After a week of haemorrhaging, the tech sector looks like it might be turning a corner – but only as it offers an olive branch to the US President-elect Donald Trump.
As reported last week, Trump has gone to war with a series of the largest listed stocks, including the biggest one of all, Apple (NASDAQ:AAPL), and appears to have favoured the blue-collar worker and the old economy over the new. Read more.
Trump has said he wants to get tough with China as well as the tech sector specifically, as he looks to boost other parts of the world’s biggest economy. China is a huge part of the success of many tech stocks. Trade is vital at low cost, but the vote winner for Trump wasn’t the tech sector.
Similarly, immigration is important for Silicon Valley. Many of the tech sector’s smartest heads carry a foreign passport. But Trump has promised to get tough on immigration, a foundation stone of the United States, as it happens.
While forecast-beating US retail sales for October, released earlier on Tuesday, can only undermine his zeal for kick-starting the economy with high-profile infrastructure grand schemes, Trump now faces a charm offensive from Silicon Valley, which less than a week ago was largely behind the conspiracy to demand a Brexit-style exit of California from the Union, or #Calexit as it was coined.
While those demands for the single-largest electoral college – 55 votes from California which went to Trump rival Hillary Clinton – may evaporate when the sunshine state wakes up to the sheer costs of a potential divorce, it is evident techies are beginning to realise it is better to sway the new president than it is to defy him.
With some saying that Trump’s zeal might pass a few weeks after his January inauguration as the United States' 45th President, leading him to get bored and even frustrated when his Republican party blocks a New Deal that matches up to Franklin D Roosevelt’s in 1932, he might become more conciliatory to the “brains” of Silicon Valley.
He has certainly proven to be gracious when treated with appropriate respect. His victory speech last Wednesday was warm of his rival Clinton, and he later remarked favourably the way she and her husband, former President Bill Clinton, congratulated him on his surprise win.
First to march in with a charm offensive was one of his biggest targets for criticism: IBM (NYSE:IBM). The company which Trump accused of driving US jobs abroad was fighting back with an olive branch on Tuesday when CEO Ginni Rometty issued a letter to Trump detailing steps that she says could help Americans benefit from advances in technology.
In what was a direct hit at the so-called Mid-West “rust-belt” of jobless blue-collar workers which helped sweep Trump to victory exactly a week ago, the IBM chief advocated for Trump to create "new collar" IT jobs, saying that today IBM does not always require its employees to have a college degree. She said relevant skill is what "matters most."
Rometty was certainly in tune with the stock rotation which has marked the past week on Wall Street, as investors switched out of tech stocks and ploughed into drug, healthcare and infrastructure stock, as well as banks ripe for deregulation that are earmarked to be beneficiaries of the new Administration.
So Rometty’s letter agreed with Trump's ideas on spending in infrastructure.
"The country should focus on infrastructure investments that incorporate Internet of things technology and artificial intelligence to improve performance," she said. OK, that bit did sound like a sales pitch.
The letter also included ideas on healthcare, user data to fight government "waste and inefficiency," America's tax system and medical care of veterans.
In essence, Rometty was bravely trying to convince Trump that while his plans had merit, there was a need to introduce technology into those plans. Smart technology, or the “Internet of Things” as IBM likes to call it, is the driving force behind Rometty’s letter. The difficult part may be when Trump hits back: it was the technology that cost my voters their jobs.
Anyhow, the letter was evidence of how rattled tech stocks have been in the past week to the prospect of an old economy president taking over and one who has placed his disdain for technology at the top of his agenda.
But IBM wasn’t the only tech stock to appease Trump on Tuesday.
Partly as a result of getting fooled by a fake election report, search engine Google is getting tough with bogus news websites.
Here’s how the story goes.
This week, Google's search engine highlighted an inaccurate story claiming that Trump won the popular vote in last week's election, the latest example of bogus information spread by the internet's gatekeepers.
The incorrect results were shown on Monday in a two-day-old story posted on the pro-Trump "70 News" site. A link to the site appeared at or near the top of Google's influential rankings of relevant news stories for searches on the final election results.
Google acknowledged the problem, although as of mid-afternoon Monday, the link to "70 News" remained prominent in its results.
Even if this was a pro-Trump site, the case highlighted something which Trump had been thumping during his campaign when political pundits thought he was just displaying sour grapes at the polished campaign of his adversary Clinton.
Trump accused many of lying. Many of them reciprocated. But his point was that as the underdog he was being treated badly by media and social media. And technology firms had an agenda.
Although Google rarely removes content from its search results, it is taking steps to punish sites that manufacture falsehoods. In a move disclosed Monday, Google says it will prevent its lucrative digital ads from appearing on sites that "misrepresent, misstate, or conceal information." The action could give sites a bigger incentive to get things right or risk losing a valuable source of revenue.
Google announced that its advertising tools will also soon be closed to websites that promote fake news, a policy that could cut off revenue streams for publications that peddle hoaxes on platforms like Facebook.
The decision comes at a critical time for the tech industry, whose key players have come under fire for not taking necessary steps to prevent fake news from proliferating across the web during the 2016 US election. It’s thought that, given the viral aspects of fake news, social networks and search engines were gamed by partisan bad actors intending to influence the outcome of the race.
But Facebook was facing a revolt of its own, suggesting cracks in the tech sector’s wall of defiance against Trump.
Renegade Facebook (NASDAQ:FB) employees have formed an unofficial task force to question the role their company played in promoting fake news in the lead-up to Donald Trump's victory in the US election last week, amid a larger, national debate over the rise of fake and misleading news articles in a platform used by more than 150mln Americans.
The task force has already rebutted a statement made by Facebook CEO Mark Zuckerberg at a conference last week that the argument that fake news on the social media platform affected the election was "a pretty crazy idea."
Since last week, tech stocks in the benchmark equity gauge, the S&P 500, have slumped 3.1% over four days, trailing the S&P 500 Index by 4.2 percentage points, the most since May 2009.
That’s why tech brains are having to think even sharper about what to do to arrest the decline.
And IBM shares? They have see-sawed higher and lower on Tuesday and were last up 0.3% at $158.60.