Big Tech + Big Government = Big Trouble

The logos of Big Tech companies Amazon, Apple, Facebook, and Google, in file photos. Reuters

Commentary

After the world’s brush with financial Armageddon back in 2008, a new phrase entered the lexicon that described financial institutions that were so big, so deposit-heavy, so interwoven into the global economy, that should any one of them ever run into financial trouble—a bailout would be justified.

They were called Too Big to Fail (TBTF). A great movie was made about the whole affair with the same title.

Currently, there are 29 banks around the world considered TBTF.

Today there is another sector of the stock market with a handful of companies that can be considered TBTF. Companies whose dominance is so great, that if something were to ever happen to them, it could lead to a meltdown equal to the financial threat of 2008.

And right now, government regulators are putting them in the crosshairs.

Big Tech

Currently, the market capitalization of the S&P 500 Index is roughly $40 trillion.

Of the top eight companies that comprise this index, Apple, Microsoft, Alphabet (Google) Class A, Alphabet Class C, Amazon, Tesla, Meta (Facebook), and Nvidia, six of them are considered big tech. Technically they’re listed in the “retail” category, but Amazon through its AWS division powers a big chunk of the internet, and is as much a tech company as any of the others.

Exclude Tesla, and the rest of those component stocks total up to just over $12 trillion in market capitalization.

That means these six “Big Tech” companies make up roughly one third of the entire index! Apple represents nearly 7 percent by itself!

When these behemoths move, they set the direction of the entire stock market.

If something threatened to take one of these mega-cap giants down, it could have a massive impact on the entire market. But with combined sales of over $1 trillion, what could possibly pose such a threat to them?

Big Government

These companies are all the 800-pound gorillas in their markets. There are no companies that rise to the level of what you might consider “competition.” That effectively makes them monopolies in their own universes.

And who hates monopolies more than anything?

The government.

Currently, both the House and the Senate have introduced a series of antitrust bills that would clamp down on these virtual monopolies. Among the goals:

● Barring self-preferencing or promoting their own products in front of rivals (or even clients). ● Prohibiting dominant players from buying up direct competitors (and even newer technologies that could potentially become a competitive threat). ● Forcing tech companies to give users full access to their personal data and make it easy for them to migrate to a different, competing platform.

And to some extent, all these attacks on TBTF tech have some kind of bipartisan support.

Big Guns

It goes without saying, any kind of breakup of these companies would plunge the market into the thing it abhors the most—uncertainty.

So naturally, these companies haven’t taken this attack on their fiefdoms lying down. They’ve brought out the “big guns”—the heavy “dark money” artillery. According to OpenSecrets.org (emphasis mine):

“A coalition of organizations, dubbed the Alliance on Antitrust, opposes changes to antitrust law that could facilitate a crackdown on major technology companies. The organizations operate as a project of the Committee for Justice, a conservative 501(c)(4) nonprofit with a history of promoting conservative judicial candidates and engaging in various advocacy activities.

“The conservative coalition advocating against antitrust law has worked closely with tech giants, despite the fact that many GOP members of the House and Senate are in support of the newly introduced anti-trust legislation aiming to break up tech giants.”

Google is one of their biggest donors.

Are They Really Serious?

This legislative show of moral indignation may be nothing more than Kabuki theater. After all, members of Congress are pretty big investors in all these companies. So why shoot the golden goose that’s making them rich?

But just the same, should any of this antitrust legislation get passed—or worse, implemented—these TBTF tech companies could leave a pretty big dent in the market.