The net effect of a Biden presidency on U.S. tech stocks would likely be minimal, but potentially slightly positive.
Let’s go issue by issue.
Biden would ideally like to raise corporate taxes to 28% from 21%, but it’s likely that Congress will be fairly balanced, whether the Republicans or Democrat have slight control. So a compromise would likely bring the tax rate not quite to 28%, which would mean earnings would likely only fall a few percentage points from current estimates.
Analysts note that higher corporate taxes are one of the biggest risk to tech stocks, so with the composition of Congress in mind, there isn’t much grave risk to tech stocks at all. Plus, the large cap U.S. tech stocks generate earnings all over the globe, which means these companies’ effective tax rates would barely budge given the portion of their earnings that would see that increased tax rate. Apple (AAPL) - Get Report, for example only sees 40% of its revenue from the U.S.
Capital Gains Tax:
Biden would like to raise the capital gains tax from 20% to 37% for those with annual income of over $1 million. This means the big winners in 2020 like Amazon (AMZN) - Get Report, Apple, Salesforce (CRM) - Get Report, Facebook (FB) - Get Report could see some selling pressure into year-end.
This is a short-term concern and the the rate may not jump so high.
Biden would like to invest several hundreds of billions of research and development dollars in emerging technologies such as 5G and electric vehicles.
China and Trade:
Biden would like to be harsh on China, which has been increasingly recognized in the geopolitical community as a national security threat to the U.S. But Biden would be slightly less harsh on China than President Trump is, as China has been a valuable trading partner for the U.S.
Still, Biden would be serious about protecting the nation. This could pressure U.S. chip makers’ ability to sell to Huawei and be a modest headwind.
The point: Big tech stocks aren’t necessarily in trouble or in luck under Biden.
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