The 2024 U.S. elections are shaping up to be a big deal for both politics and the economy. With Election Day coming soon, both parties are ramping up their campaigns, each with policies that could shake up the market. For investors looking to trade around this major macro-level event, brokerage firm Oppenheimer has picked out some stocks they think are worth watching as the election nears. A few particular names of note from their watchlist are tech stocks Nvidia (NVDA), Snap (SNAP), and Tesla (TSLA), which could see big moves based on which candidate wins this November.
Of course, these stocks are no strangers to big, headline-driven price swings. Shares of leading graphics chip designer Nvidia (NVDA) skyrocketed 8.2% on Sept. 11 as CEO Jensen Huang touted “incredible” demand for the company's products at a conference. Social media site Snap's (SNAP) stock lost nearly 30% of its value in August, with most of the drop occurring in a single session on Aug. 2 as investors reacted to Q2 earnings. And while Tesla (TSLA) continues to lead the U.S. electric vehicle (EV) market, holding almost half the market share as of Q2, the stock has significantly underperformed its mega-cap peers with a 7.3% loss in 2024.
While these stocks are already in focus for investors, the November election adds some new potential catalysts to the mix. Investors are on their toes, wondering how new trade rules, regulations, or laws might change things up. Let's take a closer look at what's going on with these stocks and why the election matters so much for them.
Nvidia Corp: A Bipartisan Trade Policy Play
Nvidia Corporation (NVDA) is a major force in the artificial intelligence (AI) and semiconductor industries, commanding an impressive 70% to 95% of the AI chip market. This dominance is driven by cutting-edge GPUs like the H100 and its CUDA software platform.
Strategically, Nvidia is well-positioned amid the ongoing U.S.-China trade tensions. The company's performance is closely tied to semiconductor export policies, and while trade tensions over technology and intellectual property have led to tariffs affecting tech firms, Nvidia could benefit from bipartisan support for maintaining U.S. leadership in AI and semiconductors.
Despite the backdrop of lingering geopolitical concerns, NVDA stock has surged 161% in the past year, and is up about 140% since the start of 2024.
This growth is fueled by its leadership in AI chip technology and strategic partnerships with industry giants. Nvidia's recent financial performance is remarkable, with second-quarter revenue reaching $30 billion — a 122% increase year-over-year. The data center segment, in particular, delivered a 154% revenue jump, underscoring Nvidia's pivotal role in the AI revolution.
Beyond hardware, Nvidia is making strategic moves to solidify its leadership via an expanded partnership with Microsoft (MSFT) that aims to integrate Nvidia's AI technologies across Azure, opening new growth avenues.
The excitement around Nvidia's next-generation Blackwell GPU architecture, first unveiled at GTC 2024, also promises substantial performance improvements for AI workloads, potentially cementing Nvidia's leadership in the AI chip market for years to come. This upbeat growth outlook is reflected in Nvidia's premium valuations, with a forward price/earnings (P/E) ratio of 41.94 and a forward price/sales (P/S) multiple of 23.27, both significantly above sector averages.
Wall Street remains overwhelmingly bullish on Nvidia, with 39 analysts offering recommendations. Of these, 32 recommend a “strong buy,” 2 suggest a “moderate buy,” and 3 advise a “hold,” for an overall consensus of “strong buy.” The mean target price of $149.22 suggests a potential upside of about 25.2% from the current price.
Snap Inc.: Betting on a Democratic Sweep
Snap Inc. (SNAP), the company behind Snapchat, is one company that might see a boost if the Democrats, led by Vice President Kamala Harris, win the 2024 elections. Snap has been aligning itself with policies that could support its growth, especially those focusing on digital innovation and privacy. Harris's plans to enhance tech innovation and infrastructure could create a supportive environment for Snap and similar companies, and Snap Chair Michael Lynton was notably among the Silicon Valley signatories of a recently published letter backing the Dem nominee.
SNAP stock could certainly use a policy boost to juice its stock performance. In 2024, Snap shares have dropped 43.7%, and they're down 88% from their late 2021 highs.
To strengthen its market position, Snap has launched partnerships with CreatorIQ for creator discovery and with Live Nation for "Snap Nation," showing Snap's commitment to diversifying content and boosting user engagement.
Snap's Q2 2024 financials showed revenue hitting $1.24 billion, a 16% increase from last year - though slightly short of Wall Street's forecast, which triggered the sell-off. Likewise, SNAP's EBITDA forecast for Q3 came in light. However, the user base is growing, with over 850 million monthly active users and a stronger-than-forecast 432 million daily users. For Q3 2024, Snap aims for revenue between $1.335 billion and $1.375 billion, and expects daily users to reach about 441 million.
With a market cap of $15.29 billion and a forward P/S ratio of 2.89, SNAP trades at a discount to its own historical valuations, but isn't exactly cheap compared to other communications services stocks.
Analysts' opinions on Snap are mixed, but still lean towards a cautious optimism. Out of 35 analysts offering recommendations, the consensus is a “moderate buy,” based on 8 “strong buys,” 1 “moderate buy,” 25 “holds,” and 1 “strong sell.” The mean target price is $13.50, indicating a potential upside of about 41.8% from its current price.
Tesla Inc.: Republican Victory Implications
Valued at a market cap of $732.9 billion, Tesla Inc. (TSLA) is a leader in EVs, solar panels, and energy storage solutions.
Although the stock is negative on the year, TSLA has bounced back by 26.2% in the last three months.
With CEO Elon Musk backing GOP nominee Donald Trump in mid-July, the prospect of a potential second Trump presidency presents both challenges and opportunities for Tesla. While Trump has been skeptical about electric vehicles, and might roll back federal incentives, analysts suggest that Tesla could still benefit. Its strong brand and market presence might allow it to withstand the removal of incentives better than its competitors, potentially regaining market share as rivals struggle. Additionally, Trump's proposed tariffs on Chinese imports could limit competition from Chinese EV manufacturers, indirectly benefiting Tesla by reducing competitive pressure from overseas.
Amid political uncertainties, Tesla is focused on innovation. It's planning to expand its Full Self-Driving technology into China and Europe by early 2025, which could sharpen its edge in the autonomous driving market. However, regulatory and consumer trust issues remain hurdles. In China, Tesla is looking to boost its market share with a new six-seat Model Y, showing its adaptability to local demands.
Financially, 2024 has been mixed for Tesla. Its Q2 earnings showed a profit decline, with profit margins down to 5.8%, highlighting the pressure from growing competition. Yet, Tesla's revenue hit $25.5 billion in Q2, a 2.3% increase from the previous quarter, and it delivered about 444,000 vehicles, proving its production capabilities.
Tesla's valuation frequently sparks debate, and it's currently priced at 96.9x forward earnings and 7.37x forward sales. While still rich, that's a modest discount to the stock's historical average premiums.
Analyst sentiment on Tesla remains tepid overall, based on the “hold” consensus. Out of 35 analysts covering the stock, 9 rate it a “strong buy,” 1 says it's a “moderate buy,” 18 recommend a “hold,” and 7 a “strong sell.” The mean target price of $201.06 suggests a potential downside of 12.7% from the current price.
Conclusion
In conclusion, the 2024 U.S. elections promise to be a pivotal moment for the stock market, with tech giants like Nvidia, Snap, and Tesla among the names that could be sensitive to the ultimate outcomes. As campaign promises and policy shifts unfold, all three stocks merit some further research for election-minded investors - but be aware that there are multiple big-picture catalysts impacting these global companies, and avoid investing on ballot-box expectations alone.
On the date of publication, Ebube Jones did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.
