Trump's Stargate AI Investment Plans Are Offsetting Concerns About Tariffs
There is a whirlwind of action along with key earnings to keep the market running higher. Here's the most important thing for investors to do right now.
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The Trump stock market honeymoon continued on Wednesday morning, as worries about tariffs were more than offset by plans for massive infrastructure investment in AI, called Stargate, and a blow-out earnings report from Netflix NFLX. The market is also digesting dozens of executive orders, but so far, concerns about the economic impact of tariffs on the relationships with Canada and Mexico are being delayed.
Trump commented late on Tuesday that he is still considering a 10% tariff on all goods from China. This tariff is not as aggressive as he had indicated earlier, but it is impacting the Chinese market. While the market is more concerned with Canada and Mexico, there is a week to work out a deal that appears to be Trump's real intent rather than blanket tariffs. Trump is using tariffs to gain leverage in dealing with illegal immigration and fentanyl rather than purely for economic reasons.
The AI infrastructure deal announced late Tuesday is boosting technology stocks across the board. Oracle ORCL is the big winner, with a jump of around 8%, but Microsoft MSFT, Nvidia NVDA, and others are also benefiting.
Currently, the market is responding positively to the pro-business policies of Trump while sidelining worries about the potential negative effects of immigration enforcement and tariffs. It seems Trump's threats regarding tariffs are more of a negotiation strategy rather than an actual risk, which is supporting the market's performance.
Under the surface, smaller-cap stocks have come to life while mega-caps such as Apple AAPL and Tesla TSLA are struggling. The Russell 2000 IWM has had its best action since the election rally in November. Investors are focusing on stock picking and are looking for themes that will benefit from Trump's policies. The space sector is one of the leading groups, and the AI investment news is attracting speculative traders to many smaller stocks leveraged by the AI group.
The market is focused on the positives right now, but as technical conditions extend, the danger of a negative reaction to the next Trump move is building. As more earnings reports roll in, there is also the risk of a sell-the-news reaction.
The most important thing to do right now is to be prepared for elevated volatility. That means being more aggressive with trades and not letting solid gains slip away. Dip buyers are very likely to jump in quickly if there is a negative reaction to news flow.
It is a very dynamic market environment right now, but disciplined trading is required to avoid being whipsawed.
At the time of publication, Rev Shark was long NVDA.
