Today, the U.S. House of Representatives is set to vote on a bill that will give ByteDance, the Chinese owner of TikTok, around six months to divest the app or face a ban. The decisive moment comes just days after the bill was proposed. Last week, the House Energy and Commerce Committee voted 50-0 in favor of the bill. A negative outcome for TikTok could prove to be a pivotal moment in the race to grab more eyeballs in short-form content for the likes of Meta (NASDAQ:META) and Google (NASDAQ:GOOG) (NASDAQ:GOOGL). Meta with its Instagram and Google with YouTube are betting big on short form, a feature that propelled TikTok’s meteoric rise.
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U.S. Market Implications
TikTok has nearly 170 million users in the U.S. Instagram had around 1.47 billion monthly active users in Q4 2023, compared with 1.12 billion for TikTok. In recent times, Instagram has been gradually gaining an edge over TikTok. Today’s vote on TikTok will need support from two-thirds of House members to pass.
The key bone of contention is the Chinese ownership of TikTok. President Biden has already indicated his willingness to sign the bill. TikTok, though, plans to wage a legal battle if the bill is passed, according to Bloomberg. A potential divestiture would require a green signal from Chinese authorities. This could be a tough nut to crack as China has previously stated intentions to oppose a forced sale of TikTok.
Still, the troubles at TikTok could be a major boon for Instagram and YouTube. A similar scenario has already played out in India, one of the largest markets by user base globally. The country banned TikTok in 2020. Since then, Indian users have embraced short-form content on Instagram and YouTube.
Is GOOG a Buy, Sell, or a Hold?
Shares of both Meta and Google have rallied over the past year. While the Street has a Strong Buy consensus rating on both stocks, the TipRanks Comparison Tool indicates a higher potential upside of 17.3% in Google.
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