With the arrival of a president comes sweeping changes at the top of various federal regulatory agencies. These could have implications for a variety of sectors. Expect tech to be atop that list.
Investors holding technology stocks and tech-heavy exchange traded funds, such as the Invesco QQQ Trust (QQQ) and the Invesco NASDAQ 100 ETF (QQQM), should asses how the regulatory landscape could shape up next year and over the course of the second Trump Administration.
That preparation is all the more pertinent amid the Department of Justice’s (DOJ) ruling against Google. The DOJ ruled that the company essentially controls a monopoly over internet search. That could require parent company Alphabet (GOOG), which accounts for almost 5% of the QQQ/QQQM rosters, to divest parts of its business, including the popular Chrome browser. Other big tech companies, including Apple (AAPL) and Nvidia (NVDA), have drawn regulatory scrutiny as well. Those two stocks combine for about 17% of the QQQ/QQQM portfolios.
Regulatory Outlook Could Be Tougher, But Not Bad
The most heavy-handed aspect of the Trump administration’s handling of tech regulations may be a focus on big tech’s approach to freedom of speech and marketplace competition.
Speaking of competition, President-elect Trump has made clear that he wants the U.S. to be an artificial intelligence (AI) hub and innovation leader. As such, he’s likely to favor regulations, or lack thereof, that facilitate AI growth. That’s possible good news for QQQ/QQQM investors.
“Trump’s approach will likely be shaped by figures like Elon Musk, who emphasize the need for a freer environment for AI development that enables the U.S. to maintain its competitive edge. This likely involves undoing President Biden’s executive order on AI in favor of a more hands-off approach to regulation,” noted Stephanie Aliaga, global market strategist at J.P. Morgan Asset Management.
Trump aimed bellicose rhetoric at China during his first term. Thus, some market observers believe he will push the semiconductor industry to reduce dependence on China as an export market. This could bring some of their production back to the U.S., potentially expanding the restrictions set forth by President Biden. That’s relevant to QQQ/QQQM investors because the ETFs hold a slew of chip stocks.
Another area in which incoming regulators could affect tech and QQQ/QQQM holdings, perhaps in a good way, is blockchain. That would keep with Trump campaign promises.
“A friendlier stance on blockchain and digital currencies could reduce SEC enforcement and reshape the regulatory framework for digital assets. These efforts could attract investment and spur advancements, encouraging blockchain applications in various sectors,” added Aliaga.
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