Big Tech’s Natural Immunity to COVID: BigTech shares rise amidst pandemic

May 12, 2020

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3 min read

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What's going on here?

According to the Economist, shares of Apple, Amazon, Facebook, Google and Microsoft have risen by 52% over the last 12 months. 

What does this mean?

While the outbreak of coronavirus has sent the stocks of most companies plummeting, the financial health of Big Tech has remained stable and can even be said to have increased. Facebook’s revenues in the first three months of 2020 rose to $17.7bn, beating analysts expectations, whilst Microsoft shares rose 3% at the end of April, due to a rise in revenue brought about by an increase in cloud-related business. 

The rise in share price does cause concern. The first is fear over a speculative bubble. This is when there is a spike in the value of assets within an industry, which is caused by inflated growth expectations or other events. As lockdowns ease and business opens up, stock prices may go back down, causing investors to panic sell their shares, as at the start of the pandemic. 

However, the other, perhaps more probable outcome, is that the current valuation of Big Tech is an indication of its strength. Many believe the pandemic has simply revealed the true power and importance that tech companies have in society.

What's the big picture effect?

The global state of lockdown has highlighted how dependent we are on the services of Big Tech. 

Despite recently wanting (see our article on that here) to curb the power of Big Tech, governments are now collaborating with these tech companies, to gain access to data and build apps to help track the spread of coronavirus The attitude of authorities towards Big Tech has certainly changed, as they realise that these companies have the data and technical expertise to execute such initiatives.

It remains to be seen whether the government and regulators will go back to curtailing the power of tech giants or seek new strategies to engage with them. For instance, the recent decision by the CMA, an authority which investigates the competitive effects of mergers in the UK, to push forward Amazon’s acquisition of Deliveroo, signals an interesting turn of events. This is an acknowledgement that the e-commerce leader has sufficient reserves to offer Deliveroo a lifeline in the current climate. The same may be true for other companies, who will be struggling after the pandemic eases, leaving Big Tech as the ones who can afford to buy smaller competitors. This will result in them acquiring greater market share and power. 

If the pre-COVID sentiment towards Big Tech returns this is likely to negatively impact their stock prices, as regulation will hinder growth. Furthermore, lawyers will have to navigate around any new rules that are introduced to restrain Big Tech and lawmakers must assess its effectiveness.

One possible form of regulation that has been suggested is to recognise and treat tech companies like public utilities, by breaking them up or moving to some form of nationalisation. These plans sound radical. However, governments are increasingly concerned by the power of Silicon Valley and such a plan shouldn’t be immediately dismissed. 

There is scope for Big Tech to move in two directions; further growth or greater control. It will be interesting to see the stance governments take towards the Big 5 as the pandemic eases and what this means for stock prices, as well as the role Big Tech plays in our everyday lives.

Report written by Laila Khan

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