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A threat to Big Tech?
8 Jul 2021
3 month(s) ago
The big tech companies have been an investment safe haven during the global covid crisis. But there are storm clouds appearing.
The former president Donald Trump has just announced a class action against the Big Tech monopolies: Google, Facebook and Twitter. These companies are protected from anything that happens on their sites because of section 230, legislation that protects them from prosecution as publishers. What will this mean for investors?
The tech giants have been extraordinary investments, and part of that is due to their unique legal status. Wikipedia says section 230 is: “a section of the United States Communications Decency Act that generally provides ... immunity from liability for providers and users of an "interactive computer service" who publish information provided by third-party users.”
In effect the Big Tech giants have argued that they were just providing the pipes, the infrastructure; they were not controlling the content as media publishers do.
But over the last couple of years, and especially as the pandemic crisis developed, the tech giants very much set out to control the content on their sites, cancelling and deplatforming with impunity. They banned suggestions that the covid virus came from the Wuhan lab, for example, something now accepted as very possible, even likely. They deplatformed people saying that generic drugs would work as treatments of covid, something increasingly being accepted by the scientific community. Any criticisms of the vaccines are currently being taken down, despite their not being approved, only given emergency use ‘authorisation’. That is because FDA approval typically takes 6-10 years.
So the question is: “Does Section 230 still apply when they are very much acting as publishers?” That is what the class action lawsuit will test. It will argue that the First Amendment’s protection of free speech should over ride Section 230; in effect Congress has made a law they don’t have the right to make.
That will greatly affect the US stock market. As one trader said, the best and safest investment has been the Tech Giants:
“For all of the ink devoted to value-vs-growth and cyclicals-vs-defensives -- and, for all of the hand wringing around what signal the bond market is sending -- if one were simply long of some FAAMG (Facebook, Amazon, Apple, Microsoft, and Alphabet’s Google) and long of some BCOM (Bloomberg Commodities Index), you’ve had a remarkably steady hand amidst the oddities that characterized the game in Q2.”
The tech giants, in other words, have been an investment safe haven. Here is a graph of the performance. The value has more than quadrupled since 2016:
Many will be watching anxiously to see if they continue to be strong investments as they come under what threatens to be severe legal pressure.
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