Back to top

Why Are Tech Stocks Tumbling Today?

Read MoreHide Full Article

Shares of several of the world’s largest technology companies—including Amazon (AMZN - Free Report) , Alphabet (GOOGL - Free Report) , Apple (AAPL - Free Report) , and Facebook (FB - Free Report) —were in the red on Monday morning amid increased public scrutiny over data security and possible regulatory pressure.

Tech stocks are being dragged lower after multiple media reports over the weekend detailed an alleged incident that allowed political consultancy Cambridge Analytica to access personal information from 50 million Facebook users.

Cambridge Analytica is a U.K.-based firm that uses data mining and data analysis to develop strategic communications plans. The company worked on Facebook ads for President Donald Trump during the 2016 election cycle and has ties to conservative billionaire Robert Mercer and former Trump advisor Steve Bannon.

Reports from The Observer and The New York Times suggested that Cambridge partner Aleksander Kogan created an application that polled users on personal details in order to generate a psychological profile. This data was allegedly shared with Cambridge Analytica without Facebook’s consent, which represents a terms of service violation.

Facebook reportedly learned about the violation and blocked Kogan’s app in 2015. The social media company also supposedly ensured that all parties involved destroyed the inappropriate data. However, recent reports imply that not all of the information was deleted, prompting Facebook to suspend Cambridge Analytica while it investigates.

Companies with advertising-first business models—such as Facebook, Alphabet, and Twitter (TWTR - Free Report) —have faced intense criticism for their failure to protect user data and vet content recently. Specifically, these websites have been linked to Russia’s propaganda campaign to influence the 2016 U.S. elections.

For investors, the concern is twofold. For one, these incidents could lead to increased regulatory pressure that could result in fines or added legal burdens going forward. Meanwhile, investors are also concerned about these companies being forced to spend more money on new employees and infrastructure to help prevent these problems.

Losses in the aforementioned tech stocks were enough to keep major indexes in the red through morning trading hours Monday. Elsewhere, traders are likely eyeing a pair of headlines with major macroeconomic consequences: the Fed’s first meeting with Jerome Powell at the helm and Brexit negotiations between the U.K. and EU.

The Fed will meet on Tuesday and Wednesday, with an interest rate hike considered all but guaranteed. And on Monday, British officials said that a deal with Prime Minister Theresa May’s government and the European Union has been reached.

Want more market analysis from this author? Make sure to follow @Ryan_McQueeney on Twitter!

More Stock News: This Is Bigger than the iPhone!

It could become the mother of all technological revolutions. Apple sold a mere 1 billion iPhones in 10 years but a new breakthrough is expected to generate more than 27 billion devices in just 3 years, creating a $1.7 trillion market.

Zacks has just released a Special Report that spotlights this fast-emerging phenomenon and 6 tickers for taking advantage of it. If you don't buy now, you may kick yourself in 2020.

Click here for the 6 trades >>



More from Zacks Stocks in the News

You May Like