Sessions In, Tech Stocks — Eventually — Out?

Tech stocks are still riding the reflation wave, but late Wednesday news that Jeff Sessions is now the attorney general should give Nasdaq investors pause.

Sessions as AG should particulary worry advisors who are bullish on the big India IT outsourcers, namely Infosys (INFY)INFY 19,17 -0,06 -0,31% and Wipro (WIT)WIT 6,07 -0,07 -1,06%. Both Infy and Wipro are outperforming the Nasdaq on Thursday. CEOs from the big outsourcers are supposedly preparing their own “march on Washington” this month. No date has been set. They are worried about Donald Trump’s immigration reform and the impact it willl have on H1-B visa dependent tech companies like theirs.

Quite frankly, there is a lot at stake here for tech companies. Silicon Valley has been complaining about immigration policies all year. The H1-B visa is either their lifeline to extraordinary global tech talent, as the proponents say, or a means to curb wages and not just at tech companies, as opponents like Sessions believe.  And who is in power? Not Mark Zuckerburg.

Sessions is anti-H1-B, insofar as he has gone on the record now for three years arguing that the visa displaces American workers, including those with highly coveted STEM degrees.

Senators Tom Cotton (R-Ark.) and David Perdue (R-Ga.) are proposing legislation that would initially cut the number of legal immigrants to the United State by 40 percent.  It is likely that the H1-B and other immigrant worker visas like the L and F visas will be trimmed or Washington will make it harder for companies to bring in foreign workers through measures requiring they show evidence that American citizen employees could not be found.  This policy is the single biggest headwind for tech stocks going forward.

According to the U.S. Customs and Immigration Service, a record 348,669 petitions were filed for H1-B visas in 2015. Over 60% of all H1-B visa holders are working for tech companies and the vast majority of them are from India, according to USCIS. The government approves roughly 85,000 new H1-B visas annually, and extends visas on thousands more. USCIS says it does not know how many H1-B employees are currently in the U.S. This will be a fight to watch for the tech sector, bar none.