As TikTok CEO Shou Zi Chew faced hours of grueling questioning from members of Congress in late March, small business owner Chad Spangler watched in frustration.
The bipartisan congressional committee was exploring how TikTok, the massively popular short-form video app owned by China’s ByteDance, could pose a potential privacy and security threat to U.S. consumers.
Representatives grilled Chew about the app’s addictive features, possibly dangerous posts and whether U.S. user data could end up in the hands of the Chinese government. Politicians have been threatening a nationwide TikTok ban unless ByteDance sells its stake in the app, a move China said it “strongly” opposed.
But that’s not the only source of dissent. Creators such as Spangler, who sells his artwork online, are worried about their livelihood.
TikTok has emerged as a major piece of the so-called creator economy, which has swelled past $100 billion annually, according to Influencer Marketing Hub. Creators have formed lucrative partnerships with brands, and small business owners such as Spangler use the sizable audiences they’ve built on TikTok to promote their work and drive traffic to their websites.
“That’s the power of TikTok,” Spangler said, adding that the app drives the majority of sales for his business, The Good Chad. “They’ve captured the lightning in the bottle that other platforms just haven’t been able to do yet.”
Spangler has more than 200,000 followers on TikTok, and his business brought in over $100,000 last year, largely because of his reach there. Influencer Marketing Hub’s data shows that the average annual income for an influencer in the U.S. was over $108,000, as of 2021.
TikTok has been on a meteoric rise in the U.S., capturing an increasing amount of consumer attention from people who used to spend more time on Facebook, Instagram, Snapchat and Twitter. In 2021, TikTok topped a billion monthly users. An August Pew Research Center survey found that 67% of teens in the U.S. use TikTok and 16% said they are on it almost constantly.
Advertisers are following eyeballs. According to Insider Intelligence, TikTok now controls 2.3% of the worldwide digital ad market, putting it behind only Google, including YouTube; Facebook, including Instagram; Amazon, and Alibaba.
But with Congress bearing down on TikTok, the app’s role in the future of U.S. social media is shaky, as is the sustainability of businesses that have come to rely on it.
TikTok CEO Shou Zi Chew testifies before the House Energy and Commerce Committee hearing on “TikTok: How Congress Can Safeguard American Data Privacy and Protect Children from Online Harms,” on Capitol Hill, March 23, 2023, in Washington, DC.
Olivier Douliery | Afp | Getty Images
In April, Montana legislators approved a bill that would ban TikTok from being offered in the state starting next year. TikTok said it opposes the bill, and claims there’s no clear way for the state to enforce it.
Congress has already banned the app on government devices, and some U.S. officials are trying to forbid its use altogether unless ByteDance divests.
ByteDance did not respond to CNBC’s request for comment.
The White House also threw its support behind a bipartisan Senate bill in March called the RESTRICT Act, which would give the Biden administration the power to ban platforms such as TikTok. But following significant pushback, momentum behind the bill has slowed dramatically.
As the debate gains steam, creators are in a state of limbo.
Creators are turning to other platforms
Vivian Tu, who lives in Miami, has been preparing for a possible TikTok ban by working to build her audience and diversify her content across multiple platforms.
She began posting on TikTok in 2021 as a fun way to help answer co-workers’ questions about finance and investing. By the end of her first week on the platform, she had more than 100,000 followers. Last year, she left behind a career on Wall Street and in tech media to pursue content creation full time.
Tu shares videos in an effort to serve as a friendly face for financial expertise. Aside from posting on TikTok, she uses Instagram, YouTube and Twitter, and she also runs a podcast and a weekly newsletter.
Tu said she began building out her presence on multiple platforms before a potential TikTok ban entered the equation, and she’s hoping she spread out her income sources enough to be OK if anything happens. But she called her work on TikTok, where she has more than 2.4 million followers, her “pride and joy.”
“It would be a huge letdown to see the app get banned,” she told CNBC in an interview.
The top social media companies in the U.S. are preparing to try to fill the vacuum.
Meta, which owns Instagram and Facebook, has been pumping money into its TikTok copycat, called Reels. CEO Mark Zuckerberg said on the company’s earnings call last month that users are resharing videos over 2 billion times a day, a number that’s doubled in the past six months, adding “we believe that we’re gaining share in short-form video.”
Snap and YouTube have been pouring billions of dollars into their own short-video features to compete with TikTok.
Tu said she expects there will be a “massive exodus” of creators that flock to other platforms if TikTok is banned, but that the app is hard to beat when it comes to discovering new and relevant content.
“That’s why someone like myself, who didn’t have a single follower, didn’t have a single video, could make a video and have the very first one get 3 million views,” she said. “That really doesn’t happen anywhere else.”
Emily Foster with her stuffed animals.
Source: Emily Foster
Emily Foster, a small business owner, agrees. She said other media platforms can’t come close to offering the type of exposure she gets from TikTok.
Foster designs stuffed animals that she sells through her Etsy shop and her website called Alpacasews. She said she started sewing the plushies by hand as gifts for her friends and on commission. But when a video of a dragon she made during the pandemic received 1,000 views on TikTok — a number that’s tiny for her these days — she said it gave her the confidence to open an Etsy shop.
“I was like, ‘Oh my god, this could be something,'” she told CNBC.
Foster’s designs quickly gained traction on TikTok, where she now has more than 250,000 followers. She recently shared a behind-the-scenes video that showed her packaging up an order for someone who ordered one of every stuffed animal in her Etsy shop. The video quickly amassed more than 500,000 views, and her entire inventory sold out within a day.
‘Audience just isn’t there’
Demand for Foster’s stuffies soon outpaced her ability to make them by hand, so she turned to crowdfunding site Kickstarter to raise money to cover manufacturing costs. She raised over $100,000 in her most recent Kickstarter campaign, which came after three of her videos went viral on TikTok.
“My business would never be where it is today without TikTok,” she said.
With the looming threat of a TikTok ban, Foster said she’s been sharing content across Instagram, YouTube and Twitter to try to expand her following. At this point, she said, her business would probably survive if TikTok goes away, but it would be difficult.
“The audience just isn’t there, especially for smaller creators,” she said.
Beyond the money, Foster is concerned about losing the following she’s worked so hard to build. She said she’s met “fantastic” friends, artists and other small business owners on the platform.
“You’re never quite alone. It means a lot,” she said. “I’m stressed about potentially losing sales, potentially losing customers, but it’s more so just losing a community that’ll break my heart.”
For Spangler, the artist, the debate surrounding TikTok is maddening not just because of what it could mean for his livelihood, but because it seems to him that lawmakers are ill-informed about what the app does.
Spangler recalled one Republican congressman asking Chew in his testimony about whether TikTok connects to a user’s home Wi-Fi network.
“If you even have a working knowledge of anything technology related, if you watched those hearings, it was just very embarrassing,” Spangler said. “What’s extra frustrating is it feels like this is being potentially taken away from me by people who have no idea how any of this works.”
Spangler channeled his anger into his artwork. After the hearing, he designed a T-shirt featuring a zombie-like congressman with the phrase, “Does the TikTak use a Wi-Fi?”
He shared a video about it on TikTok and made almost $2,500 from T-shirt sales in less than two days.
Every weekday, the CNBC Investing Club with Jim Cramer releases the Homestretch — an actionable afternoon update, just in time for the last hour of trading on Wall Street. Markets: The S & P 500 bounced back Friday, recovering from the prior session’s sharp losses. The broad-based index, which was still tracking for a nearly 1.5% weekly decline, started off the session a little shaky as Club stock Nvidia drifted lower after the open. It was looking like concerns about the artificial intelligence trade, which have been dogging the market, were going to dominate back-to-back sessions. But when New York Federal Reserve President John Williams suggested that central bankers could cut interest rates for a third time this year, the market jumped higher. Rate-sensitive stocks saw big gains Friday. Home Depot rose more than 3.5% on the day, mitigating a tough week following Tuesday’s lackluster quarterly release. Eli Lilly hit an all-time high, becoming the first drugmaker to reach a $1 trillion market cap. TJX also topped its all-time high after the off-price retailer behind T.J. Maxx, Marshalls, and HomeGoods, delivered strong quarterly results Wednesday. Carry trade: We’re also monitoring developments in Japan, which is dealing with its own inflation problem and questions about whether to resume interest rate hikes. That brings us to the popular Japanese yen carry trade, which is getting squeezed as borrowing costs there are rising. The yen carry trade involves borrowing yen at a low rate, then converting them into, say, dollars, and investing in higher-yielding foreign assets. That’s all well and good when the cost to borrow yen is low. It’s a different story now that borrowing costs in Japan are hitting 30-year highs. When rates rise, the profit margin on the carry trade gets crunched, or vanishes completely. As a result, investors need to get out, which means forced selling and price action that becomes divorced from fundamentals. It’s unclear if any of this is adding pressure to U.S. markets. We didn’t see anything in the recent quarterly earnings reports from U.S. companies to suggest corporate fundamentals are deteriorating in any meaningful way. That’s why we’re looking for other potential external factors, alongside the well-known concerns about artificial intelligence spending, the depreciation resulting from those capital expenditures, and general worries about consumer sentiment and inflation here in America. Wall Street call: HSBC downgraded Palo Alto Networks to a sell-equivalent rating from a hold following the company’s quarterly earnings report Wednesday. Analysts, who left their $157 price target unchanged, cited decelerating sales growth as the driver of the rerating, describing the quarter as “sufficient, not transformational.” Still, the Club name delivered a beat-and-raise quarter, which topped estimates across every key metric. None of this stopped Palo Alto shares from falling on the release. We chalked the post-earnings decline up to high expectations heading into the quarter, coupled with investor concerns over a new acquisition of cloud management and monitoring company Chronosphere. Palo Alto is still working to close its multi-billion-dollar acquisition of identity security company CyberArk , announced in July. HSBC now argues the stock’s risk-versus-reward is turning negative, with limited potential for upward estimate revisions for fiscal years 2026 and 2027. We disagree with HSBC’s call, given the momentum we’re seeing across Palo Alto’s businesses. The cybersecurity leader is dominating through its “platformization” strategy, which bundles its products and services. Plus, Palo Alto keeps adding net new platformizations each quarter, converting customers to use its security platform, and is on track to reach its fiscal 2030 target. We also like management’s playbook for acquiring businesses just before they see an industry inflection point. With Chronosphere, Palo Alto believes the entire observability industry needs to change due to the growing presence of AI. We’re reiterating our buy-equivalent 1 rating and $225 price target on the stock. Up next: There are no Club earnings reports next week. Outside of the portfolio, Symbotic, Zoom Communications , Semtech , and Fluence Energy will report after Monday’s close. Wall Street will also get a slew of delayed economic data during the shortened holiday trading week. U.S. retail sales and September’s consumer price index are scheduled for release early Tuesday. Durable goods orders and the Conference Board consumer sentiment are released on Wednesday morning. (See here for a full list of the stocks in Jim Cramer’s Charitable Trust.) As a subscriber to the CNBC Investing Club with Jim Cramer, you will receive a trade alert before Jim makes a trade. Jim waits 45 minutes after sending a trade alert before buying or selling a stock in his charitable trust’s portfolio. If Jim has talked about a stock on CNBC TV, he waits 72 hours after issuing the trade alert before executing the trade. THE ABOVE INVESTING CLUB INFORMATION IS SUBJECT TO OUR TERMS AND CONDITIONS AND PRIVACY POLICY , TOGETHER WITH OUR DISCLAIMER . NO FIDUCIARY OBLIGATION OR DUTY EXISTS, OR IS CREATED, BY VIRTUE OF YOUR RECEIPT OF ANY INFORMATION PROVIDED IN CONNECTION WITH THE INVESTING CLUB. NO SPECIFIC OUTCOME OR PROFIT IS GUARANTEED.
Mug shot of Eric Gillespie, Govini Founder and Chairman.
Courtesy: Pennsylvania Attorney General
Govini founder Eric Gillespie, who is charged with four felonies, including multiple counts of unlawful contact with a minor, was released on bail.
Gillespie, who lives in Pittsburgh, posted a $1 million bond after his court appearance Thursday. He is not allowed to travel, and his passport has been revoked.
He was initially denied bail following his arrest on Nov. 7, with the judge citing flight risk and public safety concerns.
David Shrager of Shrager Defense Attorneys, who represents Gillespie, insisted that his client did not break any laws.
“Mr. Gillespie has never contacted a minor, either online or in person, and the facts clearly prove that,” Shrager said after the hearing on Thursday.
“Completely false statements, including the use of artificial intelligence between adults made in the context of an online fantasy chat, are not illegal,” he added.
The Pennsylvania Attorney General’s Office said Gillespie sent lewd photos to an agent posing as a father offering his daughter to be abused, and made graphic comments about sexual acts with children.
Gillespie, 57, commented on the security of the encrypted platforms being used in the chats between him and the undercover agent, according to a criminal complaint obtained by CNBC.
Gillespie is the founder of defense contractor Govini.
He was listed on the company’s website on the leadership page as a board member as recently as Aug. 17, according to an archived version of the page available on the Wayback Machine.
Earlier this year, Govini landed a nearly $1 billion contract with the Department of Defense. The company’s suite of artificial intelligence-enabled applications is used by every department of the U.S. military and other federal agencies.
Following his arrest, Pentagon officials said they were looking into Gillespie and possible security issues.
CNBC has repeatedly asked the Department of Defense about updates on the status of the probe and potential security concerns with Govini or Gillespie.
“We don’t comment on ongoing investigations,” a Pentagon spokesperson said Thursday.
The chip giant’s talismanic leader trumpeted “off the charts” chip sales and dismissed talk of an “AI bubble,” and for a while, the tide lifted all boats.
“There’s been a lot of talk about an AI bubble,” Huang said during an earnings call this week. “From our vantage point, we see something very different.”
The buzz from the blowout report quickly reversed, sending the AI winners deeply into the red — and few beneficiaries were left unscathed.
Every member of the Magnificent 7, except for Alphabet, was tracking for a losing week, with Nvidia, Amazon and Microsoft staring down the biggest losses.
Amazon and Microsoft have led the group’s drop lower, falling about 6% this week. Meanwhile, Alphabet has gained nearly 8%. The search giant is also the only megacap of the group on pace for November gains thanks to a boost from the launch of Gemini 3.
Oracle, which is another major Nvidia customer, slumped about 10%. The chipmaker also supplies major model developers such as OpenAI and Anthropic.
CoreWeave, which buys and rents out Nvidia’s chips in data centers, initially soared on the chipmaker’s earnings report, but swiftly reversed course. The company’s stock is looking at an 8% blow this week.
AI fever was cooling in the runup to Nvidia’s earnings report on Wednesday, and investors looked to the print to alleviate fears that the AI bubble was on shaky ground. Since the launch of ChatGPT in late 2022, the stock has helped power the market to new all-time highs.
Major investors, including Bridgewater’s Ray Dalio told CNBC Thursday that the market is definitely in a bubble.
Much of the worries have stemmed from a boom in capital expenditures spending to support AI, with few signs of a payoff in view for many of the players.
Investor Michael Burry recently accused some of the biggest cloud and infrastructure providers of understating depreciation expenses and estimating a longer life cycle for their chips, calling it “one of the more common frauds of the modern era.”
Shares of the software analytics company, which supplies AI tools to the government and businesses, are down 11% this week. The stock has shed nearly a quarter of its value this month.