Tech Stock Bashing on Wall Street Reflects President-Elect’s Tenuous Ties to Silicon Valley
Donald Trump’s unexpected electoral victory, amplified by the Republicans’ control of both houses of Congress, has had a major effect on the financial markets. Investors have done what they always do; they rush to safety. Not surprisingly, then, the markets have rewarded the sectors most likely to benefit from Trump’s pro-growth policies, especially as the president-elect has the political room to impose them.
The Trump effect appears to have ignored the technology sector. Tech investors fell to the lure of smug and wildly optimistic polls, which were all but hailing the Democratic candidate as “President Hillary.” It’s no surprise then, that tech stocks have not been invited to the Trump presidential merriments.
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As a famous Nobel Prize-winning songwriter-poet once waxed: “The times, they are a changin.” Because of the Trump effect, the market muses have shifted in favor of the sectors that will benefit from the budget and fiscal largesse that the president-elect promised during his campaign. This is what has been missing from the U.S. economy.
The big stars of the tech sectors have experienced notable drops since November 8. Even seemingly bulletproof stocks like Amazon.com, Inc. (NASDAQ:AMZN) and Facebook Inc (NASDAQ:FB) have lost in the order of 10-15%—in some cases even more. Even Alphabet Inc (NASDAQ:GOOG) lost some seven to eight percent. Investors have, doubtless, discovered a sudden disaffection for the big stars of the NASDAQ.
Tensions certainly exist between Silicon Valley and President-elect Trump. One of the causes is the tech sector’s penchant for hiring foreign engineers and programmers. This is known as the clampdown on H1-B visas. The companies fear that Trump’s immigration policies might interfere with their model.
Some tech executives have other reasons to fear, due to their past criticisms of Trump the tycoon, as well as Trump the presidential candidate. One of these is Amazon.com CEO Jeff Bezos. Trump cited the company as a worthy antitrust target. The new U.S. president said that Bezos has a “huge antitrust problem because he’s controlling so much, Amazon is controlling so much of what they are doing.” (Source: “Tech Trump: Silicon Valley steps into the valley of unhappiness,” The Register, November 9, 2016.)
Moreover, many tech sector companies already benefit from a lower tax rate (average 23.6% instead of 29.9% for others). Therefore, they can expect few gains from the tax reductions that Trump has contemplated offering to more traditional businesses. (Source: “Tech Stocks Have Tumbled After The Election – What Gives ?,” The Wall Street Journal, November 15, 2016.)
