By Eric J. Savitz
The tech sector has a lot on the line in the midterm elections.
Two years into the term of President Joe Biden, Big Tech has come under pressure from the White House, Congress, and regulatory agencies -- which are all trying to rein in its power.
So far, there haven't been any major legislative changes: the push to rewrite antitrust regulations haven't resulted in new laws; there hasn't been any new privacy legislation; and no revisions have been made to Section 230, the measure which protects social media companies from risk of litigation for material created by users.
At the same time, the tech sector did get a big win in the CHIPS and Science Act, which provides substantial government funding for construction of new chip fabs.
Political pundits think the Republican Party is likely to take control of the House while the fate of the Senate remains a tossup. Paul Gallant, analyst with the Cowen Washington Research Group, sees advantages for the tech industry on multiple fronts from a Republican takeover of one or both houses.
Here is a rundown on his outlook for the tech sector if that happens:
He sees a win for internet platforms: Gallant notes that Republicans believe social media companies such as Facebook and Google have an anticonservative bias, but he says the GOP is unlikely to pass new antitrust legislation before the 2024 presidential election. "That would be good for $Apple(AAPL.US)$, $Alphabet-C(GOOG.US)$ and $Amazon(AMZN.US)$ because we view it as the biggest government risk they've faced in years and still under-appreciated by the market," Gallant writes.
It could be a win for telecom: Gallant notes that the Senate has yet to approve Gigi Sohn's nomination to the Federal Communications Commission. If she isn't approved in the lame duck session after the election, and the Republicans take the Senate, Gallant thinks she might not ever win confirmation, and the FCC could remain deadlocked with two members from each party. And that, he contends, could open the door for more telecom M&A, including a potential Dish (DISH) merger with DirecTV, or further consolidation in the cable industry.
For semis, the picture could be "noisier": While the Biden administration has taken a tougher stance on the export of semiconductor technology to China, and add new controls and additions to the "Entity List" of foreign companies restricted in their ability to do business in the U.S.
A win for gig companies: Gallant notes that $Uber Technologies(UBER.US)$, $Lyft Inc(LYFT.US)$, $DoorDash(DASH.US)$, and other companies that rely on a labor force of contract drivers face some risk from a proposed Labor Department rule that would address when workers should be classified as employees rather than contractors. Gallant's view is that Republican control of key oversight committees "would put pressure" on the department and reduce the probability of federal litigation against the gig companies once the rules are adopted, likely in the second quarter of next year.
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