Will equity valuation and tech business models survive regulatory tightening?
Prospects of a regulatory tightening similar in magnitude to what the banking industry has gone through, could increase the equity risk premium of the sector, as investors demand more compensation for higher uncertainty on the tech companies profit margins, growth and potential fines in the medium term. This could have a material impact on the long-term growth assumptions and earnings volatility for these companies.
This uncertainty has increased the volatility of the sector, resulting in the large and cash rich S&P 500 to be consistently more volatile than the debt and political crisis prone Eurostoxx50 index.
If this is the beginning of a new uncertain era for the tech sector, the cost of investing in this sector might be on your mind.
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