What Does A Democrat Victory Mean For Tech Companies And Investors?

What Does A Democrat Victory Mean For Tech Companies And Investors?
Image source: CNBC Video Screenshot

With the market reacting to the results of the Senate election in Georgia, there is already speculation regarding what a Democrat victory is likely to mean for tech companies, particularly when it comes those listed on the stock market.

Play Quizzes 4

Get Our Activist Investing Case Study!

Get the entire 10-part series on our in-depth study on activist investing in PDF. Save it to your desktop, read it on your tablet, or print it out to read anywhere! Sign up below!

Q3 2020 hedge fund letters, conferences and more

In response, please find below a comment from Giles Coghlan, Chief Currency Analyst at HYCM, offering his initial thoughts on what a Democrat victory means for tech companies.

Voss Value Sees Plenty Of Opportunities In Cheap Small Caps [Exclusive]

investFor the first quarter of 2022, the Voss Value Fund returned -5.5% net of fees and expenses compared to a -7.5% total return for the Russell 2000 and a -4.6% total return for the S&P 500. According to a copy of the firm’s first-quarter letter to investors, a copy of which ValueWalk has been able Read More

A Democrat Victory Viewed As Being Negative For Tech Stocks

"Many market analysts see a Democrat blue sweep as being negative for US tech stocks, with some anticipating an 8% to 10% drop in the S&P 500. This is due to the risk of more tax and tech regulations being introduced as part of a Democrat victory. 

"Yet while there may be higher taxation and restrictions on tech activity as a consequence of a Democrat Senate, we must also remember that a large stimulus bill is also likely to be on the way. This will provide plenty of stimulus for stocks and, with more COVID-19 lockdowns on the horizon, I anticipate that tech stocks should avoid a heavy sell off and find dip buyers in the long-term. 

“Throughout 2020, our reliance on Big Tech to stay connected while working remotely has massively bolstered the industry’s revenue and influence. The stock prices of the big five tech companies (Google, Amazon, Facebook, Apple and Microsoft) have all showed record levels of growth since the beginning of the pandemic. 

Breaking Up Big Tech

"However, governments now have their eye on the possibility of breaking said companies up. Ever since the CEOs of Amazon, Facebook, Google and Apple testified to the US congress last July, American legislators have become more vocal about the idea of bringing trust busting into the 21st century. But what could this mean for investors?

"In my mind, this could actually be beneficial. If Mark Zuckerberg is forced to spin off Instagram and WhatsApp from Facebook, Facebook stockholders will have a choice as to which of these newly formed independent companies they which to keep their equity in. Thus, such a development would actually bring more choice to investors as to where they want their assets to lie. 

In fact, a state-enforced break up of a company might be seen as positive news for investors. Equity analysts often speak about how the greatest sign of a company doing well is it being so large that it must be broken up. As such, any of the big five could enjoy a stock price surge of up to 50% if the US Federal Government moves forward with any plans to break them up."

Updated on

Jacob Wolinsky is the founder of ValueWalk.com, a popular value investing and hedge fund focused investment website. Jacob worked as an equity analyst first at a micro-cap focused private equity firm, followed by a stint at a smid cap focused research shop. Jacob lives with his wife and four kids in Passaic NJ. - Email: jacob(at)valuewalk.com - Twitter username: JacobWolinsky - Full Disclosure: I do not purchase any equities anymore to avoid even the appearance of a conflict of interest and because at times I may receive grey areas of insider information. I have a few existing holdings from years ago, but I have sold off most of the equities and now only purchase mutual funds and some ETFs. I also own a few grams of Gold and Silver
Previous article The Role Of Private Equity Investment In Healthcare
Next article What Is The New Normal For Businesses And AP?

No posts to display