Tech giants on the ropes wbj electricity word search ks2


The tech world has been buzzing with headlines in the past few months. Alphabet (Google) was fined in 2017 by the European Commission and is facing more anti-trust litigation. Its Q1 results also leave a lot to be desired. The same goes for Microsoft. Meanwhile, Facebook has come under a barrage of criticism in view of the Cambridge Analytica scandal, and despite Mark Zuckerberg holding his own during his Congress appearance and distancing the social network from the crimes of the now-bankrupt advisory firm, Facebook’s stock price has a long recovery ahead of it.

Famously bearish investor Jim Mellon, a UK national, told CNBC that, “These fatted calves are now ripe for the plucking by governments everywhere,” and added that major tech companies could be “pillaged” by national administrations all over the world.

Amazon is no better, either. President Trump has been openly critical of the retail giant’s tax avoidance and the fact that subsidizing each parcel delivered by the Post Office totals billions of dollars in costs to the US economy. The online retailer’s stock price took a dive in the second half of March, from which it has not yet fully recovered.

Tesla is facing financing difficulties and its stock price has also taken a hit following the California crash where an autonomous Tesla car operated by Uber crashed and killed a woman while on autopilot. The incident didn’t help Uber either, which had had an abysmal year all through 2017, including a security breech that led to hackers gaining access to sensitive information about 57 million people.

I would say the troubles of tech companies are temporary. It is evidenced by Facebook – despite the controversies surrounding the company, its Q1 results were very good. While Facebook’s strife relates to its image, other companies do have structural problems, like the threat of imposing taxes on Alphabet in the EU or the uneasy position Amazon has found itself in its domestic market. However, I believe that these companies have such a strong competitive advantage and competencies that they will be able to remodel their business to avoid or minimize the negative effects.

In the short run, further media reports could cause more or less justified uneasiness among investors. In the mid-term, I wouldn’t expect a major correction, even though some of these companies’ share prices are quite inflated. That said, increased volatility could accompany us for the next few months.

I think it’s not right to put Alphabet, Microsoft, Amazon and even Facebook, on the one hand, and Tesla and Uber, on the other, in one basket. The former set of companies are in some kind of trouble, which they will overcome one way or another. Privacy, anti-trust issues, legal, tax issues, continental government battles, etc. always come with new technological wave. Especially right now, when it is getting harder for societies, governments and international relations to keep up with new technological developments. But I wouldn’t expect to see a crash.

Tesla and Uber are different. They are pioneers of new technologies and they are pushing the frontiers. It seems certain that at some point most of us will be driving electric cars. It is also clear that the sharing economy will take over global marketplaces. I would like to say that these companies have a bright future ahead of them, but sometimes – more often than not actually – pioneers do not survive the change they are hoping to make.