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What the election means for big tech and its relationship with China

Dan Ives, Wedbush Securities Analyst, joined Yahoo Finance to discuss China halting Ant Group's IPO and how the election will impact big tech and its relationship with China.

Video Transcript

SEANA SMITH: I also want to bring in Dan Ives. He's of Wedbush Securities. And Dan, just to get your perspective on this, because you clearly or closely watch the tech sector, and with this postponed Ant IPO, as Akiko was just talking about, this happening to one of China's most influential tech companies, how do you see this just in terms of some of the broader implications that this could have for the tech sector because, of course, it does raise the question just about the investment climate, to say the least, I guess, over in China at this point?

DAN IVES: Yeah, I think there could be some smiles within NASDAQ and the New York Stock Exchange, because it speaks to the decoupling that you're seeing between China tech and US tech, and I think many were watching to see how this went off. And obviously, you know, hitting a major speed bump, I think it just speaks to-- and we'll see what happens with the election-- but the climate to have more Chinese companies potentially list in the US. Obviously, it's a high tense area right now in terms of, essentially, a cold tech war. But this is definitely a gut punch to those looking to list, you know, within China versus coming to the United States.

ADAM SHAPIRO: Dan, I'm curious, depending on the outcome of the election, this is just an assumption, let's assume Joe Biden were to win, if you were an advisor to Joe Biden, with the China relationship, what should he tackle first? Is it the decoupling that's underway? Is it the trade war? Is it the cold tech war? Which is it?

DAN IVES: Yeah, and we've talked about that. I mean, when you're thinking about handicapping going into tonight, and essentially the cold tech war, I think that decoupling is dangerous. It's dangerous for semis.

It's dangerous for Apple and Cisco. And if a Biden presidency comes to fruition, then I think the first thing is to sort of ratchet down the tensions, whether it's on the tariffs, but especially on tech, with 5G, what we're seeing. I think that's a big focus for investors when you're thinking about a Trump or a Biden presidency.

AKIKO FUJITA: Dan, when you look at the IPO for the Ant Group, while there was the Chinese element of it, there were certainly a lot of international investors who were pouring into this IPO through the Hong Kong exchange. Given what has now transpired, what does that do in terms of the interests of American investors, for example, and their potential to invest in the Chinese market?

DAN IVES: Well, it's definitely-- it's a black cloud. And I could even tell you, being in Asia pre-pandemic, there's a big focus. I got a lot of questions from investors on this in terms of listing in Hong Kong or just more and more of this decoupling from Chinese money or even Western money and US focus on Chinese companies that didn't [INAUDIBLE] less of an appetite. I mean, this is a major black eye for really bad exchange in terms of what we're seeing in terms of this sort of time table and everything we've seen. And that's why I said and their smiles virtually from the New York Stock Exchange and NASDAQ in terms of watching this all unfold.

ADAM SHAPIRO: One of the things-- and China's very key, but so is California, I mean, California alone is one of the largest economies in the world by itself, and there are the ballot initiatives that could upset Uber and Lyft and those issues. I know you're watching those. Depending on how it comes out, what do you think are the ramifications? This has to do with the classification of the drivers as employees, right?

DAN IVES: Yeah, and it all started with AB5 that got kicked off in California, in terms of the classification for gig economy between contractors and employees. And this Prop 22, it's a linchpin. And I'd say it's a fork in the road for the likes of Uber and Lyft and the overall gig economy, depending on if it passes or not.

Because if you look at it, if they do not get the green light, you could see them potentially leave California or just have a sparse presence there, and this could really change the business model in terms of the Pandora's box, a ramification for other cities and states and even countries. So that's really a big focus tonight in terms of that Prop 22 in California. And that's why I think you're seeing Lyft stock, and even Uber, [INAUDIBLE] investor's tea leaves are hoping for some optimism going into tonight.

SEANA SMITH: And Dan, going off of that, just who has the most to lose? Is it Lyft here that has the most riding on this just because of their exposure to California?

DAN IVES: Yeah, it's a great point, because if you look, Lyft, that's domestic, that's about 16% of revs in terms of exposure. Uber, when you look at food delivery as well as just the global presence, we're talking low to mid-single digit. So it's definitely Lyft that has the most to lose, but it's also Uber.

And you see DoorDash and others that have significantly invested in this, because this is really-- it's almost a Fort Sumter moment for the gig economy to see what happens tonight. Even though you could battle it out in the court system, a lot of fingers crossed. And I've talked to many, you know, over the last few hours that are hoping for some optimism coming out of the polls in California.

AKIKO FUJITA: Dan, can you speak to the ripple effects we're likely to see from the outcome of Prop 22? I was having a conversation yesterday with a company that consults with a number of these app-based companies who are saying, look, they're watching this closely, even though they may not be the target. And then you've also got small and medium-sized businesses that have really relied on these delivery companies, especially during the pandemic, that are now looking at potentially higher costs if Prop 22 is defeated.

DAN IVES: Yeah, the shame of this whole thing is 80% to 90% of drivers that we've talked to are against it, because they do this either as a second job or making more money. And fundamentally, it's something they do not want to be classified as an employee. It would have a huge ripple effect to other cities that would focus on this, including New York probably front and center.

And it's really something that would have incremental costs that ultimately get passed to the consumer, in terms of whether it's on food delivery or Ubers and Lyfts. And that's why right now I think there's a huge ripple effect and ramifications, depending on what happens tonight, not just for Uber or Lyft, but really for the gig economy.

ADAM SHAPIRO: Dan, we never get enough time with you, but I've got to sneak this in. Regarding the antitrust actions politically, if the Democrats do get into power, whether it be in the Senate, as well as the presidency and they have the House, what does that mean going forward? Would they be more aggressive in the breakup, potentially, of big tech?

DAN IVES: Yeah, a blue wave is definitely negative for big tech in terms of antitrust, because then you could see some potential legislative change. And that's where it goes from a contained risk to potential business model risk and potential breakup. So no doubt, a blue wave for big tech would really, I think, ratchet up this beltway versus big tech battle going into 2021.