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A slower economy can increase the pressure on Big Tech – Axios

A potential recession, coupled with increasing regulatory frameworks for some of the biggest technologies, exacerbates a difficult 2019 for Silicon…

A potential recession, coupled with increasing regulatory frameworks for some of the biggest technologies, exacerbates a difficult 2019 for Silicon Valley.

Why It Matters: The biggest technology companies have already raked in billions of dollars in profits and benefited from large tax cuts that will not be repeated, so next year will not likely be better for them financially. They have also been persecuted by scandals who have left many people questioning their positive role in society, and if the economy begins to conceal, 201

9 may get worse.

“People are looking for scapegoats in a bad economy. With big technology already on their heels, a downturn would probably give rise to arguments that the biggest internet companies are too big and need to be rushed.”

– Paul Gallant, an analyst with the Cowen Washington Research Group

Big Tech is closing a contested year in Washington and potential regulation continues to haunt it well into 2019.

  • Google CEO Sundar Pichai has agreed to testify to Congress and comes likely to be asked whether the company is open about its data privacy practices and possible bias. By the end of the year, the CEOs of Twitter, Google and Facebook will have been called to testify to Congress for the first time ever in 2018.
  • Legislators in the United States are pushing a federal integrity team with urgent likelihood of worsened by more violations like the Marriott that were revealed on Friday.
  • The Federal Trade Commission still has an open investigation as to whether Facebook’s behavior violated an earlier settlement with the Agency. Margrethe Vestager, Europe’s aggressive monitoring commissioner, is still investigating aspects of Google’s business and if Amazon is playing fair in the market for generic products.
  • President Trump has said that his administration is serious about monopolistic behavior at Facebook, Google and Amazon.

Some analysts predict an economic slowdown – even if it does not lead to a recession like 2008 – will be enough to change the global attitude of major US companies.

“So it’s really shocking this year is that the only major economy in the world where growth has actually accelerated this year is America. And this is due to tax relief, deregulation, the second stimulus that has been incorporated. And it has Also helped to my results is that from the next year the effects begin to fade. “

– Ruchir Sharma, world-leading strategist at Morgan Stanley on Fareed Zakaria GPS on Sunday

” FAANG “layers (Facebook, Amazon, Apple, Netflix and Google) that ran the stock market for record increases have not been immune from this year’s market.

  • “The mood has changed. Investors ask a lot more questions right now,” says Larry Glazer, Managing Partner at Mayfl ower Advisors, who manages $ 3 billion. “Momentum has faded on these names.”
  • Add potential concern: Possible regulatory measures could lead to higher costs, especially for Google or Facebook.
  • “Facebook has been under such dark clouds so long that everyone is waiting for the worst,” said Paul Meeks, a technology portfolio manager at Wireless Fund, to Axios.

The other side: “I do not see a threatening recession, and even if it is, people will not target these companies if there is a recession,” says Nicholas Economides, professor of economics at NYU Stern School of Business.

  • Economists claim that although it was a mild decline in GDP growth, would not significantly affect the high technology sector.
  • For companies like Google, Facebook, and Twitter, their main revenue streams are from ads. They gain market share from trademarks that convert traditional ad spend to digital ads. This transformation is not so dependent on GDP growth, as they are still in the process of converting ads of different formats to digital ads, and that is something that will continue, regardless of GDP growth. “

Bottom line: Technical companies that have long been darlings of investment portfolios are likely to be in much weaker positions.

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