Alphabet Inc., Amazon Inc., Apple Inc. and Facebook Inc. have powered the S&P 500 to new highs following a bruising 34% plunge that occurred during the onset of the COVID-19 pandemic, but a Biden presidency and Democratic control of the House and Senate could derail the momentum with one fell swoop.
The so-called blue wave would “make a formidable force going after antitrust law changes with breakups possibly on the radar,” wrote Dan Ives, a New-York based analyst at Wedbush Securities.
A Democrat-led House subcommittee proposed breaking up Big Tech due to unfair business practices in a report released Tuesday. Under such a scenario, Alphabet wouldn’t be able to own both the Google search engine and YouTube while Amazon would be barred from selling its own private-label products.
While Republicans see many of the proposals from their Democratic counterparts as “non-starters,” they have their eye on the companies for a different reason.
The House Judiciary Committee later on Tuesday released a report calling for Big Tech to be held accountable for a “consistent level of bias” and suggested modifying Section 230 of the Communications Decency Act, which gives companies like Facebook and Twitter protections against civil liability for third-party content.
So long as both chambers of Congress and the presidency aren’t controlled by a single party, Ives doesn’t see Congress agreeing on legislation, setting the stage for the “eye-popping” rally in tech stocks to continue into yearend as fundamentals and growth trajectories take hold.
One of those growth trajectories comes from lingering pandemic-related restrictions, with executives speculating about longer-term remote working as a second year of COVID-19 draws closer.
Large-cap tech stocks have been “rerated as utilities because they’ve become essentials,” said David Rosenberg, chief economist and strategist at Toronto-based Rosenberg Research. “The longer we have the work-at-home theme, the higher the valuations these companies are going to receive."