Investors in the sector seem to be worried that the combination of Joe Biden’s White House win and the likelihood of Democrats controlling both houses of Congress may lead to more regulations for big tech firms, higher corporate taxes and increased antitrust scrutiny.
But given the party’s narrow majority in both chambers, it remains unclear if any of this will come to pass.
“The Democrats’ small lead in both the Senate and the House will make it tougher than many believe to pass tax hikes, impose regulation and enact some of the other market unfriendly policies that investors have been worried about,” David Bahnsen, chief investment officer with The Bahnsen Group, said in a report Wednesday.
“I suspect the initial market reaction in the tech sector to the Georgia Senate results is more of a growth-into-value story rather than a tech regulation story, as there is arguably greater appetite for Silicon Valley regulation in the GOP,” he added.
But while tech stocks were sliding Wednesday morning, many sectors were surging on hopes of significant legislative and policy changes in Washington.
The market also appears to be betting that the new regime in DC might finally be able get a major infrastructure bill passed, which could add jobs and stimulate the overall US economy.
“A Biden honeymoon with a Democratic Congress helmed by Nancy Pelosi and Charles Schumer would likely lead to more fiscal stimulus and infrastructure spending,” Philip Orlando, chief equity market strategist with Federated Hermes, said in a report Tuesday night. “That would serve as a temporary sugar high for stocks in 2021.”