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A growing chorus of Wall Street heavyweights sounds the alarm of regulatory pressure around America's largest tech juggernauts




  FILE PHOTO: Facebook manager Mark Zuckerberg testifies before a hearing about the house's energy and trade committee on the company's use and protection of user data on Capitol Hill in Washington, USA, April 11, 2018. REUTERS / Aaron P. Bernstein / File Photo </span><!-- sh_cad_1 --></p>
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  • Big tech stocks like Alphabet, Apple and Facebook have come under pressure from reports from federal probes about antitrust issues and privacy issues.
  • It is unclear whether the companies' stock prices will suffer long Run as you are uncertainty about the extent of the probes.
  • But market strategists and legal experts are warning large-tech investors who are facing big dangers.
  • Visit the Market Insider's more story site.

Federal regulators are banks at Big Tech's door.

The US Federal Trade Commission will monitor any antitrust sensor if Facebook's practices have harmed competition in the digital market, Wall Street Journal reported earlier this month. The news sent the social network shares down and pulled the entire technology sector down.

The Alphabet and Apple saw their shares fall on similar press releases the same day the US Department of Justice prepares antitrust probes in each company. Later, Elizabeth Warren ̵[ads1]1; Massachusetts Democrat and US Presidential Candidate – proposed earlier this year a plan to break up big tech companies, including Amazon, Google and Facebook.

While it remains to be seen whether reported probes and proposals for antitrust conditions and privacy issues will mark a death bell for such as Facebook and Google the parent alphabet – as exact ranges of probes remain unclear – experts warn investors who draw up potential dangers.

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"From a strategic perspective, we believe that uncertainty is still too high to recommend investors to avoid stock in regulatory spotlight, "Goldman Sach's strategists led by Ryan Hammond said on a Tuesday note.

They added, "But while the effect of regulation on today's shares will be incidental, similarities among historical results suggest that investors should reduce exposure to all stocks that are the subject of a lawsuit."

Strategies pointed to on past regular events, with nuances of today's concerns, which led to significant business losses.

For example, Microsoft's 1998 antitrust lawsuit ultimately resulted in a reversed court order termination and a settlement with the Ministry of Justice. The company then saw "substantially" lower sales growth after the 2001 unity decree which expired a decade later, according to Goldman. Meanwhile, they found IBM's antitrust procedure in 1969 a "steady decline" in revenue growth and margins.

 IBM's corporate response to regulatory events. Goldman Sachs

Other investment companies highlight similar risks that investors should be aware of, although the scope of various regulatory bodies' probes is a wildcard.

As problems such as data security and the overall health of technology platforms are becoming increasingly widespread, companies face a "higher business cost", Morgan Stanley wrote in a late-May report.

"Outside of China, the risk of regulation that limits foreign investment in local companies can give a headshot to international growth and profitability for some of our companies," they wrote.



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