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Trump Rails Against Google: Can Tech Firms Hold Ground?

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Alphabet’s (GOOGL - Free Report) division Google is the latest to provoke the ire of President Donald Trump.

Trump recently claimed that when searched by the term “Trump News”, Google displays results that are primarily from “Fake News Media”. The President took to Twitter (TWTR - Free Report) to allege that Google “rigged” its search results just to malign him.

Moreover, Trump lambasted Google and others for bypassing conservative opinions and favoring “left-wing”. He also accused them of “hiding information and news that is good.”

In response, Google falsified the accusations and said that its search results are never biased “toward any political ideology.” Nevertheless, Google-parent Alphabet’s stock took a hit, losing almost 1% at the close on Aug 28.

Trump’s Bitter Ties With Tech Companies

Google and Twitter are the latest tech companies to make it to Trump’s bad books. Per Reuters, Trump warned Google, Facebook (FB - Free Report) and Twitter “to tread carefully.”

Since Trump took oath of office in November 2016, his dealings with tech behemoths like Amazon (AMZN - Free Report) and Facebook have been rough. This can be primarily attributed to the fact both the companies’ CEOs — Jeff Bezos (owns Washington Post) and Mark Zuckerberg — have openly criticized Trump and his policies.

Trump loves to hate Amazon, a Zacks Rank #1 (Strong Buy) stock. You can see the complete list of today’s Zacks #1 Rank stocks here.

The President has time and again said that the United States Postal Service (USPS) is losing billions of dollars every year by charging the likes of Amazon and others a pittance for package delivery. Also, Trump believes that the country's tax-paying retailers are shutting stores due to Amazon's relentless assaults.

Trump didn’t spare Apple (AAPL - Free Report) as well, which currently has a Zacks Rank #2 (Buy). The iPhone maker was criticized for focusing on other nations instead of creating enough manufacturing jobs in the United States.

Apple’s plan to pump $350 billion into the U.S. economy over the next five years (including $55 billion in 2018) following Trump’s tax-cut initiative resulted in a truce. The stability in Apple-Trump relationship was evident from the fact that CEO Tim Cook, who is known for his left-wing lineage, dined with Trump on Aug 11.

Are Tech Stocks in Rough Waters?

Notably, tech stocks have gained significantly from Trump’s tax cuts and repatriation policy. The higher amount of cash has not only allowed tech majors to bump up share buybacks to record levels but also pursue strategic acquisitions. Technology Select Sector SPDR ETF (XLK) has returned 18.2% so far this year primarily backed by these factors.

Moreover, the rapid adoption of cloud, Internet of Things (IoT), autonomous cars, advanced driver assisted systems, wearables, virtual reality/ augmented reality devices, artificial intelligence opens up significant opportunities.

Amazon, Alphabet and Twitter are well-poised to cash in on this opportunity banking on fundamental strength despite increased possibilities of regulations post Trump’s warning.

Notably, Trump’s repeated bashing had negligible impact on Amazon. Per data from Yahoo Finance, Amazon’s stock has jumped 90% since Trump’s first attack on Jun 28, 2017. Notably, the stock has returned 65.3% on a year-to-date basis, outperforming the S&P 500’s gain of 8.6%.




 

Amazon is benefiting from an expanding AWS enterprise customer base. Additionally, the company’s growing distribution footprint bodes well for Prime. We believe these positives will continue to drive Amazon.

Despite the 1% drop in share price, we believe Alphabet is immune to any threat from Trump’s tweets due to its indisputable dominance in the search market. Moreover, Alphabet's focus on innovation, Artificial Intelligence, cloud, home automation space, strategic acquisitions and Android OS should continue to drive its top line.

This Zacks Rank #3 (Hold) stock has returned 18.2% on a year-to-date basis, outperforming the S&P 500’s gain of 8.6%.


 

Twitter is Trump’s favorite platform, which guards it from threats. This Zacks Rank #3 company has returned 47.8% on a year-to-date basis.


 

The company is benefiting from strong growth in the international market and video advertisements. Twitter’s focus on boosting user growth rate and engagement levels by adopting various measures like making tweeting easier and more expressive are expected to be major growth catalysts in the days ahead.

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