Should investors fear tech company surveillance disclosures?

Web giants like Google are facing mounting criticism over their cooperation with NSA surveillance programs. But could these revelations hurt investors?

Web giants like Google are facing mounting criticism over their cooperation with NSA surveillance programs. But could these revelations hurt investors?

For the past two weeks, the U.S. technology industry has been awash with controversy following former National Security Agency (NSA) contractor Edward Snowden's disclosure that the Obama administration had undertaken a vast global spying initiative aimed at preventing future terrorist attacks. Some of the biggest tech giants, such as Apple, Yahoo! and Google were all implicated in the release for their complicity with government data-mining operations. As a result, some investors have been publicly wondering whether or not they should continue putting their faith – and money – in the hands of businesses that may be passing sensitive information over to federal officials.

Jessica Meyers and Michelle Quinn of Politico explored this quandary in a recent piece titled "Tech titans and their 'trust problems.'" This article explored the idea that the corporations had breached unspoken privacy agreements with their customers and, as a result, could lose some of their business. 

"They have a little bit more than a public relations problem; they have a trust problem," David Di Martino, an information technology expert, told the source in an interview. "Consumers expect their data to be protected and the tech companies are now trying to leverage their transparency policies, and contrasting themselves with the government's policies, to start regaining that trust."

There are two major implications that investors might want to be mindful of. First, the perception that these large tech companies are working in the best interest of U.S. intelligence services rather than their own constituents could cause long-term harm, but market movements for the past two weeks have not shown this to be the case. However, given the fact that Snowden and the U.K.-based The Guardian have promised to release more materials, more damaging evidence could come to light.

Some fears relate to the idea of these businesses actually being sued, either through a class-action suit or civil litigation. While the government has ostensibly given these resources with which to brush off legal actions in the United States, international prosecution – centered around the foreign intelligence-gathering system known as PRISM – could create complications.

In the past several days, Apple, Facebook and Yahoo!, among others, have partially revealed the extent of government requests for information. While these releases certainly indicate a greater willingness to be open with the public, it's too early to say if damage has truly been done.

Ultimately, tech sector investors or those who are interested in getting involved with the industry should consider using the portfolio monitoring tools from SmartStops. These resources can help users observe, react and control risk flare-ups when they threaten to cause losses in a volatile market. 

About SmartStops

We are a new service launched to the market in July of 2008. Our mission - to help ensure stock and etf investors stay protected in their positions at all times. see www.smartstops.net

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