One year after Donald Trump was elected president, stocks are at record highs.
While Trump frequently claims that the former caused the latter, the technology industry might beg to differ.
Tech giants Apple, Alphabet, Microsoft, Facebook and Amazon are the five top contributors to the S&P 500’s advance in 2017, accounting for 28% of the index’s gain, according to Howard Silverblatt, a senior index analyst at S&P Dow Jones Indices.
That’s over $1 trillion of increased market value from five companies.
Facebook is the top performer in the group, up 57 percent this year as of Monday, followed by Apple at 52 percent. The lowest of the five is Alphabet, up 32 percent, still well ahead of the S&P 500’s 16 percent gain.
A war of words
Trump has never had a particularly friendly relationship with tech.
During the campaign, as Hillary Clinton was staffing her digital team with people from Google, Facebook and Twitter, Trump was attacking Apple for manufacturing abroad and accusing Amazon of somehow using The Washington Post, owned by Jeff Bezos, to keep the e-commerce giant’s taxes low.
Now imagine if Trump had followed through on his promise to go after Amazon for, as he claimed, not paying its fair share of taxes. Or if he’d somehow forced Apple to start manufacturing in the United States.
More broadly, remember when Trump promised to levy a 45 percent tariff on products made in China? Apple and Microsoft manufacture devices there, and Amazon counts on Chinese sellers for a disproportionate number of products sold on its marketplace.
Tech has also taken public stances against many Trump proposals.
Since Trump took office, tech companies have adamantly opposed his immigration restrictions, whether the travel ban or his move to end protections for people who were brought to the country illegally as kids.
In July, Google and Amazon were among companies to participate in an online protest against the Trump administration’s effort to unwind net neutrality rules that force large internet providers like CNBC owner Comcast and AT&T to treat all content equally.
Tech leaders have spoken out against Trump’s order to ban transgender people from serving in the military, and they criticized the president in August for suggesting that “many sides” were to blame after a white supremacist rally in Charlottesville, Virginia, turned violent.
But apart from the rhetoric, little has actually changed in Washington since Trump took office. And for tech companies, that’s just fine.
Tech has ‘optimized the rules of globalization’
Kate Mitchell, a partner at venture capital firm Scale Venture Partners, said that if Trump did follow through with protectionist trade policies that made it harder for big American companies to grow, the Trump stock rally would disappear in a hurry.
She predicts that U.S. leaders would lose ground to Chinese tech giants Alibaba and Tencent, the world’s sixth and seventh most-valuable tech companies.
“If we have a trade war so that Amazon, Apple and everybody else is being discriminated against globally because we’re being so protectionist, Alibaba and Tencent will say, ‘Move on over,'” Mitchell said. “They are very interested in taking share away.”
After attacking Apple several times during the campaign, Trump told The Wall Street Journal in July that CEO Tim Cook plans to build three plants in the U.S. But there’s no evidence that Cook made such a promise, and it would cost Apple a fortune to move iPhone production from China, home to the world’s best manufacturing technology for
“You cannot manufacture smartphones at scale in the United States,” said Denny Fish, who invests in tech stocks at Janus Henderson, where he helps manage $4.7 billion. “There’s rhetoric from the president, but it’s not based in reality in terms of what you could actually do.”
Fish, who owns shares of each of the five biggest tech companies, said he hasn’t changed his view on the industry since Trump became president, “because the reality is that not much is happening.”
In fact, while Trump has touted an “America first” message of economic nationalism, the companies most benefiting during the Trump era are the identical brands that flourished the most under his predecessor. They’re winning from the same trade policies that have existed for decades.
“You look at companies like Microsoft, they’ve pretty much optimized the rules of globalization for 30 years,” said Jack Ablin, chief investment officer of BMO Wealth Management, which oversees $70 billion in assets. Despite Trump’s campaign pledges, “there are a ton of entrenched interests saying we want things to stay the same,” he said.
Taxes represent one area where Trump and tech have been on the same page. Heading into the election, Trump’s tax repatriation proposal called for allowing companies to bring back the huge sums of cash they hold overseas and pay a one-time tax of just 10 percent, as opposed to the corporate tax rate of as high as 35 percent.
The tax plan that the Trump administration has proposed includes an unspecified repatriation benefit and a corporate tax rate of 20 percent. But those changes haven’t happened yet, and it’s not clear if he’s got the votes in Congress to pass the bill.
A political crackdown?
Otherwise, tech investors like Fish are happy with the status quo. As a stakeholder in Alphabet and Facebook, Fish said he is watching to see if any new regulations emerge that could thwart the growth of the dominant digital advertising companies.
New data protection rules go into effect next year in Europe that can limit how those companies use personal data in targeting ads. The U.S. has yet to take similar steps, but Fish said there could be some political pressure on these platforms as it becomes more evident how online ads and fake news were created and manipulated by foreign actors ahead of the presidential election.
“If anything were to change their ability to monetize in the same way, that’s where we would be more concerned,” Fish said.
He was quick to point out that for now, “We don’t see that.”
Ari Levi and Josh Lipton for CNBC