With the Trend of Base Rate Cuts
Expectations for Trump’s Second-Term Administration Policies
Small-cap stocks related to next-generation technology sectors in the United States are showing explosive rallies. This is the result of growing expectations that the technology themes, which have emerged as the center of the US-China tech hegemony war alongside the US interest rate cut trend, could gain an advantage under the Trump administration's second term of America First policies.
On the 16th (local time), stocks of specialized startups in quantum computing, drones, space, and other related fields soared vertically in the New York stock market, drawing attention.
First, the stock price of Quantum Computing, a small-cap stock related to quantum computing, surged by a staggering 65.25% that day. Rigetti Computing and IonQ stocks also jumped 17.74% and 23.59%, respectively.
Quantum computing refers to next-generation technology that processes calculations at an overwhelming speed compared to conventional computers based on quantum mechanical principles. On the 10th, news of Google's development of the quantum chip 'Willow' fueled expectations for the commercialization of quantum computers, which analysts say is driving the rally in related small-cap stocks.
Drones, which are emerging as core technologies in modern advanced warfare, also stood out in the US stock market that day. The drone small-cap company Red Cat Holdings surged 26.97% that day. This was influenced by news that some drones are equipped with visual navigation software from Palantir, an AI defense company. Along with this, Unusual Machines, a drone company where Donald Trump Jr., the eldest son of President-elect Trump, serves as a member of the advisory board, also jumped 17.93%.
The stock price rise of space-related startups was also notable. On that day, Intuitive Machines and Rocket Lab stocks closed up 10.65% and 6.06%, respectively. Space-related startups are rising in tandem as Elon Musk, Tesla CEO, helped President-elect Trump win the US presidential election. Due to Musk, who leads SpaceX, expectations have spread that the space industry could grow as regulatory easing related to rocket launches and other activities may occur under the Trump administration's second term.
Amid ongoing debates about an AI bubble, the voice AI startup SoundHound AI's stock price closed up 16.44% that day. According to MarketWatch, Wedbush analyst Dan Ives raised SoundHound AI's target price from $10 to $22, indicating an upside potential of 11.73% from the current price. With the continued effect of the pro-cryptocurrency President-elect Trump, small-cap companies involved in Bitcoin mining, Riot Blockchain (8.01%) and Marathon Digital Holdings (8.05%), also saw significant gains that day.
It is characteristic that all the small-cap stocks that surged strongly that day are emerging in next-generation technology sectors. Along with the interest rate cut trend, expectations have spread that these companies could gain real momentum as President-elect Trump pursues America First policies.
Wall Street also sees the time for small-cap stocks approaching. According to US economic media CNBC, BTIC evaluated that small-cap stocks will perform well compared to large-cap stocks over the next two months. Dennis Debusschere of 22V Research analyzed, "At the moment, there is no catalyst to reassess a sustained rally in small-cap stocks through the end of the year."
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