Welcome to Trump 2.0.
Whether you love or hate him, the S&P 500 has greeted Trump’s inauguration by rising to an all-time high.
The new President has been busy on his first day, signing a record-setting 200 executive orders, memoranda, and proclamations.
In the process, Trump has rescinded numerous executive orders signed by his predecessor, Joe Biden.
While most eyes are on Trump’s executive orders and their implications for businesses, you should consider a crucial point: just as Trump has revoked Biden’s executive orders, future presidents can do the same to Trump.
That’s the hard truth: executive orders lack long-term stability.
Hence, building an investment thesis around policies that may not survive beyond the next four years is not the best idea.
Long-term, sustainable growth
Thankfully, that’s not all Trump did during his return to office.
On the following day, the US President, together with OpenAI, announced the Stargate Project, an ambitious plan to invest US$500 billion over the next four years in AI infrastructure.
Funding will be led by Softbank Group Corp (TSE: 9984) with OpenAI, Oracle (NYSE: ORCL) and UAE-based MGX providing the initial funds.
Softbank’s Masayoshi Son will be the chairman.
Beyond the above, OpenAI’s technology partners include ARM Holdings (NASDAQ: ARM), Nvidia (NASDAQ: NVDA), Microsoft (NASDAQ: MSFT), and Oracle.
The Stargate Project’s massive investment comes as the Generative AI (GenAI) trend continues to pick up the pace.
For instance, the quartet of Amazon.com (NASDAQ: AMZN), Alphabet (NASDAQ: GOOGL), Microsoft, and Meta Platform (NASDAQ: META) are fresh off spending a combined US$59 billion in the third quarter of 2024, nearly 60% higher year on year.
Meanwhile, Microsoft has upped the ante by committing to spend US$80 billion on AI-enabled data centres for the fiscal year ending June 2025 (FY25).
The enormous spend is expected to flow into the semiconductor sector.
Around a week ago, leading Taiwanese chipmaker TSMC (NYSE: TSM) reported a near-39% year-on-year jump in revenue with profits soaring 57% above last year’s figure.
Here’s the kicker: revenue growth is expected to continue over the next five years.
In fact, TSMC is forecasting a mid-40% per year growth for its AI accelerator sales over the next five years between 2025 and 2029.
It’s a bold projection, to say the least.
The rising tide lifts many boats
The companies supporting TSMC are expected to benefit from the rising chip demand.
Semiconductor equipment makers such as ASML (NASDAQ: ASML), Applied Materials (NASDAQ: AMAT), and Lam Research Corporation (NASDAQ: LRCX) could see more orders coming in as a result.
How about local stocks?
The likes of Venture Corporation Limited (SGX: V03), UMS Integration Ltd (SGX: 558) and Micro-Mechanics (Holdings) Ltd (SGX: 5DD) could stand to benefit as demand for AI-related semiconductor chips persists in the foreseeable future.
Meanwhile, REITs such as Keppel DC REIT (SGX: AJBU) and Mapletree Industrial Trust (SGX: ME8U) could see sustained demand for their data centres.
All in all, there could be many beneficiaries from this GenAI-led growth.
Get Smart: Picking the right surfers from a rising tide
While there could be multiple winners in the space, picking the right stocks is key.
Beyond an underlying trend, investors will need to look at the company’s strategy, its financials, and the stock’s valuation, to name a few.
That’s what we have been doing since 2020 at The Smart Dividend Portfolio, featuring SGX dividend stocks, and The Smart All-Stars Portfolio, which covers US growth stocks.
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Disclosure: Chin Hui Leong owns shares of Alphabet, Amazon, ASML, Meta, Micro-Mechanics, Keppel DC REIT, Mapletree Industrial Trust, and Microsoft.
