Not all of the new dependence on digital will stick when the pandemic finally recedes, but Wall Street has cast its vote. Essentially all the gains in the S&P 500 index this year have come from the five, adding around US$12.4 trillion ($18.3t) to their combined market cap.
Of course, this is as much a financial phenomenon, driven by the weight of cash, as it is a reflection of changes in the companies' underlying prospects and valuations are stretched. Five years ago, with revenue growing at nearly 30 per cent, Apple's shares were trading at just 11 times trailing 12-month earnings. In the years since, it's revenue has grown at a compound rate of only 3.3 per cent a year — but the p/e ratio now stands at 35.
It would also be wrong to read the post-election share price bump — the value of the five companies has increased more than US$700 billion since election day on Tuesday — as a sign that the political order that is taking shape would necessarily be good for Big Tech.
There have been good reasons for a stock market rally, starting with the easing of fears about whether the US election would dissolve into chaos. A handful of secular growth stocks that has led the market higher still look as if they may be the best bet for a world of little growth and excessively loose monetary policy, whoever is in the White House.
The tech companies might at least hope to benefit if partisan feuding continues to be the order of the day in Washington. That could well reduce the chances for political agreement over sweeping legislation — even if both sides believe some kind of action to limit the power of the tech companies is needed. The division over a recent Democrat-led House committee report on Big Tech, which failed to gain the support of the committee's Republicans, hints at the kind of division that may continue.
Importantly, the tech companies also seem to have got through this election without seriously blotting their copybooks. Much of the initial passion that fuelled the "techlash" in Washington can be traced to Facebook's mishandling of the 2016 election, as well as its Cambridge Analytica scandal two years later.
It is too early to write the history of how well the social media companies coped with this election, but the initial signs are encouraging. Facebook's last-minute shifts in policy — taking a more active stance in adding warnings to some of the president's posts — might turn out to have been a canny move if Democrats retake the White House. Of course, they also risked a backlash in the event of a second Trump term.
All this might suggest an easing of the techlash. But on key issues like antitrust and whether Congress may try to bring in new rules for online content, it is far early to judge. The recent lawsuit against Google, likely to be extended when a state-level investigation wraps up in the coming months, landed with tacit support from both political camps.
The antitrust investigations that have been under way since early 2019 may have enough momentum of their own, whoever is appointed to head the key enforcement agencies.
The real test may not come until some way into the next administration. If and when a court finds against one of the leading tech companies in an antitrust case, it will then come down to a political decision: Will the leaders in Washington be in favour of strong sanctions, up to and including break-ups? That will depend on a political judgment at the time that is impossible to prejudge.
Big Tech may have won 2020 — but 2021 and beyond could still be a different matter.
Written by: Richard Waters
© Financial Times
