Trump’s historically strained relationship with CEO Mark Zuckerberg could influence Meta’s position. There may be a softened stance on a TikTok ban, potentially increasing competition for Meta in user engagement. If Meta's engagement is impacted by TikTok, Truth Social, or Elon Musk's X, its high AI investment might come under investor scrutiny.
• Apple: Apple faces the most significant risk from tariffs due to its heavy reliance on China for iPhone production. Tariffs could increase costs or disrupt Apple’s supply chain, putting pressure on profitability.
• Alphabet: Alphabet’s key risk lies in potential antitrust policies. While a Trump administration hasn’t clarified its stance on Big Tech’s antitrust issues, ongoing scrutiny could impact Alphabet’s business model and long-term growth strategy.
• Nvidia: NVIDIA may benefit from increased demand for AI infrastructure if deregulation and energy capacity expansion move forward. This could drive data center growth, helping NVIDIA maintain its leadership in AI chips. Key to watch will be Trump’s stance on Taiwan, and how it affects Nvidia’s key supplier TSMC.