The 2020 U.S. presidential elections have the power to transform the face of the world economy. As the world awaits the results, the tech industry stocks seem to be soaring on the election day. But what kind of impact will the elections have on the tech industry stock market?
Despite the global pandemic, technology stocks have soared and been one of the best performing sectors in 2020. As the world shifted to a remote working model, digital adoption took a quantum leap. The tech world saw the explosive growth of cloud computing, online collaboration tools, AI, and automation.Â
The pandemic-driven digital transformation led to massive profits for the tech industry and Wall Street. Regardless of being surrounded by volatility, big tech companies proved to be resilient, and their stocks propelled the S&P 500 index up by 52%Opens a new window . Since the mid-March market crash, Amazon stock soared by 97%, Apple’s shares rose by 124%, Facebook’s stock surged by 85%, Microsoft’s shares rose by 57%.
In the last nine months, the tech sector has proved that they are highly profitable. However, the outcome of the 2020 U.S. presidential election could have a profound impact on various publicly traded tech companies. The election between Republican candidate Donald Trump and Democratic candidate Joe Biden has the power to change the face of the tech industry and its booming stocks.
Tech Stocks Soared Higher on the Election Day
The tech stocks soared higher on Election Day, with the S&P 500 index closing up 1.78% to 3,369.11, tech-centric Nasdaq Composite ended up 1.9%, Dow Jones industrial average closing up 2% to 26 925, signaling a positive trader sentiment. At the closing, shares of Apple, Amazon, Alphabet, Facebook each rose by 1.5%.Â
President Trump believed that the stock market performed better because investors bet on him for a second term. Under the Trump administration, five valuable U.S. tech companies have reported stellar performance in their quarterly revenues. Amazon, Microsoft, Facebook, Google, and Apple bring in $7 trillion in stock market value, accounting for 46% of the Nasdaq 100. Analysts predict that investors can invest in the managed care sector, 5G networking companies, and AI if Trump wins the Oval Office.
Although polls favor Biden’s win over Trump, Wall Street analysts believe it’s best not to predict the election results. Instead, it’s best to invest in companies that will benefit from post-pandemic structural changes, such as 5G networks. Meanwhile, some economists believe that technology and communication stocks might face a dip in the upcoming months, irrespective of who wins the elections.
Jim Cramer, the founder of The Street, saidOpens a new window , â€œWe’ll [markets] go down no matter who is elected, and then we’ll bounce, and you have to buy again when we get down.â€
Sharing a similar perspective, Brian Jacobsen, senior investment strategist at Wells Fargo Asset Management, saidOpens a new window , â€œWe’ve done some scenario analysis and thinking through various permutations of who controls Congress and the White House, and our general view is that it might not matter all that much.â€
Furthermore, under a Biden administration, tech companies will see higher corporate tax bills and stronger antitrust regulations, which might affect the tech sector stocks. Biden has proposed to increase the corporate tax rate from 21% to 28%. These changes could also affect the tech stock market. However, analysts predict that investors must put their money in energy companies, such as solar energy and electric vehicles like Tesla and Ford, if Biden wins the election.
In September 2020, shares of big tech stocks underwent a massive dip due to the possibility of a developing antitrust lawsuit against big tech companies. On September 3, 2020, when the DOJ announced an antitrust lawsuit against Google, Wall Street noticed the S&P 500 index fell 3.5% at closing. Similarly, Facebook stocks plunged to 7.3% when the FTC announced an antitrust case against the company.
Michael Levine, a Pivotal Research Group analyst, saidOpens a new window , â€œIf I look at the drop, Facebook experienced it, but so did Google and Amazon. It seems to be this rotation out of big tech. Antitrust is certainly hanging over the stock; that’s for sure.â€
Tech Industry Donations for 2020 Elections
With tech companies flourishing from Trump’s reduced corporate tax rates, increased funding for emerging technologies such as AI, tech employees have expressed concerns about Trump’s various other policies, including anti-immigration policies, the rollback of clean energy R&D funding, and an escalating trade war with China.Â
According to the Center for Responsive Politics reportOpens a new window , Apple, Microsoft, Amazon, Alphabet, and Facebook employees have contributed a total of $15 million to Democratic candidates, compared to under $3 million to Republicans. Top executives, including former Google CEO Eric Schmidt, Twilio CEO Jeff Lawson, Asana CEO Dustin Moskovitz, and Netflix CEO Reed Hastings donated $6 million, $7 million, $24 million, and $5 million, respectively to the democrats.
The 2020 elections appear to be twice as expensive as the 2016 elections â€” several tech companies donated to the democratic party’s political action committee (PAC). Among the big tech companies, Microsoft contributed $17 million, Amazon donated nearly $8.9 million, followed by Alphabet with a sum of $3.7 million. Biden’s campaign also saw the interest of networking companies â€” Intel contributed $2.8 million, Oracle donated almost $3.5 million, and Cisco contributed $2.4 million. Several other tech companies, such as VMware, Dell Technologies, and T-Mobile, donated to Democratic and Republican candidates.Â
In its blog post, OpenSecrets wroteOpens a new window , â€œWhen excluding multimillion-dollar super PAC donations from mega-donors, democrats see far more money from most industries. Several industries have flipped over to the Democrats’ side under Trump’s presidency, including the well-funded miscellaneous finance and securities and investment industries.â€
While several tech firms and other industries have contributed substantial amounts to the democrats, only time will reveal if their investments paid off. 2020 has been a monumental win for the tech sector, especially the big tech companies. Their business models have weathered the pandemic and more, and their stocks have soared high. The U.S. election can make a significant impact on their shares. Besides, the ongoing antitrust lawsuits might redefine the technology sector and bring in the scope of better competition and innovation.Â
What kind of impact will the elections have on the tech industry’s stocks? Comment below or let us know on LinkedInOpens a new window , TwitterOpens a new window , or FacebookOpens a new window . We’d love to hear from you!