A ‘nirvana set up’ for FAANG in 2021: Wedbush says Chinese tech crackdown is bullish for US tech stocks

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  • Brewing crackdowns on Chinese tech stalwarts like Ant Group and Alibaba may bode well for US tech stocks next year, according to Wedbush's Dan Ives. 
  • Last week, Beijing's State Administration for Market Regulation announced the launch of an antitrust investigation against Alibaba, while Chinese finance regulators also summoned Ant Group to discuss its compliance processes. 
  • The senior technology analyst wrote in a note to clients that increasing regulations in China and gridlock following the incoming US administration will create a "nirvana set up" for FAANG stocks and the broader US technology sector. 
  • Technology soared in 2020 and Ives anticipates continued gains. The Nasdaq 100 climbed 47% in 2020 while Apple climbed 86%, Netflix rose 61%, and Google's parent Alphabet gained 32%.
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Brewing crackdowns on Chinese tech stalwarts like Ant and Alibaba may bode well for US tech stocks next year, according to Wedbush's Dan Ives.

Last week, Beijing's State Administration for Market Regulation announced the launch of an antitrust investigation against Alibaba. Chinese finance regulators also summoned Ant Group to discuss its compliance processes, per The Wall Street Journal. The Ant crackdown comes after the company had to halt its $37 billion IPO in November due to micro-lending rules in China.

"The Ant Financial IPO delay and further regulatory crackdown is a major black eye for the Chinese tech sector and thus cast a shadow over the space with Alibaba front and center," Ives' team wrote in a note to clients Tuesday.

The senior tech analyst said that this regulatory crackdown, coupled with the incoming US administration, will create a "nirvana set up" for FAANG stocks and the overall US tech sector in 2021. 

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The tech sector has seen an incredible run in 2020. The Nasdaq 100 climbed 47% in 2020, while individual FAANG stocks soared. In just 2020, Facebook has gained 35%, Amazon 78%, Apple 86%, Netflix 61%, and Google's parent Alphabet is up 32%. Ives sees more gains ahead.

Also, the Biden presidency and a likely GOP-held Senate is a "goldilocks scenario" for tech stocks moving into 2021, said the analyst.

He explained that political gridlock will be bullish for tech stocks as any potential antitrust legislative changes against Big Tech will be hampered.

"The chances of major business model changes for tech stalwarts Amazon, Apple, Google, and Facebook look slim at the moment which removes a dark cloud lingering over the tech sector for the past year," he added. 

However 2021 won't be completely risk-free for the technology sector. Ives said that the ongoing DOJ suit against Google is worth keeping an eye on, as it could pave the way for further scrutiny against FAANG names in the US and EU.

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