Tech sector heads into regulatory storm

For tech investors, the recent Congressional grilling of Facebook (FB) and Twitter (TWTR) executives about their data security and privacy policies was a market-moving event.

Google (GOOGL) decided to decline the invitation to send a senior executive, which probably was not the brightest move in my opinion.


Regulatory Scrutiny

Regulatory pressure in the EU and US is forcing the largest companies to spend far more money on compliance and security.

That, in my opinion, has caused investors to rethink the whole sector.

Even Amazon (AMZN), which recently surpassed the trillion dollar market value mark, lost ground after the testimony by Facebook and Twitter executives on the Hill.

Google Breakup?

Many tech investors believe heightened regulation is inevitable, and Liberty Media founder and billionaire investor John Malone has even suggested Google may be someday forced to break up by the government.

I think companies’ need to spend more money on anything that does not help profitability is not going to be viewed favorably by investors.

In my view, the prospect of more regulation is weighing on technology stocks and may continue to do so for a while.

Photo Credit: Christiaan Colen via Flickr Creative Commons