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(CNN Business) —  

Washington’s crackdown on Big Tech creates a treacherous landscape for investors long accustomed to blockbuster growth from this industry.

US regulators have reportedly laid the groundwork for potential antitrust investigations of Facebook (FB), Google owner Alphabet (GOOGL), Amazon and Apple (AAPL). The specter of a possible war with the federal government has already spooked Wall Street — driving down shares of these tech superstars.

Goldman Sachs is urging clients not to take rash action, in part because the consequences of the crackdown will be case-dependent.

“Uncertainty is still too high to recommend investors avoid stocks in the regulatory spotlight,” Goldman Sachs strategists led by Ryan Hammond and David Kostin wrote in a note late Tuesday.

However, that guidance changes if the federal government pulls the trigger on litigation. Goldman Sachs studied the consequences of three of the most well-known examples of antitrust lawsuits: IBM (IBM), AT&T and Microsoft. In each case, the firm found that stock valuations deteriorated during years-long periods of litigation — and sales growth decelerated even after the cases were decided.

“Similarities among historical outcomes suggest that investors should reduce exposure to any stock that becomes subject to an antitrust lawsuit,” Goldman Sachs wrote.

Break-ups or fines?

Of course, it’s too early to know how this will play out. At this point, it’s unclear if Washington will attempt to break up one or multiple Big Tech firms, or perhaps just try to better regulate them. It’s also possible that tech firms get away with a slap on the wrist — such as large fines.

But it’s clear that regulatory risk is rising. There is bipartisan outrage, featuring not just potential regulatory probes but an antitrust investigation from the Democratic-led House Judiciary Committee and tough scrutiny from officials in the European Union.

“Large-cap tech will without question face significant choppy waters,” said Peter Kenny, a veteran market strategist and founder of Kenny & Company.

Kenny urged investors to be cautious. “There are too many unknowns,” he said.

One ironic problem for Big Tech: It may have become too successful, especially in today’s shrinking stock market.

The number of listed US companies has halved from about 8,000 in 1996 to just 4,000 today, Goldman Sachs noted. That decline has largely been driven by a shortage of IPOs and a boom in mergers.

Commanding positions

At the same time, tech has become more dominant.

Based on 2018 sales, the most concentrated industries of the US stock market are tobacco and interactive media & services, according to Goldman Sachs.

Google and Facebook laid claim to 87% of last year’s sales within the interactive media & services space, the firm found. Google alone accounted for 63% of the sales.

And while Amazon (AMZN) makes up just a small slice of the massive retail industry, it generated 72% of last year’s revenue in the internet & direct marketing retail space, Goldman found.

In many ways, this dominance fueled the rise of these superstar stocks, enabling them to wrack up monster sales growth, enviable margins and lofty valuations.

History shows that while government efforts to break up dominant companies isn’t always successful, it can still be costly to investors. Antitrust lawsuits create massive distractions, enormous legal bills and cast a shadow over companies.

Breaking up Ma Bell

The best-known example is AT&T, (T) which controlled more than 70% of sales among public US telecom companies between 1950 and 1980, according to Goldman Sachs.

In 1974, the United States sued to break up Ma Bell. The case took eight years to be decided — and dealt a sizable blow to AT&T’s valuation along the way.

AT&T’s relative price-to-book multiple tumbled from 1.3 in 1974 to 0.7 after the breakup was ordered, Goldman found.

While AT&T’s valuation eventually rebounded, its sales growth decelerated from an average of 10% prior to the breakup to 4% afterward, the report said.

Goldman also found that the Baby Bells that were spun off from AT&T traded at a discount valuation to the remaining company. One of those Baby Bells eventually acquired AT&T and took its former parent company’s name. CNN is now owned by AT&T.

Microsoft stumbled – even after settlement

More recently, Microsoft (MSFT) faced an antitrust lawsuit in 1998 due in part to the commanding position of its Windows operating system. Microsoft (MSFT) survived — and even briefly reclaimed its title as the world’s most valuable company for a time last year — but investors still suffered.

The company’s settlement with the Justice Department required it to change some of its business practices, including the use of controversial exclusive agreements.

Like AT&T, Microsoft’s once-lofty valuation shrank to more pedestrian levels during the time of the lawsuit.

And Goldman Sachs found that Microsoft’s valuation continued to rapidly decline — even slipping below that of the S&P 500 — until 2011 when the settlement with the government expired.

The history lesson suggests that even companies that survive antitrust lawsuits do not do so unscathed.