Even though stock market went pretty untouched following the last week’s debacle in Washington, DC, when pro-Trump rioters breached The Capitol, there could very well be consequences--at least for the tech companies that have long been behind the market rally.
In the wake of his support for the mob that stormed the Capitol, Trump’s social media accounts have been locked and banned.
Facebook, Twitter, Instagram, and YouTube all took steps to restrict Trump’s ability to use their platforms, some for good.
PayPal also shut down an account raising funds for Trump supporters who traveled to Washington, DC.
Then, Amazon suspended the pro-Trump social network Parler from its web hosting service, while Apple and Google removed Parler’s app from their stores.
All of that raises some questions about our tech giants in a time of political crisis, and stock prices are potentially starting to reflect that.
Following the riot, the Dow closed up 437 points, or 1.44%, to 30,829, and the S&P 500 gained 0.57% to 3,748. Both the Dow and S&P 500 reached record intraday highs following Congress' confirmation of Joe Biden's presidential election win.
But on the flip side, tech companies sold off heavily on Monday, with Twitter tumbling over 6%, Facebook 4%, and others around 2%.
Americans seem unsure which beast they want to let out of its cage here--a situation that will continue to add to the uncertainty
Banning Trump spurs concern among investors about the future regulation of social networks and how they create and wield unchecked power.
While the social media giants justified the action due to the risk of further violence following the storming of the U.S. Capitol, its action still drew criticism from some Republicans for violating Trump’s right to free speech. But the criticism isn’t just coming from the Trump camp: Both at home and abroad fears are mounting from anti-Trumpers as well.
What few seem to grasp is that either scenario means unchecked power for these tech giants: Whether it’s used as the tool to enable fomenting of violence and proliferation of hate speech, or whether it becomes the arbiter supreme, determining single-handedly who can say what, and when. The issue isn’t what they do, it’s how big they have become.
In the meantime, investors have reason to be worried that our beloved “FAANG” stocks might not only cease rallying but take a hit as pressure mounts.
And they have more reasons to worry than the recent breach of the Capitol.
The bosses of Facebook, Google, Amazon and Apple testified before the Congress last year as part of a bigger investigation into their influence on the market.
Last month, the Attorneys General of 48 states and the Federal Trade Commission (FTC) filed much anticipated antitrust lawsuits against Facebook, alleging that the social media giant illegally pushed out competition.
In the lawsuit, the states’ claim that Facebook bought competitors “illegally” and in a “predatory manner” in order to grow and preserve its market power.
The lawsuits have been years in the making, with the authorities recently increasing efforts to place growing tech companies under its oversight. They come on the heels of an October report published by a U.S. House Subcommittee on Antitrust that determined that the social media giant has a monopoly.
Again, this isn’t just about Facebook. The Subcommittee concluded that Big Tech companies enjoy monopoly power and suggest Congress should change antitrust laws in a way that could result in parts of their businesses being separated out.
Furthermore, Trump signed an executive order in May that will attempt to limit the legal protections afforded to social media giants in direct response to Twitter’s fact-checking warnings on his presidential tweets.
"A small handful of social media monopolies controls a vast portion of all public and private communications in the United States," he claimed. "They've had unchecked power to censor, restrict, edit, shape, hide, alter, virtually any form of communication between private citizens and large public audiences."
In the executive order, Trump called for killing Section 230 of the Communications Decency Act from 1996, which blocks liability claims against social media companies for users’ posts on their sites.
Lawmakers in the European Union and United Kingdom are also keen to regulate the big tech.
And China is perhaps the most visible example of what happens when tech giants get too big.
Investors have every reason to be worried.