The Rumble (RUM) and Trump Media & Technology (DJT) stocks saw a significant surge this week as the election cycle took more unpredictable turns. Rumble, a popular alternative to YouTube, experienced a rise of over 20% following the Trump shooting incident and the nomination of JD Vance as Trump’s vice president pick. Vance, along with his associate Peter Thiel, have made investments in Rumble. This surge in RUM and DJT stocks is fueled by predictions of a potential win for Donald Trump in the upcoming general election.
The odds of Trump winning the election have been boosted by recent events, including an assassination attempt on Trump at a rally in Pennsylvania. This incident, combined with Joe Biden’s lackluster performance at the first debate, has led investors and analysts to believe that Trump stands a real chance of winning if he faces Biden in the election. The possible scenario of Biden dropping out and being replaced by a younger candidate like Kamala Harris, Gretchen Whitmer, or Gavin Newsom could further shake up the election season, leading to more engagement and activity in the stock market.
Despite the recent surge in RUM and DJT stocks, these companies face substantial risks moving forward. Both companies heavily rely on advertising revenue, but they are struggling to attract mainstream advertisers who often avoid right-wing platforms. The financial reports show significant cash burn for both companies, with Rumble facing a net loss of over $43.3 million in the first quarter and DJT posting a loss of $327 million. This financial situation will likely lead to more cash raising activities in the future as both companies continue to spend heavily on building their platforms.
Competition in the social media industry presents a major challenge for both Rumble and Trump Media. Rumble faces stiff competition from YouTube, a dominant player with billions of users worldwide, while Trump Media competes against platforms like X and Reddit. The market cap of DJT is significantly lower compared to competitors like Reddit and X, pointing towards valuation concerns for the company. These factors, combined with the challenges of attracting mainstream creators and competing with established cloud solutions, raise doubts about the sustainability of the recent surge in RUM and DJT stocks.
In conclusion, the recent surge in Rumble and Trump Media stocks may be short-lived as the companies face various risks and challenges in the highly competitive social media industry. The election season may bring more twists and turns, but the long-term sustainability of these stocks remains uncertain. Investors should brace for a possible pullback in the coming months as the companies navigate through financial difficulties and intense competition.
