Better Stock Under the Trump Administration: Palantir or Tesla?

Keith Speights, The Motley Fool

Mon, Dec 2, 2024, 3:42 AM 4 min read

Both companies have ties to the president-elect and his team. Palantir's co-founder, Peter Thiel, was a Trump supporter in the past and a mentor to Vice-President-elect J.D. Vance. Tesla CEO Elon Musk was a vocal Trump supporter in the recent presidential campaign and was picked by the president-elect to co-lead the new Department of Government Efficiency.

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Perhaps more importantly, both stocks have soared since Trump was elected -- a clear sign investors think they will prosper in a second Trump term. Palantir's share price has skyrocketed more than 250%, while Tesla stock is up over 50%. But which of these stocks is the better pick under a Trump administration?

The case for Palantir

Like most companies, Palantir would directly benefit from corporate tax cuts proposed by Trump. It would also probably not be directly affected by any negative consequences of the president-elect's proposed tariffs.

Probably the bigger impact for Palantir during a second Trump administration, though, would be the changes in federal government priorities. The U.S. government ranks as the company's largest customer.

One potentially lucrative opportunity for Palantir with Trump back in the Oval Office is immigration enforcement. The president-elect's promise to deport millions of individuals who entered the U.S. illegally could require extensive use of data analytics. During Trump's first term, Palantir won contracts with the Immigrations and Customers Enforcement (ICE) agency. ICE could look for further help from the company as it ramps up deportation efforts.

Even if national defense spending doesn't increase significantly under Trump, the makeup of the spending could still benefit Palantir. Improving efficiency within the U.S. Department of Defense could lead to an increased focus on the use of artificial intelligence (AI).

The case for Tesla

On the surface, Tesla might not seem like a great stock to own under a second Trump administration. The president-elect's proposed tariffs could cause problems for the electric vehicle (EV) maker. Trump's emphasis on increasing domestic oil production could lead to lower fuel prices, which could in turn cause the demand for EVs to decline.

However, there's more promising news for Tesla below the surface. For one thing, higher tariffs could limit Tesla's competition in the U.S. from Chinese EV makers. Tesla also relies less on imported components for its vehicles than the Big Three automakers in the U.S. Tariffs could impact Tesla's rivals, therefore, more than they would Tesla.

It's a similar story with the potential elimination of EV credits with Trump again in the White House. These changes could hurt Tesla's rivals more than they do Tesla and ultimately give Tesla a greater competitive advantage.

Trump's transition team is reportedly working on prioritizing a federal framework for regulating self-driving vehicles. The establishment of a federal policy could especially help Tesla as it prepares to enter the robotaxi market.

Which is the better "Trump 2.0" stock?

Investors seem to believe that Palantir's business will be helped more in a second Trump term than Tesla's based on the respective performances of the two stocks. I think that's the correct take. However, this doesn't necessarily mean Palantir's stock is the better pick over the next four years.

The main problem for Palantir is valuation. Its shares trade at nearly 143 times forward earnings. That makes Tesla's forward earnings multiple of 98 seem cheap by comparison.

My hunch is that Tesla will deliver greater gains than Palantir will during Trump's next stint as president. But while it's the better "Trump 2.0" stock in my view, I think there are other stocks that should be even bigger winners than either Tesla or Palantir.

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Keith Speights has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Palantir Technologies and Tesla. The Motley Fool has a disclosure policy.

Better Stock Under the Trump Administration: Palantir or Tesla? was originally published by The Motley Fool

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