China’s regulatory crackdown on internet titan Alibaba (BABA) - Get Alibaba Group Holding Ltd. Report and its affiliate Ant Financial Group should help the U.S. technology sector, says analyst Daniel Ives of Wedbush.
“It was viewed by investors pre-Elections in early November that Chinese tech stalwarts such as Baidu (BIDU) - Get Baidu Inc. Report, Tencent (TCEHY) , Alibaba, JD.com (JD) - Get JD.com Inc. Report and others were positioned well to gain more investor mind-share, given the complex global backdrop,” Ives wrote in a commentary Monday. “Fast forward to today and the Ant Financial IPO delay and further regulatory crackdown is a major black eye for the Chinese tech sector and thus cast a shadow over the space, with Alibaba front and center.”
Chinese regulators are investigating Alibaba on antitrust grounds and told Ant to narrow its focus to payments. Alibaba owns 33% of Ant, the world’s largest financial technology company.
That means “dynamics will yet again bode well for U.S. tech stocks as the favorable backdrop creates a nirvana set-up for FAANG [Facebook (FB) - Get Meta Platforms Inc. Class A Report, Amazon (AMZN) - Get Amazon.com, Inc. Report, Apple (AAPL) - Get Apple Inc. Report, Netflix (NFLX) - Get Netflix, Inc. Report and Google (Alphabet) (GOOGL) - Get Alphabet Inc. Class A Report] names and the overall U.S. tech sector into 2021,” Ives said.
With Joe Biden as president and a likely Republican-controlled Senate, Ives also noted that “the gridlock situation is bullish for the tech sector, as now it appears any potential antitrust legislative changes/fixes against Big Tech have essentially hit a brick wall."
And on the China front, “the U.S./China decoupling path could be altered with Biden in the White House,” he said. “The U.S./China Cold Tech war under a Biden White House likely takes a much softer tone going forward.” That would particularly help Apple, Cisco (CSCO) - Get Cisco Systems, Inc. Report, and semiconductor companies, Ives said.