Making sense of market moves
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The US government really went there.
After a federal judge ruled in August that Google operates a monopoly and broke antitrust laws in its advertising and search businesses, we all knew there was a range of punishments the Justice Department could inflict—but few thought that the DOJ would actually go forward with breaking up the company.
Turns out, the DOJ is seriously considering just that, the agency said in a court filing yesterday.
Shares of Google fell 1.59% today on the news.
Still, most people still don’t think the breakup will actually happen, at least not imminently. “We continue to view structural changes as an unlikely outcome for Google as a result of this case and expect any material business model impact will relate to search distribution,” wrote Wedbush analyst Dan Ives in a note today.
Your portfolio is under investigation
Google isn’t the only company in hot water with regulators these days.
Nearly half—43%—of companies on the S&P 500 are currently under antitrust scrutiny, including heavy-hitters like Nvidia, Meta, Amazon, and Microsoft. The Federal Trade Commission and DOJ are reining in Big Tech in a big way, accusing these companies of illegally overpowering markets and squashing competition.
But even with the government stepping up its investigative powers, Silicon Valley is still amassing larger and larger market caps due to the explosion in artificial intelligence.
The big picture…Analysts like Ives believe that huge tech companies are going to effectively fight antitrust scrutiny, or at least stall the legal process as long as possible. While DOJ probes certainly hurt share prices, we haven’t seen regulators do anything to slow down the S&P 500’s gains this year.
And don’t forget, analysts consider earnings, new product launches, and revenue growth to be far more important for a stock’s prospects than DOJ scrutiny.
With a big win under its belt, only time will tell if the DOJ makes an example out of Google—and the other 215 companies it’s investigating at the moment.—LB