Analyzing trends in the stock market can serve as a pretty good proxy for the general psyche of investors. Since Donald Trump's presidential victory on Nov. 5, the stock market has moved in just about every direction.
In the immediate weeks after the election, the Nasdaq Composite (^IXIC +0.95%) gained as much as 9.4%. In a way, this wasn't too surprising. During his campaign, Trump spent a lot of time pumping up voters over the idea that he would increase domestic manufacturing, strengthen international trade relations, and bring peace to Eastern Europe and the Middle East. Given that rhetoric, I'm not surprised that an index packed with high-flying growth stocks began to climb higher after he clinched the White House.
But the Nasdaq has given back all of its gains since Election Day, and then some. As of March 4, the index is actually down roughly 1.2% since Trump gave his victory speech. Moreover, the Nasdaq has dropped by an even more pronounced 7.4% since he was inaugurated on Jan. 20.
The market was set moving again this week when tariffs on goods imported from Canada, Mexico, and China were enacted or increased. Let's consider what investors might be thinking and why current market turbulence could present a lucrative opportunity to buy the dip -- particularly in these eight artificial intelligence (AI) stocks.
Things have been changing
In the last several years, consumers experienced unusually high levels of inflation combined with a rising interest rate as the Fed boosted its benchmark rate to combat those rising prices. However, by the final year of President Joe Biden's tenure in the Oval Office, inflation had cooled considerably, and the Federal Reserve started to ease borrowing costs down again.
Nevertheless, on Nov. 5 voters decided that changes in Washington needed to be made -- hence, Trump was elected to return for a second stint as president. In addition, Republicans took control of the Senate, giving them slim majorities in both houses of Congress, and theoretically providing Trump with a clear path to get legislation passed.
To look at the trends in the chart above, you'd think investors have changed their minds.
The recent market volatility largely revolves around one factor: tariffs.
Tariffs are taxes that are placed on imported goods, and are commonly used to protect local manufacturers from foreign competition or to push back against other nations' use of trade practices perceived as unfair. Tariffs on goods from Canada and Mexico were threatened and then paused for a month.
But on Tuesday, Trump instituted tariffs on goods from Canada and Mexico, and increased tariffs on goods from China. However, the administration was soon hinting at compromise, so things could change fast. Trump has expressed concerns about Canada, Mexico, and China in relation to issues such as drug trafficking and immigration trends in the U.S.
Given that Canada, Mexico, and China are all major trade U.S. partners, the potential results of these tariffs have rattled investors -- causing many of them to begin selling stock out of fear that the U.S. economy will suffer. While I understand that uncertainty can be jarring, and that a retreat to cash or safe-haven investments could be seen as a smart move in these circumstances, savvy investors may want to take advantage of depressed stock prices.
Image Source: Getty Images.
Which AI stocks does Wall Street like right now?
When it comes to investing in AI, one Wall Street analyst whom I encourage investors to pay attention to is Dan Ives, the head of global tech research at Wedbush Securities. He frequently travels around the world, meeting with executives and leadership teams of many of the AI landscape's most influential companies. Even better, he often posts the results of his research on social media -- making his insights accessible to everyone.
Yesterday, Ives published a note in which he acknowledged that the U.S. is now caught in a game of "geopolitical poker" thanks to Trump's tariff policies. He made it clear that investors should have been expecting some turbulence, as Trump repeatedly spoke of his plans to impose tariffs during his time on the campaign trail. However, Ives went on to assert that these tariffs will "very likely not last for an elongated period of time" -- just as Trump's tariff policies in 2018 and 2019 didn't cause widespread market downturns.
Ives listed Nvidia (NVDA +0.69%), Microsoft, Palantir (PLTR 3.65%), Alphabet, Amazon, Salesforce, Apple, and Tesla (TSLA +2.12%) as his top AI stocks to buy right now. Most of them have dropped recently.
When in doubt, zoom out
There was a good reason why Ives called out those eight companies in particular. When it comes to the cloud computing hyperscalers, Microsoft, Amazon, and Alphabet are projected to spend a combined sum of more than $250 billion on AI infrastructure in 2025. And Apple recently announced that it plans to spend $500 billion in the U.S. over the next four years on manufacturing, AI initiatives, and silicon engineering.
All this spending on AI infrastructure should keep sales flowing for Nvidia, which Ives describes as being the company developing the "one chip in the world fueling the AI revolution."
Salesforce is competing heavily with Microsoft in a new phase of the AI narrative: agentic AI. While this type of software is still in its early days, Salesforce has a unique opportunity to benefit greatly from rising spending on AI thanks to its tightly integrated ecosystem, which spans sales and marketing, data analytics, and enterprise communication channels.
Meanwhile, Tesla has already proven that it is able to navigate the impacts tariffs can have on its ability to source parts and materials for its batteries and cars. During Trump's first term in office, Tesla's revenue growth far outpaced any rises in costs -- leading to prolonged periods of positive cash flow and a soaring stock price, too.
Lastly, Palantir has major partnerships with the likes of Oracle, Microsoft, Meta, and Amazon -- many of which are yet to bear fruit. While I'll admit that Palantir's valuation has gotten pricey, the stock has sold off hard during the last few weeks. This could be an opportunity to scoop up shares at a more reasonable price.
The core point here is that even though tariffs will bring a lot of uncertainty -- especially in the near term -- AI's biggest players are doubling down on their respective roadmaps. Though headwinds could result from tariff-hiked costs or fractured trade relations, to me, the ongoing rise in spending on infrastructure and R&D suggests that big tech sees these as short-term challenges. Meanwhile, the long-run narrative that the power of AI will transform business operations appears to be strong.
While it can be hard to focus on that longer-term picture amid the short-term turbulence, I think Ives is correct that investors need not hit the panic button. As growth stocks continue to slide, long-term investors may want to take advantage of their discounted valuations.
