Big Tech Has Come Under Fire Once Again
The latest government attack on big tech has a lot of investors worried.
A series of five new bills that were introduced last Friday by the House Antitrust Subcommittee take aim at monopolistic practices of some of the world’s largest tech firms.
That includes several members of the FAANG stocks – namely Amazon.com, Inc. (AMZN), Alphabet Inc. (GOOG), and Facebook, Inc. (FB).
The proposed legislation follows a lengthy investigation into those three companies last year, and are intended to curb what U.S. lawmakers have characterized as “unregulated power” that these companies wield.
The concern over new heavy-handed government regulations big tech have investors worried about the fate of some of the most popular stocks in the market.
Where’s the money?
There’s been renewed scrutiny around some of the practices of tech giants in recent years. Proponents of the bills argue that antitrust laws haven’t been meaningfully updated in decades and don’t reflect modern business.
The main goals of the new package of regulatory bills include:
- Preventing large companies from owning businesses that present a conflict of interest.
- Prohibiting platforms from giving preferential treatment, particularly giving their own products or services and advantage over competitors on their platform.
- Ensuring that mergers and acquisitions are lawful and the company being bought does not directly compete with the acquiring company.
- Allow easier transfer of consumer data from one platform to the next.
- Increasing the fees companies pay to notify the FTC and DOJ of large mergers, with the goal of raising funds for those agencies.
If enacted, the bills could force Amazon, Alphabet, and Facebook to drastically alter they way their platforms operate.
And many investors are concerned that the changes could negatively affect the bottom line of those companies and drive share prices down.
Here’s what I think…
How do I get some?
It’s still unclear which, if any, of these pieces of legislation will be able to make it through Congress and signed into law. The House Judiciary Committee will vote on the proposed bills next week – the first step in deciding whether to allow a full vote in the House.
Even if they are all passed, I don’t believe investors should be overly worried.
The government has been going after Big Tech for years and all that has happened is those stocks go higher.
Just look at Microsoft Corporation (MSFT) as a great example. After the DOJ won the lawsuit suit in 2000, MSFT stock took a relatively small hit as the company was forced to settle and revise its practices.
Since then, MSFT stock has experienced a meteoric rise of more than 1,080%.
I am not worried about any of these new antitrust concerns, mostly because Facebook and Google are growing both top and bottom lines.
Of the two, I would buy FB on any pullback. It its latest earnings report, the company reported revenue of $26.17 billion for the quarter, which was up 48% compared with a year prior. Net income also rose by $94% from the prior year.
And I can’t see any of the new rules in these bills significantly slowing down that growth.
Quadruple Witching Day Is Here
On Friday, June 18, four financial contracts will expire.
Stock futures, index futures, index options, stock options…
At the same time, all four of these contracts will close – setting up a volume spike that only occurs four times a year.
This is a profit opportunity we won’t see again until September. But on Thursday at 2 p.m., you can catch all the best quadruple-witching trades live.
In the Spotlight: More dovishness from the Fed
The market held its breath yesterday as we awaited the latest announcement from the Federal Reserve.
During yesterday’s press conference, the Fed announced it would be holding interest rates steady for now, but stated that new rate hikes would likely be coming before the end of 2023.
As the U.S. economy continues its slow recovery from the pandemic, the Fed also reiterated its support for its $120 billion per month asset purchase program.
While the status quo is upheld in the short-term, the forward-looking statements from the Fed reflect its optimism for stronger economic performance in the coming months of years.
This may be the signal investors were looking for to go all-in on economic recovery plays as the future appears to be much brighter for the U.S. economy.
I’ll be doing some deep dives into where the biggest flows of money are moving in the market as the recovery continues, and if I spot any must-have stocks, I’ll be sure to let you know.