Tech Investors Don’t Seem to Mind All the Antitrust Probes

Yet look more closely and you’ll see that the shares of all four occasionally have bent under the pressure of the nonstop techlash. Some experts say a higher level of tech stock volatility in 2020 could force investors to drop their this-too-shall-pass insouciance. And a slump in tech stocks could drag down the broader market.

Money managers such as Hank Smith, co-chief investment officer at Haverford Trust Co., say the antitrust probes will fizzle. “It’s much to do about very little,” says Smith, who adds that fear of voter backlash will keep the companies safe from politicians looking to break them apart.

Wedbush Securities Inc.’s Michael Pachter agrees. The probability of a forced breakup is “close to zero,” he says, because U.S. antitrust laws, as currently written and interpreted by courts, wouldn’t allow the kind of dismantling some have proposed. The worst-case scenario is that the tech companies would face billion-dollar fines or be forced to tweak their business models, Pachter says.

Still, Doug Anmuth at JPMorgan Chase & Co. warns that “the status quo is the most optimistic outcome,” so 2020 could bring unwelcome news. The July 23 announcement that the U.S. had opened formal antitrust reviews of social media, online retail, and search companies wasn’t a surprise, he said in a research note. But the development was “incrementally negative.”

The market showed such skittishness repeatedly in 2019. Hints of a U.S. probe sent Facebook shares skidding almost 8% in late July. When President Trump disparaged the tech companies in a September speech, investors wiped $50 billion from their market s.

Although much of the volatility around Apple shares is from contentious U.S.-China trade relations, a Supreme Court ruling showed the stock’s sensitivity to antitrust concerns. The justices on May 13 allowed a class-action lawsuit to proceed against Apple over the fees it charges on sales in its App Store—pushing shares down almost 6% that day.

The uncertainty could grow in 2020, with several presidential candidates making stronger antitrust enforcement a theme of their candidacy. “If one of the Democrats, especially the farther-left portion of those candidates, were to become president, the pressure would be put to bear to break some of these companies up,” says Scott Colyer, chairman and chief executive officer at Advisors Asset Management.

The broader stock market could feel the strain, too. The four companies under the most scrutiny have accounted for almost 14% of the S&P 500’s gains since the bottom in 2009. Should they falter, it’s unclear which companies, if any, have the ability to replace them as market leaders. Some see a silver lining. A true breakup would be a problem for the big internet companies, says Lori Calvasina, head of U.S. equity strategy at RBC Capital Markets, but smaller web companies and retailers that have suffered under the dominance of the tech behemoths could benefit.
 
Read more: A Guide to the Antitrust Battle’s Biggest Players

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