The Nasdaq 100 Index climbed to its first record since July in the wake of the US presidential election, which added to the year’s powerful bull market in megacap tech stocks.
The index rose 2.7% on Wednesday, its biggest one-day gain since 8 August, and closed at an all-time high.
It is now up 24% in 2024, and up 16% off an August low. The day’s gain came as investors bet the results of the election would result in a more favourable regulatory backdrop, though Big Tech has performed well throughout 2024 amid a boom in artificial intelligence.
Results this earnings season have reinforced the bull case for technology megacaps, with Alphabet (Google) and Tesla both seeing pronounced rallies following their reports. Amazon.com hit a record of its own on Wednesday, and also recently reported strong results.
“So far I’m encouraged, because it seems like fundamentals remain intact,” said Jim Awad, senior MD at Clearstead Advisors. “The market has been wanting to see that there’s a benefit from all the spending on AI, and these reports indicate that it’s so. I think the rally will continue, and if you have any sort of long-term investment horizon, you need to be in these names.”
Tesla shares climbed 14.8% by the close, meanwhile, as investors wagered the car maker run by Elon Musk would be a major beneficiary of Trump’s return to the White House.
The Tesla CEO was arguably the most prominent supporter of Republicans this election cycle, backing them with more than US$130-million in spending and relentless messaging on X, his social media network. While Trump criticised electric vehicles throughout his campaign, he softened his tone somewhat after Musk’s endorsement.
‘A star is born’
“Let me tell you, we have a new star, a star is born: Elon,” Trump said during an address to supporters at his election watch party in West Palm Beach, Florida. He spoke about Musk for almost four minutes, praising his company SpaceX and calling him a “special guy” and “super genius”.
“The biggest positive from a Trump win would be for Tesla and Musk,” Daniel Ives, a Wedbush Securities analyst, wrote in a report to clients. Tesla would be at a competitive advantage over other manufacturers in the event the US reduces tax incentives for electric vehicles, he said.
Read: China is better prepared for Trump 2.0
Trump’s opponent, vice President Kamala Harris, likely would have maintained policies supporting US production and sales of EVs, including the Inflation Reduction Act that President Joe Biden signed into law two years ago. But Musk had already soured on Biden before then, in large part due to the Democrat’s embrace of unions and failure to credit Tesla for leading the EV transition.
Multiple EV-related provisions could now be targets for repeal — especially if Republicans take both houses of congress, BloombergNEF analysts warned last week. Fuel-economy and emissions requirements are also likely to undergo rewrites, as they did during Trump’s first term, which could limit the revenue Tesla generates from selling regulatory credits to manufacturers struggling to comply with Biden’s tougher rules.
Musk has downplayed the threat of any pullback in government incentives for EVs while emphasising the potential for companies to benefit from deregulation.
During Tesla’s quarterly earnings call last month, he called for a federal approval process for autonomous vehicles and said he would “try to make that happen” if tapped for a role in Trump’s administration.
Under current regulations, car makers must get permission from the National Highway Traffic Safety Administration before putting cars on the road that lack a steering wheel or other controls required by US auto-safety standards. If Tesla were to secure such an exemption, it could only put a few thousand such cars on the road per year.
Read: Trump open to naming Elon Musk as a top adviser
“The autonomous fast-tracking will be front and centre for investors,” Wedbush’s Ives wrote, speculating that Tesla may be able to accelerate plans to put self-driving vehicles on the road. — Ryan Vlastelica and Craig Trudell, with Subrat Patnaik, (c) 2024 Bloomberg LP
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