Capstone believes that European policymakers will increasingly prioritize the EU’s strategic autonomy and global competitiveness in the TMT sector. Policymakers are concerned about the strategic dominance and unparalleled ability of Big Tech firms to leverage data across their ecosystems. Lawmakers also want to bolster the EU’s semiconductor manufacturing capacity and reduce its exposure to supply chain and geopolitical risk.

Capstone believes the Biden administration and a Democrat-led Federal Communications Commission (FCC) will move forcefully in 2023 on various telecommunications policy issues—notably broadband funding, net neutrality, and Universal Service Fund (USF) reform.

Capstone believes the Securities and Exchange Commission (SEC) will ramp up enforcement in 2023 and is increasingly likely to deem Ethereum a security. However, the risk posed by tighter scrutiny is balanced by the likelihood that legislation in the next congressional session will benefit the industry by restoring some confidence in it.

Capstone believes many investors are underappreciating the likely enforcement ramp-up by the California Privacy Protection Agency (CPPA) as the California Privacy Rights Act’s (CPRA) provisions take effect on January 1, 2023. The CPRA includes provisions for an expansive private right of action in the event of a data breach and significant civil penalties. As a result of the statutory minimums for sizing fines, we expect Big Tech platforms that violate the CPRA will have to agree to higher settlements.

Capstone believes 2023 will mark a pivotal year for the US push to implement its domestic manufacturing strategies to compete against China. We are increasing our probability that the US will reach a multilateral agreement with key allies on semiconductor-related export controls by December 31, 2023, from 35% to 55%.

Capstone believes heavy-handed state regulation of China’s tech industry is here to stay, despite broader market expectations that the government’s crackdown is near its end. In 2023, China will set and enforce policies that require technological development and innovation to occur hand-in-hand with the state.