Here's why the Georgia election results are a 'clear negative' for big tech, according to Wedbush
- Democrats strong performance in the two Georgia Senate run-off elections on Tuesday is a “clear negative” for big tech firms, according to a note from Wedbush’s Daniel Ives.
- Democrats likely control of the Senate means mega-cap tech firms should expect much more scrutiny and potential legislative changes to current anti-trust laws, Ives said.
- The Nasdaq sold off sharply in pre-market trading on Wednesday as the broader market was flat.
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The likely blue sweep of Georgia by Senate candidates Raphael Warnock and Jon Ossoff will have big implications for technology stocks, according to a note from Wedbush’s Daniel Ives.
“To be blunt, it’s a clear negative for Big Tech as ultimately with a Senate now likely controlled by Democrats we would expect much more scrutiny and sharper teeth around FAANG names,” Ives explained.
Tech stocks sold off sharply in pre-market trading on Wednesday, with the Nasdaq’s loss of nearly 1.5% far outpacing flat trades in the Dow Jones Industrial Average and a slight decline in the S&P 500.
With Democrats now controlling the agenda in the Senate, and Vice President-elect Kamala Harris being the key tiebreaker vote, “legislative changes to current anti-trust laws” are now on the table, Ives said.
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Increasing momentum over the years in the EU and Washington, D.C. for breaking up the businesses of FAANG names lacked political strength given the divided control in Congress since 2018.
“This all changes now in the eyes of the Street with the risk of business model scrutiny from tech giants like Amazon, Google, Apple, and Facebook now in a brighter spotlight, which adds more risk to the overall tech sector,” Ives said.
Still, given Democrats’ slim majority in the Senate, major legislative changes to big tech companies “will find difficulty becoming a reality,” the note said, and Ives is still bullish on tech stocks going forward.
“We still remain firmly bullish on tech stocks for 2021, however the Senate turning Blue could tame the tech rally until the Street gets a better sense of the legislative agenda under Biden heading into the rest of 2021/2022,” Ives said.
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