Earlier this month, a US federal appeals court made a decision that required ByteDance, TikTok’s parent company, to divest itself or face a ban in the US. The app, which is used by 170 million Americans, is accused of spying on American citizens and storing their data. The court believes that all of the constitutional claims of the company are invalid as the government wants to protect American citizens with this move.
A ban on TikTok will mean American citizens cannot use the app anymore. But that isn’t the biggest issue here. Many American companies do business with TikTok. A ban on the social media app will bring these partnerships to an end. At the same time, some of the Big Tech companies will benefit, with META and Alphabet being among them.
TikTok generated $11bn in ad revenue in the US in 2024. At this scale, the company is an integral part of the US economy and many small businesses choose to advertise on it. It is a tough decision for the American government to take, considering the app is extremely popular among youngsters.
On the other hand, this $11bn will eventually go to other similar advertising platforms. Alphabet and META will take a significant share of this. This was apparent on December 6th when the court upheld the decision to ask TikTok to divest or face a ban. META stock increased 2.3% as a result while Alphabet gained 1.1%.
Donald Trump didn’t shy away from using the app’s popularity during his campaign when he promised to allow TikTok in the US and stop it from being banned. Donald Trump will be sworn in as the US president on the 20th of January 2025. The deadline for TikTok to divest is just one day prior to this event. Clearly, there is politics at stake here and that’s one reason why lawmakers wanted Alphabet and Apple to be on their side.
Members of the House Committee on the Chinese Communist Party have reached out to both Apple and Alphabet, asking for support in compliance with a potential TikTok ban. Since both these companies are big enough to have relationships with the company even outside the US, the government needs them on its side. However, with a change in government imminent, it remains to be seen which side these companies eventually take. Tim Cook met Donald Trump just a few days ago so it would be prudent not to expect his company to go against the wishes of the incoming President.
META ranks 3rd on our latest list of the 31 Most Popular Stocks Among Hedge Funds. As per our database, 235 hedge fund portfolios held META at the end of the third quarter which was 219 in the previous quarter. While we acknowledge the potential of META as a leading investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for an AI stock that is as promising as META but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article was originally published at Insider Monkey.