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GAFA: Objectively Analyzing Impact Of Antitrust Scrutiny

Chetan Woodun profile picture
Chetan Woodun


  • Alphabet, Apple, Facebook and Amazon are being scrutinized because of dominant market position.
  • Their combined market capitalization is worth more than the GDP of some developed countries.
  • Also, each company makes use of multiple technologies with each at a different phase of maturity.
  • Still, challenges posed by antitrust regulations need to be objectively analyzed using a risk matrix.
  • Valuations are consequently reviewed to reflect the results of the analysis and also the total addressable market.

The bosses of Alphabet (NASDAQ: GOOG) (GOOGL), Apple (NASDAQ: AAPL), Facebook (NASDAQ: FB) and Amazon (NASDAQ: AMZN), sometimes referred to the gang of four (or GAFA) have faced the US congress last week.

They are accused mainly of market dominance.

According to David Cicilline, chairman of the House Antitrust Subcommittee in his opening statement at the big tech antitrust hearing:

Whether they control access to information or to a marketplace, these platforms have the incentive and ability to exploit this power," he said. "They can charge exorbitant fees, impose oppressive contracts, and extract valuable data from the people and businesses that rely on them."

There have also been breaking-up talks by some commentators leaving investors awake at night as well as fears of some drastic action before the November polls when viewed in light of doubts about foreign interference in the 2016 elections.

Also, there is daily media coverage of potential regulatory actions impacting GAFA.

Therefore, the primary risk to investing in big techs has shifted from fundamentals to regulatory.

This is the reason which motivated me to focus on objectively analyzing the challenges using a risks matrix and I will also support my views through specific examples.

I also use the Gartner Hype cycle to show the importance of emerging technologies for GAFA.

I have also taken the liberty to include Microsoft (NASDAQ: MSFT) despite its leader not having to testify before congress. The reason is for peer review purposes in specific areas when common services are provided.

I start with the finances.

More than just market cap

The combined market cap of GAFA, estimated at $4.8 trillion is, thought provokingly, two times the entire GDP of France 2020.

Therefore, it is no wonder that they have enabled the US to dominate the global internet, right from communications, social interactions to e-commerce.

This article was written by

Chetan Woodun profile picture
As a tech-focused industry Research Analyst, my aim is to provide differentiated insights, whether it is for investing, trading, or informational reasons. For this purpose, I am not a classical equity researcher or fund manager, but, I come from the IT world as the founder of Keylogin Information and Technologies Co. Ltd. Thus, my research is often backed by analytics and I make frequent use of charts to support my position.I also invest, and thus, in this tumultuous market, I often look for strategies to preserve capital. As per my career history below, I have wide experience, initially as an implementer in virtualization and cloud, and I was subsequently a team leader and project lead, mostly working in telcos.I like to write around themes like automated supply chains, Generative AI, telcos Capex, the deflationary nature of software, semiconductors, etc and I am often contrarian. I have also covered biotechs.I have also been an entrepreneur in real estate ( a mediocre one), a business owner, and a farmer, and dedicate at least 5 hours per week to working on a non-profit basis. For this purpose, I help needy families by providing sponsored work and contributing peer reviews and opinions for enterprise tech.I have been investing for the last 25 years, initially in mutual or indexed funds before later opting for individual stocks. Got a lot of experience in the 2008/2009 downturn when I lost a lot due mostly to wrong advice. Since then I do my own research and have fallen in love with Seeking Alpha because of the unique perspectives it provides to someone investing hard-earned money as well as access to some of the best analysts.

Analyst’s Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

I would like to thank Stephen Davies, a digital strategist and consultant for the original Gartner Hype Cycle which I augmented with the Big Techs. This is an investment thesis and is intended for informational purposes. Investors are kindly requested to do additional research before investing.

Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.

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