Americans Don't Trust Big Tech. NewsWire

NewsWire: 1/21/22

• Fully 64% of Americans say the government should do more to regulate tech companies. Most Internet users don’t trust how social media companies handle their personal information, with Facebook faring the worst. (The Washington Post)
• NH: Big Tech is no stranger to criticism. And a new WP survey shows just how distrustful Americans are of these businesses. 
• According to the poll, people are most suspicious of social media companies. Most don't trust them to handle their personal data: 60% don’t trust Instagram, 63% TikTok, and 72% Facebook (FB). On the same question, companies that sell goods and services fare slightly better. Roughly 40% don’t trust Microsoft (MSFT), Apple (AAPL), and Amazon (AMZN).

• The survey also found that Americans want more regulation. 64% believe the government “should do more” to regulate how these companies handle privacy. That's a significant increase from 2012 when 38% of Americans said the same thing in a Pew survey. We have covered prior studies that found strong bipartisan support for such regulations. Yet less than half of Americans think the government should break up these businesses. (See “Voters Stop Short of Breaking Up Big Tech.”)
• So is this increasing “tech-lash” affecting stocks? Perhaps. Let’s compare the performance of the Communications sector (XLC), the Technology sector (XLK), and the S&P 500 (SPY) since September 1.
• XLC: The Communications sector is down -13.13%. This sector includes Facebook, which owns Instagram, and Google (GOOGL). 
• XLK: The Technology sector has fared better. It’s down only -0.91%. This sector includes Apple and Microsoft.
• SPY: The S&P 500 ETF is down -1.12%.

• Clearly, the Communications sector is the biggest loser. This sector includes social media companies which, as we discussed above, are the businesses Americans trust the least. Perhaps that distrust combined with the threat of government regulation is keeping these stocks down. 
• To be sure, other major trends are also hurting Communications. Just look at the recent woes of streaming services: Production costs are rising, there is an over-saturation of content, people are cutting down their screen time, and subscription growth is slowing. (See “The End of Password Sharing” and “Winners and Losers of the "Attention Recession.") Netflix is down -26.52% since November 17. 
• Nevertheless, I suspect the thought of looming government action is in the minds of many investors. Last June, a package of antitrust bills passed the House Judiciary Committee with bipartisan support. And just last week, a federal judge allowed the FTC antitrust lawsuit against Facebook to continue. This anti-tech tide isn't actually hurting the Technology sector itself--since most of the targeted companies  (like GOOGL and FB) are in Communications--and AMZN is in Consumer Discretionary (XLY). But it could sweep beyond APPL and into the rest of Tech if Congress keeps going in this direction.