Tech risks pile up as ‘treacherous’ antitrust looms over stocks

By Ryan Vlastelica | Bloomberg

Among the many headwinds facing big tech these days, a perhaps-unexpected one continues to nag at investors: an aggressive antitrust posture coming out of Washington.

Just as the Trump administration’s focus on tariffs has roiled markets, its hard-line view against megacap tech stocks — many of which are facing antitrust or regulatory probes — has also caught some off guard.

“People expected a complete loosening of regulation, and there’s been a surprise that the Trump administration has continued things that began under Biden,” said Monica Guerra, head of US policy at Morgan Stanley Wealth Management. “I don’t think there’s real teeth in some of the actions right now, but given the broader policy uncertainty, it throws the probability of what could happen into coin-flip territory, and it could mean that the Mag 7 are not the place for investors to look right now.”

The Nasdaq 100 Index is down 19% this year, and while much of the recent weakness relates to tariffs, antitrust risk remains precarious as well. The index was little changed on Wednesday.

In particular, Meta Platforms Inc. is facing a “treacherous macro and antitrust landscape,” according to Monness Crespi Hardt & Co. analyst Brian White. A trial to break up the Facebook parent — which would force it to sell Instagram and WhatsApp — is scheduled to begin April 14. Another trial, concerning Amazon.com Inc.’s Prime subscription practices, is scheduled to begin in September.

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There are signs tech has been anticipating a more favorable regulatory backdrop in some respects, including with Alphabet Inc.’s proposed $32 billion acquisition of Wiz Inc. However, the Federal Trade Commission is moving ahead with an antitrust probe of Microsoft Corp. that was started under the Biden administration, and a remedy package from the Department of Justice against Alphabet was more punitive than many expected.

“The actions against Microsoft and Alphabet show this administration isn’t easing up on big tech,” said Art Hogan, chief market strategist at B. Riley Wealth. He views the antitrust steps as another example of policy uncertainty at a time when erratic tariff announcements have contributed to a spike in volatility and roiled markets, with big tech stocks tumbling.

“While tech has far less impact from trade wars, it is getting less regulatory relief than other sectors,” he said, noting that while hardware companies have been hit hard, sectors like software and online advertising have less direct exposure to tariffs.

In many respects, the administration’s stance was well telegraphed. Some antitrust actions — including the one against Meta — were launched during the first Trump administration, while key figures like Vice President J.D. Vance have been vocally critical. Trump’s antitrust picks were seen as likely to maintain the Biden administration’s focus on big tech. Andrew Ferguson, Trump’s choice for FTC chair, said the agency would prioritize scrutinizing the sector, and that it has the resources to do so.

Still, some expected a more hands-off approach, especially after major tech companies and their chief executives donated to and attended Trump’s inauguration; the Wall Street Journal recently reported that Meta CEO Mark Zuckerberg lobbied Trump to agree to a settlement that would avoid the antitrust trial. Trump has also criticized European Union regulators for targeting companies like Alphabet, Meta, and Apple Inc.

The Justice Department’s case against Alphabet has implications for both it and Apple, which gets about $20 billion from the Google parent for search exclusivity.

“For investors who assumed that a new Administration would mean backing away from the DOJ’s most aggressive demands,” including a breakup of the company and a cessation of payments to Apple, the filings “will be a disappointment,” MoffettNathanson wrote recently. Barclays added that with respect to the relationship between Alphabet and Apple, it “still looks to us as though its days are numbered.”

Antitrust probes — which can take years to play out and are often appealed — are far from the biggest risk facing these companies, which remain broadly liked by investors for their dominant market positions and balance-sheet strength.

Eric Schiffer, CEO of the private equity firm the Patriarch Organization, acknowledged that the level of policy uncertainty is elevated now, but said that “antitrust stuff is toward the bottom of my list with respect to risks from this administration.”

In his view, a breakup of a company like Alphabet is less likely under Trump than Biden, despite the potential for near-term headline risk.

“There are curveballs that lead to high anxiety, but a lot of these issues were already out there, and to the extent stocks fall on them, it looks to me like a buying opportunity.”

–With assistance from Subrat Patnaik and David Watkins.

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