Prediction: This Artificial Intelligence (AI) Stock Will Go Parabolic After Trump Assumes the White House

Adam Spatacco, The Motley Fool

Fri, Nov 15, 2024, 6:55 AM 4 min read

Chief among those guesses is Tesla (NASDAQ: TSLA) Chief Executive Officer Elon Musk, who emerged as a critical Trump surrogate during the final months of the election campaign. Whether Musk ends up heading the ill-defined Department of Government Efficiency isn't all that important to me. Instead, I'm focused on the policy agenda under the Trump administration and how the new decision-makers in Washington could bode well for Tesla.

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Here's why I think Tesla stock is poised for a breakout as Trump's inauguration in January looms.

What is Wall Street saying?

One of Wall Street's most respected technology analysts is Dan Ives of Wedbush Securities. Ives reminds me of Ark Invest's Cathie Wood due to his unapologetic, aggressive calls.

During a recent interview with CNBC's Scott Wapner, Ives called a Trump White House a "game changer" for Tesla.

That's a bold stance to take, especially before Trump even gets sworn into office. Nevertheless, I think Ives might be onto something here.

The U.S. flag over the Capitol. — Image source: Getty Images.

How a Trump White House could help Tesla

During the past couple of years, Musk has spent a lot of time explaining to investors that Tesla is in the early stages of evolving from a car manufacturer to more of a robotics and artificial intelligence (AI) company.

One of the biggest pursuits in Tesla's AI roadmap is autonomous driving. Achieving widespread autonomous Tesla robotaxis could have enormous implications for the company.

For example, autonomous driving could be a technology that other car makers are so far behind that it will be hard for them to catch up to Tesla. In turn, Tesla could witness an uptick in demand for its vehicles on the consumer side. On the business side of the equation, Tesla's robotaxi fleet could spur interest from ride-hailing platforms, car rental businesses, and even delivery services.

Without going too far in terms of optimistic projections, it is hard to imagine that Musk's relationship with Trump won't carry some weight as Tesla continues to jump through regulatory hoops to get its full self-driving (FSD) technology commercialized. In the eyes of Ives, the autonomous opportunity at Tesla could be accelerated by two or three years thanks to the Trump administration.

Should you buy Tesla stock right now?

To be completely honest, I'm torn on whether buying Tesla stock right now is a good idea.

Autonomous driving technology presents an incredibly lucrative opportunity. Tesla's FSD software is a recurring source of sales. In theory, more FSD revenue should result in meaningful margin expansion for Tesla -- thereby bolstering the company's cash flow and profitability. In turn, I could very easily see Tesla's valuation skyrocket under such a scenario. Ives' recent price target of $400 implies about 25% upside from Tesla's current share price.

With all of this said, it's important to keep in mind that Tesla stock has gained almost 30% since Election Day (Nov. 5). Investing in momentum stocks is always risky because it's a near certainty that day traders will eventually move on for another opportunity. Unfortunately, this type of dynamic doesn't become clear until an outsize sell-off occurs.

So while I think some of the optimism surrounding the Trump-Musk relationship is priced into Tesla stock on some level, there is an argument to be made that investors could still benefit from buying shares today.

But I'd encourage investors to do their best not to get caught up in the exuberance. Although I am hopeful that a Trump White House could be positive for Tesla and investors in the company, I think the most prudent strategy is to exercise some discipline and patience for the time being.

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Adam Spatacco has positions in Tesla. The Motley Fool has positions in and recommends Tesla. The Motley Fool has a disclosure policy.

Prediction: This Artificial Intelligence (AI) Stock Will Go Parabolic After Trump Assumes the White House was originally published by The Motley Fool

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