Prediction: 3 Market-Leading Stocks That Could Plunge If Donald Trump Wins in November

A victory for the former president could bode ill for a trio of leading companies in the sector.

In exactly five weeks, on November 5, voters across the country will weigh in and decide which presidential candidate – former President Donald Trump or current Vice President Kamala Harris – will lead our nation forward during of the next four years.

What happens on Capitol Hill doesn't always matter to Wall Street. But elections ultimately determine which president and which political parties will shape fiscal policy for at least the next two years. Understanding the economic policy proposals of both presidential candidates has implications for the investment community and American businesses.

Former President Trump speaking to reporters. Image Source: Official White House Photo by Andrea Hanks.

For former President Donald Trump, his message remained similar to one he echoed during his 2020 campaign. He proposed a handful of new tax breaks for individuals, wants to further reduce the income tax rate companies to spur economic growth, is a big promoter of domestic energy production and plans to get tougher on China.

While there are some pretty clear winners in this potential scenario, there are also some proven and/or high-flying stocks that may end up being losers.

Here are three market-leading stocks that could fall if Donald Trump wins in November.

Nvidia

The first widely held stock that could face tough headwinds if Trump wins in five weeks is Nvidia, Wall Street's leading artificial intelligence (AI) company (NVDA -3.66%).

As most investors probably know, Nvidia's stock has been on a historic rise, with the company enjoying a classic expansion of its operations. In a short time, Nvidia's AI graphics processing units (GPUs) have become the undisputed preferred choice for companies running generative AI solutions and creating/training large language models.

Although the prospect of a lower corporate tax rate could, at least temporarily, boost Nvidia's gross margin and allow it to retain more of its revenue, another key aspect of Trump's economic plan could potentially limiting Nvidia's rise.

Specifically, Trump plans to take a tough stance on China, the world's second-largest economy by gross domestic product. He proposed a 60% tariff on goods imported from China to the United States. Although Nvidia does not import products from China, the world's second-largest economy has always been a key generator of sales for Nvidia. The possibility of Trump triggering a trade war could completely eliminate China's desire to buy chips from California-based Nvidia.

To add to the above, Biden administration regulators have twice limited Nvidia's ability to export its high-power AI GPUs to China in the past two years. I think it is unlikely that Trump or his administration will ease or lift these restrictions, which limit Nvidia's revenue potential in a key market.

I would be remiss if I didn't also mention that all of the most impactful technologies, trends, and innovations in 30 years found their way through an early-stage bubble. Investors systematically overestimate the adoption and utility of breakthrough innovations, and it seems unlikely that AI will be an exception to this unwritten rule. If the AI ​​bubble were to burst under President Trump, no company would likely feel the consequences more than Nvidia.

Tax credits for electric vehicles could be eliminated by Trump. Image source: Tesla.

Tesla

A second market leader that could collapse if Donald Trump wins a second term is electric vehicle (EV) maker Tesla (TSLA -1.38%).

Tesla used its first-mover advantages to build itself from the ground up and produce around 2 million electric vehicles per year on a regular basis. It became the first electric vehicle company to generate recurring profit and is trying to diversify its operations by expanding into energy storage.

Although former President Trump hinted that he would give Tesla CEO Elon Musk a position in his administration if he was re-elected in November, he also criticized tax credits and tax incentives for electric vehicles. While Trump hasn't concretely said he would eliminate the $7,500 electric vehicle tax credit for new purchases, his statements suggest it's a real possibility.

Tax credits play an important role in providing a potential price advantage to electric vehicles over internal combustion engine vehicles. If this credit is removed, the most attractive competitive advantage for electric vehicles will disappear – especially with electric vehicle charging infrastructure still somewhat limited.

To add to the above, Tesla's reliance on unsustainable revenue sources – particularly interest income earned on its cash and automotive regulatory tax credits – has rapidly increased in percentage terms. income before taxes. In the quarter ended June, about 66% of Tesla's pretax profit came from these two sources, with $890 million of its $1.89 billion pretax profit coming from regulatory credits.

It's also unclear how Trump's tariff policy will affect domestic and international sales of electric vehicles for U.S.-based companies. Tesla has aggressively reduced the selling price of its electric vehicles (Models 3, S, X and Y) since the start of 2023 to counter growing competition and rising inventory levels. Unfortunately, these price cuts did not prevent inventory levels from increasing year over year and reduced the company's operating margin.

Even if Musk were to land a role in the Trump administration, Tesla is a stock that would likely struggle with the former president back in the Oval Office.

Apple

The third hot stock that could be poised to plunge if Donald Trump wins in November is Wall Street's largest company by market capitalization, Apple (AAPL -2.91%).

Although Apple shares have soared in 2024 on the heels of its AI ambitions and excitement over the possible incorporation of AI tools into its best-selling iPhone, it is the services segment of the company that has been the real strong point for years. CEO Tim Cook is overseeing a transformation that will see Apple become a platform company. A subscription-based model is expected to increase its operating margin, smooth out the sales fluctuations that occur during iPhone upgrade cycles, and further strengthen the company's impressive customer loyalty.

Like Nvidia, it could also benefit from a further reduction in the corporate tax rate. Apple has repurchased $700.6 billion in common stock since the start of 2013, reducing its number of shares outstanding by 42.2%. A lower corporate tax rate could encourage even more buyouts.

On the other hand, Apple imports some of its products from China, relies on a significant portion of its iPhone sales from China, and the overwhelming majority of its iPhones (as well as Macs and iPads) are assembled in China. Between the tariffs and the potential anti-American caused by a trade war with China, Apple could see its already stalled growth engine come to a complete halt.

Although stock buybacks have played a key role in increasing Apple's earnings per share over the past 11 years, the problems affecting Apple's growth engine cannot be solved with the main program repurchase of shares from the market. Even a reduction in corporate tax rates won't be enough to make up for the persistent sales weakness Apple is facing across all of its physical product lines.

While tech stocks and all three major stock indexes have thrived under Trump's first term, I predict Apple will flounder if Trump wins in November.

Sources 1/ https://Google.com/ 2/ https://www.fool.com/investing/2024/10/01/prediction-3-stocks-plunge-if-donald-trump-wins/ The mention sources can contact us to remove/changing this article

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