Tech stocks plunged this morning after an important announcement. The news? Big Tech may be facing some severe regulation as an antitrust bill continues to garner support. The American Innovation and Choice Online Act first received bipartisan approval from the Senate Judiciary Committee in January. Now, a letter has revealed it has the backing of the Department of Justice (DOJ).
As the Wall Street Journal reports, this development represents “the Biden administration’s first full-throated support of the antitrust measure.” This is no small thing. If the bill passes, it could severely limit the power of many of tech’s biggest names, stopping companies from favoring their own products over the products of competitors.
Tech stocks have already started falling as a result of this new bill traction. Right now, Apple (NASDAQ:AAPL) is down 0.60% for the morning. Alphabet (NASDAQ:GOOG, GOOGL) is down 0.30%. Finally, Amazon (NASDAQ:AMZN) is seeing an even worse day, falling 1.5% as of this writing.
What’s Happening with Tech Stocks?
This isn’t the first attempt the government has made to try and curb the power of Big Tech. The backing of the DOJ is a key endorsement, however. The DOJ letter expressed the following:
“The Department views the rise of dominant platforms as presenting a threat to open markets and competition, with risks for consumers, businesses, innovation, resiliency, global competitiveness, and our democracy.”
This bill absolutely represents a threat to the tech sector, specifically the “dominant tech platforms.” And, although the tech lobby has worked hard to fight the bill, the new DOJ letter indicates Big Tech is up against powerful forces.
Of course, this news isn’t coming at a great time for tech stocks. So far, 2022 has been generally difficult for the sector. Geopolitical tensions generated negative market momentum in February. What’s more, both AAPL stock and GOOGL stock fell earlier this week. Now, the new legislation is casting a shadow over the industry. Investors may have difficulty proceeding with confidence if the bill gains more support.
Still, while this is bad news for Big Tech, it doesn’t have to be for the entire sector. The bill is aimed at promoting the growth of smaller tech companies. So, the bipartisan bill is aimed at spurring growth, even if it does limit the industry’s top players.
What It Means
The politicians behind the American Innovation and Choice Online Act aren’t looking to dismantle the U.S. tech sector. Far from it. Rather, they’re employing a classic economic principle; markets are driven by competition.
It’s important to note that, even if the bill passes, Big Tech stocks won’t plummet. Yes, they are likely to fall. But not to the point that they will be unable to rise again. That said, investors may want to consider alternative tech investments looking forward. This type of antitrust legislation could mean the rise of new tech names that aren’t yet on Wall Street’s radar.
On the date of publication, Samuel O’Brient did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
