On Jan. 20, 2025, Donald Trump will take the presidential oath of office for the second time. Soon thereafter, federal government policies on a wide range of issues will change as new executive orders are issued, administrative guidance is revised, and new cabinet officers take the helm of government agencies.
The question for investors is this: Which stocks are the ones to own as we head into this new -- but also familiar -- administration? Three Fool.com contributors have identified their favorite "Trump 2.0" stocks: Palantir Technologies (PLTR -3.72%), ASML Holding (ASML -0.32%), and Tesla (TSLA -4.95%).
Here's why they're screaming buys for 2025.
Image source: Getty Images.
The Trump administration could call on Palantir to help drive government efficiency
Jake Lerch (Palantir Technologies): Let's get one thing straight. I think Palantir Technologies is a great stock to own. What's more, I believe the company's stock was poised to grow no matter who won the 2024 presidential election. That's because Palantir is one of the best AI companies around, and the AI revolution is just getting started.
All that said, there are reasons why Donald Trump's victory could benefit Palantir.
First, let's remember that more than 50% of Palantir's business is governmental. Palantir boasts defense contracts with the U.S. Department of Defense and intelligence community, along with the defense agencies of U.S. allies such as the U.K.'s Ministry of Defense and Israel's Defense Ministry.
While it's clear Trump wants to end fighting in Ukraine and the Middle East, it's unclear how long it may take before the fighting ends. In any event, the incoming Trump administration is likely to push U.S. allies to "buy American" to help secure the peace -- not just when it comes to restocking their supply of conventional arms but also for technological weaponry -- like the kind furnished by Palantir.
Moreover, Palantir could benefit from another administration policy: the drive for government efficiency. Trump has already announced that Elon Musk and Vivek Ramaswamy will co-chair an outside-of-government commission, dubbed the Department of Government Efficiency (DOGE).
The top priorities for the commission include cutting regulations, cutting costs, and reducing administrative functions. That could mean an increased role for Palantir, which specializes in identifying and implementing large-scale efficiencies across complex organizations.
In summary, Palantir remains an intriguing stock thanks to its key place in the AI revolution. However, with the second Trump administration on the horizon, the company could see a further boost thanks to a few key initiatives, including "buy American" policies and a renewed focus on government efficiency. Investors should take note.
Trump needs this Dutch company to become a chip manufacturing giant
Will Healy (ASML): Considering Donald Trump's inclination to put America first, focusing on a Dutch company like ASML may seem counterintuitive.
Nonetheless, the interest in ASML makes more sense when one understands the critical role it plays in semiconductor manufacturing. ASML is the leading producer of extreme ultraviolet lithography (EUV) machines, the technology necessary to produce the world's most advanced semiconductors. That means any U.S. fabs will need this company's equipment to compete.
Not surprisingly, Taiwan Semiconductor Manufacturing Company (TSMC) relies on ASML's technology to retain its dominance as the world's most advanced chip manufacturer. Consequently, an estimated 92% of the world's most advanced chip manufacturing takes place in TSMC's home country of Taiwan.
Concern about this industry concentration led the Biden administration to back $53 billion in industry subsidies through the CHIPS Act. To this end, TSMC, Samsung, Intel, Micron, and SK Hynix have received subsidies to construct advanced fabs in the U.S. with ASML equipment.
However, Taiwan's chip production dominance is also a problem for the U.S. because the island is a political target of China's. Given Trump's adversarial relationship with China, the need to move advanced manufacturing back to the U.S. becomes all the more critical.
Additionally, these moves come at a time when artificial intelligence (AI) has raised demand for semiconductors. Amid rising demand, ASML forecasts a compound annual growth rate (CAGR) between 10% and 20% in EUV lithography spending between 2025 and 2030 to produce advanced logic chips. For DRAM memory chips, the EUV lithography CAGR rises to 15% to 25% over the same time frame, implying ASML's growth should benefit its stock over time.
Still, ASML stock is down for the year as some customers temporarily slow spending on fab construction. This appears to present an opportunity for investors as its P/E ratio has fallen to 34, well below the five-year average earnings multiple of 43.
Ultimately, national security concerns and Trump's goal to make the U.S. a major chip manufacturer play into the hands of ASML shareholders. Knowing that, investors should take advantage of the discount in this chip stock before Trump's presidential term begins in earnest.
Tesla could benefit as Trump 2.0 gets underway
Justin Pope (Tesla): Regardless of your political leanings, it's hard to deny that politics can impact private companies. Every administration has winners and losers, and Tesla seems poised to win big under Trump's second presidency if you look at the evidence piling up. Tesla CEO Elon Musk has repeatedly made headlines since the election for his unexpectedly close involvement with Trump, including:
- Public appearances with Trump.
- Musk's appointment to co-lead the Department of Government Efficiency, a non-official role within the administration.
- Briefly appearing on a call with Ukraine's president.
- Trump attending a recent rocket launch by Musk's rocket company, SpaceX.
I don't want to risk speculating too much, but there is some logic here. Musk's increasingly apparent influence in government could put him in a position to advocate for policies that might benefit Tesla. Reputable news sources recently reported that Trump's administration is considering rolling back electric vehicle (EV) tax credits and regulations on autonomous vehicles.
Assuming they meet the criteria, consumers who purchase electric vehicles are eligible for up to a $7,500 tax credit as part of the federal government's push to make them more affordable. Tesla is America's largest EV manufacturer by a wide margin and has over $33 billion in cash on its balance sheet. It has a massive cost and financial advantage over its smaller competitors and would better endure the pain of selling at lower prices if the credits go away. Musk has supported eliminating subsidies for EVs on X, stating it would only help Tesla.
Meanwhile, Musk has repeatedly emphasized how vital autonomous driving is to Tesla's future. Rolling back regulations to help progress autonomous driving technology would be an obvious plus for Tesla. The market seems wise to these things; Tesla stock has rocketed over 50% higher over the past month. Tesla stock is notoriously volatile, but if the government is this friendly to Tesla over the next four years, it's not hard to imagine the company (and investors) doing well.
