Increased regulation poses a risk to tech stocks. This is not a new phenomenon. It’s evidently increasing.
What’s the latest: A House of Representatives committee has just passed sweeping bills that would rein in large tech companies such as Google (GOOGL), and Facebook (FB). Meanwhile, the European Union and the United Kingdom have launched new antitrust investigations into Apple and Google (AAPL and GOOGL) this month. India is adding pressure.
This push comes as several of the largest companies are being challenged in ongoing US court battles under existing antitrust laws.
“Is there a growing risk?” Nicholas Hyett from Hargreaves Lansdown, senior equity analyst, said yes. It probably limits to some extent what tech stocks can do.
The US legislation could have a dramatic impact on their businesses, and tech companies are actively lobbying against it. Amazon may have to decide between a marketplace for third-party sellers or going back to being the sole retailer on its platform in the end. Google could be ordered by a court to sell YouTube and parts of its advertising operations. Apple could also be ordered to modify its policies regarding app developers.
On the radar: President Joe Biden has recently appointed Lina Khan, Big Tech critic, to head the Federal Trade Commission. This commission would play a significant role in enforcing new legislation if it is passed.
These companies are not only under pressure in the United States. Recently, the UK’s antitrust regulator stated that it is investigating Apple’s and Google’s dominance of mobile operating systems, web browsers, and app stores. The European Union launched an antitrust probe into Google’s huge advertising business. In June, France’s Competition Authority fined Google EUR220m ($263 million), “for abusing its dominant position” on the online advertising market.
Silicon Valley is also becoming embroiled in regulatory battles in India. Facebook’s WhatsApp has sued the Indian government after it took a while to get approval for its payment system in India.
Investor insight: While investors acknowledge that regulation could hurt Big Tech shares so far, their concerns are not fully baked in stock prices. Facebook reached an all-time high Wednesday.
Hyett stated that certain tech companies are more vulnerable to antitrust actions than others.
He said that the search space is not as competitive as social media, where there’s a giant but also several other gorillas.
Facebook will not be able to acquire smaller competitors in the current market, as it did with Instagram in 2012.
Regulators are a hindrance at a time in which some investors are shifting money away from tech stocks to invest in shares they believe are undervalued due to the pandemic.
Hyett stated that it might slow down further tech share price growth.
Wall Street firms adopt a hard line on vaccines
Wall Street banks want employees to return to work as soon as possible. If that means mandatory vaccinations, then so be it.
Morgan Stanley will ban workers from its New York headquarters if the worker has not been vaccinated with Covid-19. This rule will also apply to guests and clients who have not been vaccinated.
Morgan Stanley ( ) informed its employees in New York that any staff in buildings with a “large employee presence” must confirm their vaccination status by July 1st. The Financial Times first reported the news.
Morgan Stanley will expand its mandate for vaccinations to all employees and guests at other locations in New York City, Westchester, and Westchester beginning July 12.
A source close to the company stated that “operating in a fully vaccinated environment permits us to lift restrictions such as the use of facial coverings and the need for physical distancing, returning more normal office conditions.”
James Gorman, the CEO, has been tough on employees who return to work.
You can visit a New York City restaurant and come to the office. He said this at an earlier investing conference.
Gorman stated that over 90% of bank workers had already been vaccinated and that he expects this figure to rise to 98% to 99 percent. He said that employees who do not wish to be vaccinated due to religious or health reasons will be dealt with on an individual basis by the company.
Disclosures required: Goldman Sachs ( GS) requested that its employees return to the office last week and ordered them to disclose whether they had been immunized. JPMorgan ( JPM ) has asked US employees to register their vaccination status via an internal portal before the end of the month. However, they can choose to not share any details with the company by ticking a box.
Record-breaking year for Amazon Prime Day
Despite some sellers stating that they were not planning to offer any deals this year, Amazon Prime Day is still being enjoyed by shoppers.
Amazon (AMZN), reported that Prime Day, which was held on Monday and Tuesday this past week, was the largest two-day period of sales for third-party sellers in Amazon’s history. Nathaniel Meyersohn, a CNN Business colleague, reports. Third-party merchant sales outpaced Amazon’s.
Details: Prime members bought more than 250,000,000 items globally on Prime Day. Top-selling products included robotic vacuums, Crest Whitestrips, and coffee makers.
According to Adobe Analytics, overall online spending during the two-day event exceeded $11 billion. This is 6.1% more than last year’s Prime Day in October.
Investor insight: This event has not given Amazon’s stock much boost. However, Before the Bell readers were warned earlier this week. As inflation and other concerns limit tech stock enthusiasm, shares are down 0.5%.