A bubble you didn't even know existed could be bursting (FB)

Mark Zuckerberg sad serious

Nomura says a bubble you didn't know about could be bursting without you knowing.
It's not the whole tech sector, Nomura says, but data firms and platform companies that provide free services in exchange for user data that it can sell to advertisers.
Such companies have been under fire this week following news that Cambridge Analytica harvested the personal data of millions of Facebook users without permission to target them with political ads.

Social media companies are under fire as regulators and users across the Atlantic raise new questions about their troves of personal data.

Reports over the weekend revealed that the data firm Cambridge Analytica harvested the personal data of 50 million Facebook profiles to target them with political ads ahead of the 2016 US election.

This kind of scrutiny is part of a broader trend pushing the needle closer to bursting the "data/platform bubble," according to Bilal Hafeez, Nomura's global head of G-10 foreign-exchange strategy.

"The bottom line is that trade wars, populism, income inequality can be looked at in isolation, but together they all point to a reaction against the growth of fluid intangible-intensive industries such as the data/platform companies," Hafeez said. "This means that these markets will come under increasing pressure on how they value data/platforms as the year unfolds."

Hafeez cites a political sea change against the sector as the core reason that the bubble is set to burst.

Since his campaign, President Donald Trump has focused on improving goods-producing sectors like manufacturing. Meanwhile, the services sector — a bigger contributor to the economy — continues to create the lion's share of US jobs.

Trump's approach has represented a departure from that of his immediate predecessor, Barack Obama, who embraced Silicon Valley and was the first to create executive positions for a chief technology officer and a chief data scientist.

It also doesn't help that data companies have helped widen income inequality by creating "winner-takes-all" dynamics, Hafeez said.

Hafeez also highlights "the cab driver" — people who aren't specialists but have become some of the biggest advocates of some technologies.

"A classic sign of the late stages of a boom is when non-specialists start to become the most vocal advocates for the boom," he wrote.

Bitcoin's explosion and subsequent rollover, which hurt many platforms created to profit from it, is probably the best recent example of a bandwagon that nonspecialists jumped on.

Finally, Hafeez says the rise of misinformation and fake news could also mean the end of the platform bubble.

"Today thanks to the increasing concerns that platforms and data-holders have been 'gamed' by corporations and foreign governments to manipulate consumers and voters, there is a growing backlash from individuals and governments on how these platforms can operate," he wrote. "For individuals, this could be resulting in a shift from 'crowd-sourced' information to 'reputation-based' information and opinion."

And the result for governments could be even more regulation — the final trigger, as companies move away from adhering to global standards to new regional rules.

"The EU is increasingly flexing its muscles on the rights of the consumer in relation to data/platform owners," Hafeez said. "That leaves the pioneering US companies with the most to lose as they have to retrench from these markets."

If you're looking for a trade recommendation that could profit from this, Hafeez advises that the Japanese yen "typically performs well in a volatile world."

Join the conversation about this story »

NOW WATCH: Facebook can still track you even if you delete your account — here's how to stop it