Silicon Valley’s Giants Will Continue to be Both Joyful and Painful in 2021: Their Company’s Profits Will Still Rise While Regulatory Backlash May Lead to Corporate Spin-offs

Mackenzie Scott, the ex-wife of Amazon CEO Jeff Bezos, had decided to donate part of her wealth to charity in 2020. In just four months, Scott has donated $4.2 billion to the U.S. Food Bank and Emergency Relief Fund, which broke the previous record of charitable donations.Yet Scott can easily afford it, because her 4% of Amazon’s shares are worth nearly $61 billion, which has increased by $23 billion in the past 12 months. Such an increase makes her the fourth-richest woman in the world.

When tech giants enjoyed their Christmas vacations in Seattle or Silicon Valley in 2020, they could review this extraordinary year: the share prices of the world's most valuable technology companies initially fluctuated under the influence of the Covid-19 epidemic, and then soared to incredible heights. The epidemic has added new fuel to the growth of e-commerce and some other underlying business trends, which has given them a huge boost.

For example, Alphabet—Google's parent company—its stock price has risen by 27% in 2020, giving it a market value of nearly $1.2 trillion. Amazon's share price has also soared 70% with the market value of more than $1.6 trillion. After the busiest Christmas ever, Amazon will report its fourth quarter results next month, which might be another shock to the market.

As consumers are trapped at home because of Covid-19, tech companies have undertaken most of the economic activities and have entered our homes through the countless personal devices, applications and e-commerce platforms we rely on, which have gotten huge returns.

Anyway, after making big profits in 2020, the prospects of big tech companies in 2021 present a much more subtle picture.

On the one hand, these tech companies can still make incredibly high profits. After all, the changes that the epidemic has brought to our lives may still continue, which is good news for companies such as Facebook, Google, Amazon, and Apple. But on the other hand, these companies are facing the biggest challenge in history: a regulatory backlash that could threaten their survival. The companies have already been hit with a number of antitrust suits in the past year, and there may be more this year.

Because of being dissatisfied with the growing power and wealth of tech giants, worrying about their impact on competition and erosion on our cities and mental health, legions of lawyers and lawmakers from the United States to Europe are itching to change such situation, which could be the source of all the legal battles.

After years of discussion, the battle to reform big tech companies has finally begun. As speculation mounts that these companies could be broken up, the companies now find themselves surrounded by the biggest series of antitrust enforcement actions since the 1990s, when Microsoft faced a similar shock.

The battle not only happens in the United States, the European Commission has also announced "Digital Services Act" and "Digital Markets Act", and the United Kingdom has announced its proposed "Online Harm" legislation, which aims at creating a "responsible new era" for social media. How big tech companies respond to this threat may become the biggest business focus in 2021. It will shape the future of the world's largest companies and will have a profound impact on consumers.

If history is any guide, it means shareholders could benefit from breaking up monopolies. AT&T had a combined market capitalization of $47.5 billion when it was divided into eight companies by the US government in 1982 after a long antitrust struggle. Ten years later from then, the value of these companies had risen to $180 billion.

Of course, not every tech giant is willing to consider such an approach. But the sooner they see the bad omen and realize that the antitrust threat is unlikely to go away any time soon, the better it may be for shareholders. Besides, it may also mean that Scott can be more generous with her philanthropy in the future! (Source: Tencent Tech)