So much for the idea that political risk will snuff out the tech stocks rally. After a week of unexpectedly strong earnings reports, the FANG tech stocks (Facebook, Amazon, Netflix and Google) have bounced back.
Amazon’s jump in profits, a particular relief after President Trump attacked the company on Twitter, propelled the stock past Alphabet, Google’s parent, to make it the second-biggest tech group by market value. Facebook also surprised on the upside, and the shares are now only a smidgen below their pre-data-scandal level.
But it’s too early to assume Big Tech is impervious to political and social pressure, says Alan Murray on Fortune. The sector will “remain at the centre of Washington policy discussions” for years.
The biggest four companies are all tech firms, which could increase pressure on regulators to consider breaking them up. The furore over fake news and cybersecurity is also likely to keep them in the political spotlight, while the likelihood of the US following Europe’s tough restrictions on data protection is a potential concern for investors.
Even if they shrug off all these dangers, stockmarket history suggests that their high profitability will be eroded away by competitors before too long, gradually eroding their market capitalisation, says John Authers on FT.com. “Dominance is seldom sustained… The Fall of the FANGs… still lies ahead.”