Apple and Google are facing a storm of controversy after reports revealed that their app stores are still hosting VPN apps connected to Qihoo 360, a Chinese cybersecurity firm blacklisted by the U.S. government. Despite being sanctioned in 2020 over suspected military ties, these VPNs, Turbo VPN and VPN Proxy Master, among them, remain available to U.S. users, raising major privacy and security concerns.

These VPNs, which are marketed as tools for “private browsing,” have raised significant concerns. While promising privacy, these apps allow the companies behind them to access everything users do online once they are connected. This becomes particularly alarming given China’s national security laws, which can require companies to hand over user data to the Chinese government when requested.

The Ownership Structure and Red Flags

The situation is further complicated by the complex ownership structure behind these VPN apps. The apps are operated by Innovative Connecting, a Singapore-based company owned by Lemon Seed, a firm registered in the Cayman Islands. Qihoo purchased Lemon Seed for $69.9 million in 2020. Although Qihoo claimed to have sold the business shortly after, reports indicate that the team in China developing these apps continued to operate under Qihoo’s control for years. One developer stated,

“You could say that we’re part of them, and you could say we’re not. It’s complicated.”

Apple and Google Take Action, but Trust is Eroding

In response to the growing pressure, Apple has removed two of the VPN apps, Thunder VPN and Snap VPN, after being contacted by The Financial Times. Apple assured that it enforces strict rules on VPN data-sharing. Google, too, pledged to follow U.S. sanctions and remove violations from its platform. However, the trust in both companies is beginning to erode, and many are questioning the effectiveness of their policies.

Investor Concerns Over Privacy and Regulatory Risks

The privacy issues surrounding these VPN apps are not only damaging to Apple and Google’s reputations but also posing risks to their financial health. As investor focus intensifies on data privacy and regulatory risks, particularly concerning U.S. tech companies’ ties to China, the potential fallout could be significant. Lawmakers and regulators could intervene, leading to fines, stricter regulations, or even further app removals. Such actions would be detrimental to shareholders, raising concerns over the long-term impact on stock valuations.

Impact on Tech Stocks: A Closer Look

For investors closely tracking the situation, the TipRanks Stocks Comparison tool offers a way to compare APPLE and GOOGL stocks. Analysts remain cautiously optimistic about both, with ratings of Moderate Buy for both companies. However, Google is considered to have slightly more growth potential.

The bigger question remains: will these VPN apps stay off the platforms for good, or will they return under new names?

As this issue continues to unfold, both Apple and Google are at a critical crossroads, facing not only public backlash but also the possibility of further regulatory action that could impact their bottom lines and investor confidence.