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There are mounting fundamental reasons to question the 3Q18 earnings prospects of FAANG, from the accelerating user backlash against Facebook to Apple’s trade war exposure to Amazon’s rapidly-intensifying workforce revolt that could see the e- commerce giant left with no option but to raise wages and improve workplace conditions for its warehouse and Whole Foods employees. However, as Apabhai suggests, the message BAT is sending is less about earnings, and more about the cost of exuberance. And FAANG exuberance faces threats that go beyond fundamentals. A flurry of regulatory announcements last week signaled the political tide has turned in the U.S. Across every branch of government, the message was consistent: the U.S. no longer trusts tech giants to self- police. And the public agrees—according to a Gallup poll last month, 79% of Americans now believe “tech companies should be regulated the same way the news media is.” Regardless of political will, threats may not turn to action in the near term. Nonetheless, FAANG appears increasingly vulnerable to a decisive sentiment shift. At some point, the relentless barrage of bad news will force investors to begin pricing in regulatory risks. Any sustained stumble by FAANG’s leadership could cripple exuberance, and cause an unraveling of passive and algorithmic strategies that are heavily overweight tech (see WILTW April 7, 2018 for more). We will continue to watch closely to estimate timing, but given BAT’s collapse, today more than ever, acute scrutiny of tech giant leadership is required. Through August 28, Amazon, Apple and Microsoft had accounted for greater than 35% of the S&P 500’s total return this year, according to S&P Dow Jones Indices data. It took Amazon just 165 trading days to grow its market value from $600 billion in January to $1 trillion. The combined market cap of FAAMG (Facebook, Apple, Amazon, Microsoft, and Google) now sits over $4 trillion, or roughly equal to the combined market cap of the 283 smallest S&P 500 members. Tech’s continued market leadership means investors have largely discounted the mounting risks tech giants face. We have been warning about the downsides of tech giant monopolism for more than two years in these pages, from surveillance/data security concerns to anticompetitive behavior and their role in escalating inequality. For the political establishment, for the media, for the public, this year has seen a broad awakening—the Cambridge Analytica scandal, the backlash against Jeff Bezos’ astonishing wealth, and tech’s ever-skyrocketing market caps were all warning signs. The past month signals a new phase has begun: from a distant rumbling of change to preparation for action. The number of significant tech-related regulatory developments that have emerged from the U.S. and the E.U. in recent weeks is nothing short of staggering. Here is an abbreviated list: HOUSE_OVERSIGHT_032807