Impending government regulation could squeeze profits and sharply slow the growth of mega tech stocks, the Wall Street Journal reports. Particularly vulnerable may be the so-called FAAMG stocks, which also are the top five members of the S&P 500 Index (SPX) in terms of market capitalization. They are attracting increased regulatory scrutiny based on their size, now a staggering $3 trillion of combined market value, up by more than $580 billion, or about 25%, for the year-to date, per the Journal.

These five are, with their current market caps: Apple Inc. (AAPL), $807 billion; Google parent Alphabet Inc. (GOOGL), $685 billion; Microsoft Corp. (MSFT), $581 billion; Facebook Inc. (FB), $504 billion; and Inc. (AMZN), $473 billion. The increases in their share prices during the five years through Friday are, respectively: 81%, 157%, 188%, 667% and 284%. Clouding their future is that these huge, wealthy companies' increasing dominance in the marketplace has prompted calls for regulatory restraints. (For more, see also: The Tech Bubble Will Burst: The Question Is When.)

Political Ad Probes

Between them, Google and Facebook pulled in $106 billion in revenue from advertising, the Journal says. Their ad growth could be crimped by proposed rules regarding campaign spending on social media, for example. A bipartisan effort in Congress already is building to force Facebook and Google to make detailed disclosures of political advertising to the Federal Election Commission (FEC), disclosures for which they currently have waivers, CNBC reports. Yielding to intense pressure from federal regulators and the general public alike, Facebook recently agreed to turn over 3,000 ads linked to Russia, the New York Times reports

Probes into foreign-sponsored political ads and so-called "fake news" designed to influence election results or public opinion are increasingly taking aim at both Facebook and Google, CNBC indicates. Meanwhile, a Texas congressman alleges that anti-fracking ads on Facebook have been placed by Russian oil and gas interests eager to limit production in the U.S. The use of social media to promote hate speech is another area of controversy, with regulatory actions being threatened, and with advertisers increasingly nervous about having their own images sullied by association.

Antitrust Action

Meanwhile, Alphabet's shares have dipped 3% since antitrust regulators in the European Union (EU) slapped the company with a record $2.7 billion fine for favoring its own comparison shopping service in Google search results, per another Journal story. The ability of Google to make or break companies, or to influence public opinion, through its search results already has been a matter of growing controversy. Facebook has come under similar criticism regarding what it chooses to feature in its news feed. Additionally, Alphabet is the subject of an ongoing investigation by the U.S Department of Labor, which charges it with extreme pay disparities by gender, CNBC indicates. (For more, see also: Google Slapped With $2.7 Billion EU Antitrust Fine.)

As captures an increasing share of retail sales in the U.S., it is increasingly likely to draw antitrust scrutiny. In the 1990s, Microsoft was targeted after obtaining a near-monopoly in operating systems for personal computers, and using this to expand its influence in other categories of software, such as web browsers.

Time to Sell Short?

Doug Kass, president of hedge fund sponsor Seabreeze Partners Management Inc., also warns that the FANG stocks are generating political and regulatory pushback, and says that it's time to sell them for this and other reasons. Writing in Real Investment Advice, he mentions the electoral probes circling around Facebook. Regarding Amazon, he notes that it's putting a lot of employment-intensive companies out of business, and that amounts to a lot of votes and thus a lot of potential pressure on Senators and Representatives to initiate antitrust investigations into its business practices. State and local governments already are unhappy about lost sales tax revenues, not to mention increased unemployment insurance claims and decreased income tax receipts as Amazon displaces retail workers.