Musk bet correctly on Trump, but retail investors still love NVIDIA

After becoming Trump's top supporter, can Musk's Tesla regain its status as the favorite stock among retail investors? This may depend on NVIDIA.

Recently, Tesla's retail trading volume has rebounded, becoming one of the most traded stocks on election night. However, NVIDIA remains the most purchased stock by retail investors. Whether this situation continues in the future depends not only on Tesla's performance but also on NVIDIA's performance. Analysts at Vanda Research stated:

"It's hard to say which stock retail investors will prefer in the coming months. NVIDIA's earnings report, set to be released on November 21, may draw retail investors' attention. If the earnings report significantly exceeds expectations again, it could keep individual investors focused on NVIDIA; if the performance meets market expectations, it may become a 'sell the news' situation for NVIDIA, allowing Tesla to regain its status as the most purchased stock by retail investors."

Tesla was once the favorite among retail investors— in 2020, retail investors flocked to Tesla, and the company's stock price rose over 740% that year. In the following years, retail enthusiasm for Tesla grew, and in 2022, Tesla surpassed Apple to become the most favored stock among retail investors. However, by 2024, retail enthusiasm gradually waned, and NVIDIA overtook Tesla as the stock with the highest trading volume among retail investors.

This may change again—after Trump's victory, Tesla's stock price soared, rising 14.8% the day after the election, currently reported at $321.22 per share.

Trump's Victory: Is Tesla the Biggest Winner?

Currently, the market's focus is on whether Trump's presidency will benefit Tesla.

Garrett Nelson, Vice President and Senior Equity Analyst at CFRA Research, wrote in a report:

"In our view, Tesla and Musk may be the biggest winners of this election outcome. We believe Trump's victory will help accelerate the regulatory approval of Tesla's autonomous driving technology. Based on the results of the House elections, we believe existing electric vehicle tax incentives may face risks from tax law changes, which will further expand Tesla's competitive advantage, as we consider Tesla to be the only profitable electric vehicle manufacturer.

For these reasons, we believe Tesla's stock deserves a higher price-to-earnings ratio, but we also acknowledge there are challenges in the short term."

Previously, analysts at Wedbush Securities also stated that, on the surface, Trump's presidency may not seem like good news for Tesla, as Trump might cancel electric vehicle incentives. However, in reality, this could benefit Tesla, as Tesla's competitors rely more on these incentive policies

Beating Apple and Tesla, NVIDIA Becomes the Largest Holding in Retail Investor Portfolios

In the first half of the year, Market Watch reported that NVIDIA has become the largest holding in retail investor portfolios.

Investment research firm Vanda Research collected data on the 15 most widely held stocks and ETFs in retail investor portfolios and ranked them by weight. NVIDIA topped the list with a weight of 9.3%, surpassing other popular stocks such as Apple, the S&P 500 ETF, Tesla, the Nasdaq 100 ETF, and Meta. A year ago, NVIDIA's weight in the average retail investor portfolio was only 4.2%.

Vanda Research also disclosed that retail investors net purchased NVIDIA shares worth up to $13.787 billion over the past year.

Analysts believe that the main reason for NVIDIA's popularity is its rapid stock price increase, consistently exceeding earnings expectations, and the preference of retail investors for tech stocks—over the past year, NVIDIA's stock price has risen by 203%. In the second quarter, NVIDIA's revenue reached $30 billion, a quarter-on-quarter increase of 15% and a year-on-year increase of 122%, far exceeding the expected $28 billion.