From the start, the story of the fate of TikTok's U.S. operations has been a theater of the surreal, one in which observers could only expect the unexpected.
Over the last six weeks or so, we've seen:
- Microsoft (MSFT) , Oracle (ORCL) , Walmart (WMT) and Twitter (TWTR) all either confirm or be reported to have held talks with China's ByteDance to buy TikTok's operations in the U.S., Canada, Australia and New Zealand.
- President Trump suggest that the Treasury Department should get a cut of the proceeds from any TikTok sale.
- The Trump Administration issue executive orders calling for U.S. companies to cease transacting with either TikTok or Tencent's WeChat messaging app, within 45 days.
- The Trump Administration backtrack a little from those orders, stating that ByteDance would have 90 days to sell TikTok's U.S. ops and that American companies could continue working with WeChat in China.
- The Chinese government establish export controls allowing it to restrict the transfer of TikTok's content recommendation algorithm, and state that it would rather see TikTok shut down than sold.
- Microsoft end talks with TikTok after ByteDance stated that it wouldn't relinquish control of TikTok's algorithm or source code.
- ByteDance reach a deal with Oracle -- it still requires U.S. government approval, which isn't a sure thing right now -- under which ByteDance would retain ownership of TikTok, with Larry Ellison's firm acting as a "trusted technology provider" for TikTok in the U.S..
If you were able to predict this chain of events -- events that on a number of occasions sparked big moves in U.S.-traded equities -- with any degree of accuracy, I tip my proverbial hat to you.
Still, while the TikTok saga has been perhaps the most jarring example of a China-related situation involving tech companies in which political developments kept coming out of left field, it's definitely not the only one we've seen in recent years.
In 2018 and 2019, trade war-related headlines frequently triggered moves in the shares of both Chinese tech firms and U.S. tech firms with significant Chinese exposure. And in 2019 and 2020, chip stocks have gotten stung by news of new restrictions on sales that directly or indirectly involve Huawei.
More recently, we saw chip equipment stocks sell off on reports that the U.S. is thinking about imposing Huawei-type export controls on Chinese chip manufacturer SMIC. Also, though markets don't seem too concerned for now, Chinese tech stocks came under a bit of pressure earlier this year on fears that new accounting regulations could lead Chinese ADRs to be delisted from U.S. exchanges.
It's possible that fewer such surprises would arrive during a Biden Administration. But at the same time, considering how much bipartisan support there now is for tougher policies towards China, smooth sailing is hardly guaranteed.
And for now, certainly, those investing in either Chinese tech companies or U.S. tech companies that do a lot of business in China should stay mindful of the impact that sudden policy changes in Washington or Beijing could end up having.