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Alphabet stock is shrugging off US anti-trust issues, investors pile in

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The US government has finally gone after Alphabet Inc [GOOGL] in a major anti-trust case which will define the relationship between governments and tech giants in years to come. The case originated with the Trump administration but it is only now being fought out in the US District Court for the District of Columbia.

There are some major issues being raised in the government’s monopoly case against Alphabet, including the issue of pre-installation of software on smartphones.

But according to data from global retail trading platform, Capital.com, total trading volumes in Alphabet Inc climbed to an all-year high across the platform in October.

In October 2023, total trading volumes in GOOGL were 362% higher from the previous month while the number of traders opening new positions on GOOGL in October increased by 52% from a month earlier.

Traders were largely net buyers of GOOGL in October with heavy buying appearing to coincide with Q3 earnings and antitrust litigation against Alphabet Inc’s Google in the UK, EU and the US.

Commenting on the outlook for Alphabet amid growing antitrust scrutiny, Kyle Rodda, Senior Market Analyst at Capital.com, said: “The pandemic provided the tech giants a reprieve from anti-competition scrutiny, but the tide is changing again as governments look to crack down on their market dominance.”

Tech moats keep getting wider

The inherent problem regarding competition laws and the tech giants is that they don’t directly engage in major anti-competitive conduct. Still, because of network effects and first-mover advantages, they establish moats that are extraordinarily difficult to bridge. It means many commercial decisions these companies make are open to being interpreted as market abuse.

What Alphabet has done is effectively sell advertising space. But because it has no real competitors and the world basically revolves around e-commerce, its customers’ only options are to pay Google for the privilege of showing up on its search engine or lose out to its competitors. The costs ultimately get passed onto consumers because consumers rely almost entirely on Google. Effectively, a double whammy.


Regulating tech giants is tough

Regulating tech companies like Google is difficult due to their size, complexity, and global reach. These companies also act like a public utility, creating accessibility to an essential resource like the internet.

Dismantling these companies is difficult, so a carrot and (mostly) stick approach is the only viable way to regulate. This approach means there are ongoing risks to the profitability of these companies from any commercial decision that rankles regulators.

While Alphabet is in the frame at the moment, other tech giants are going to have to respond as well. The US government has now also filed a suit against Meta, and the Biden administration has one prepped for Amazon as well.

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This article does not constitute investment advice. Make sure you do your own research or consult a professional advisor.

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