Here's why the Georgia election results are a 'clear negative' for big tech, according to Wedbush
- Democrats' strong performance in the two Senate runoff elections in Georgia is a "clear negative" for big tech firms, Wedbush's Daniel Ives said in a note.
- Democratic control of the Senate means mega-cap tech firms should expect much more scrutiny and changes to antitrust laws, Ives said.
- The Nasdaq sold off sharply in premarket
tradingon Wednesday as the broader market was flat.
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The likely "blue sweep" of Congress with victories for the Senate candidates Raphael Warnock and Jon Ossoff in Georgia will have big implications for
"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 said.
Tech stocks sold off sharply in premarket 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 controlling the agenda in the Senate - and Vice President Kamala Harris as the tie-breaking vote - "legislative changes to current anti-trust laws" are now on the table, Ives said.
Increasing momentum in the European Union and Washington, DC, for breaking up FAANG businesses lacked political strength given the divided control of 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, with a slim Democratic majority in the Senate, major legislative changes for 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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