This week was pretty eventful for Big Tech, which might have seen the beginnings of a backlash against alleged misuse of its powers from a competitive standpoint, before reporting Q2 2020 earnings which reinforced just how economically robust some of these juggernauts have become in recent years.
CEOs from 4 of the world's most influential tech companies - Sundar Pichai (Alphabet), Jeff Bezos (Amazon), Tim Cook (Apple) & Mark Zuckerberg (Facebook) were hauled in front of the US Congress this week (via VC, of course) to defend themselves against allegations that their companies have broken antitrust rules.
Over the course of 6 hours on Wednesday, the executives had to face up to tough questions from members on both sides of the US congress, who have been compiling their lines of questioning for the past year, armed with subpoenaed documents which revealed some pretty damning information (we'll leave you to Google(!) the details and focus on the high-level picture here).
Big Tech has been the source of various pieces of controversy - both at home and abroad - over the last few years. But this is arguably an investigation which could finally force some changes in the way in which they compete with (or disadvantage) others in their quest for global dominance.
The issue has been contentious thanks in large part to the fact that they actually do provide value, not least by connecting consumers to each other, or by reducing costs while improving the quality and power of the products they're able to put in the hands of consumers. But in doing so, they sometimes disadvantage or destroy potential competitors.
New regulations and a reform of anti-trust laws to better incorporate the digital world could be in store when the House committee investigating Big Tech presents its findings in September. It'll be a tough task for legislators to find the right balance between reigning in anti-competitive practices without damaging Big Tech's ability to continue enriching our lives, and we'll be looking out to see what they come up with.
What does that mean for you, the investor?
If you're invested in the stock market, it's likely that you own shares in at least one of the above mentioned companies - either directly or indirectly (those NASDAQ / S&P500 / Dow Jones ETFs and likely any big tech fund you own is invested in Big Tech). While they clearly are economic superstars and have been amazing stocks to own over the past decade, all of these names have rallied hard in 2020 and are currently trading near all-time highs.
While it'd probably be a bit too dramatic (and difficult) to get rid of all your Big Tech investments, it might just be a good time to re-evaluate your overall exposure, take some profits following some pretty stellar Q2 earnings (more on that below), and diversify away a little from these darlings of the stock market for the next few months - you know - in case things go south from a regulatory perspective.
There are other interesting alternative companies out there with decent scale which can give you exposure to similar underlying economic drivers, and we've put together a shortlist for you below:
Baidu, IBM, Microsoft, Oracle, Salesforce, Samsung
Ali Baba, eBay, Etsy, Rakuten, Shopify for eCommerce
Adobe, Ali Baba, Cisco, Dell, IBM, Microsoft, Oracle for cloud computing
Dell, Microsoft, Philips, Samsung, Sony, Toshiba for devices
Disney, Netflix, Spotify for services
Baidu, Pinterest, Snap, Tencent, Twitter
The 4 tech names discussed above also reported earnings following their anti-trust hearings, smashing out the lights yet again and trading at-or-near all-time highs towards the end of the week, showing the economic powerhouses they have become. We'll let the Q2 numbers do the talking:
Revenues: $31.6bn vs. $30.5bn expected
Earnings per share: $10.13 vs. $8.27 expected
Revenues: $59.7bn vs. $52.3bn expected
Earnings per share: $2.58 vs. $2.07 expected
Revenues: $88.9bn vs. $81.2bn expected
Earnings per share: $10.30 vs. $1.50 expected
Revenues: $18.7bn vs. $17.3bn expected
Earnings per share: $1.80 vs. $1.39 expected
Elsewhere, Q2 2020 earnings season is accelerating with another 5,000+ companies reporting globally next week - here's a selection you might be interested in following:
3 August - AIG, Clorox, Ferrari, Global Payments, Heineken, HSBC, Liberty Global, Loews, Siemens Healthineers, Société Générale, Suzuki, Tyson Foods
4 August - Activision Blizzard, Atlantia, Bayer, BP, Diageo, Disney, Evonik, Fox Corp, Gartner, Infineon, Intesa Sanpaolo, Match Group, KKR, Prudential Financial, Softbank, Sony, Twilio, Warner Music Group
5 August - Ahold, Asahi, Allianz, BMW, Continental, CVS, Deutsche Post, Discovery Communications, Flutter, GoDaddy, Honda, Legal & General, Manulife, Metlife, Moderna, Olympus, Polyus Gold, Roku, Sampo, Square, Toshiba, Vonovia, Wayfair, Zynga
6 August - Adidas, AXA, Aviva, Coca Cola Europe, Credit Agricole, Cloudflare, Consolidated Edison, Booking Holdings, Eurofins Scientific, Galapagos, Glencore, Hilton, ING, KBC, Merck, Munich Re, Nintendo, NN Group, Novo Nordisk, NVIDIA, Shiseido, Siemens, Symrise, Sun Life Financial, T-Mobile US, Toyota, Trade Desk, Uber, UniCredit, Wix.com, Zillow
7 August - Anglogold Ashanti, Bridgestone, Hargreaves Lansdown, SMC Corp, Sumitomo, Ventas
Until next time ✌️
Please know, the value of investments can go up as well as down and you may receive back less than your original investment, meaning, when investing your capital is at risk.
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