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AI boom hides broader tech struggles: While AI giants like Nvidia and Microsoft are thriving, many tech companies not focused on AI are still feeling the pinch from a slowdown that started in 2022, when the tech-centric Nasdaq Composite fell by about 30%, the Financial Times reports.
The data paints a mixed picture: The S&P 500 IT sub-index’s revenue growth has slowed to 6.9% over the past year, well below its five-year average of 10%. Smaller firms, especially those in the Russell 2000, are facing even tougher conditions with falling revenue and earnings.
What’s happening? More traditional tech sectors — including companies in software, IT, consulting, and electronic equipment manufacturers — are seeing weak demand after a boom during the pandemic that prompted them to increase investments, including through hiring, overexpansion, and overstocking of inventories — especially as customers with limited budgets look towards investments in AI.
“What we’re seeing in tech is still kind of the unwinding of the over-hiring and overspending that we saw at the beginning of the pandemic,” Facebook co-founder and Asana CEO Dustin Moskovitz told analysts last week. “And then that all couples with what I think is massive uncertainty in the economic environment. And then, also, just with how AI is going to play out.”
This could change soon, with investors already showing signs of pivoting to less hyped up subsectors like financial services and industrials, and the excitement towards AI and data players subsides. Expected interest rate cuts are also expected to help, one portfolio manager said.
MARKETS THIS MORNING-
Asia-Pacific markets are rising as Wall Street stocks rebounded from their worst week so far this year, with Japan’s Nikkei up 0.52%, the Topix up 0.65%, and South Korea’s Kospi up 0.17%. Wall Street futures are little changed from the gains made yesterday.
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ADX |
9,355 |
-1.0% (YTD: -2.3%) |
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DFM |
4,359 |
-0.3% (YTD: +7.4%) |
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Nasdaq Dubai UAE20 |
3,774 |
-1.4% (YTD: -1.4%) |
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USD : AED CBUAE |
Buy 3.67 |
Sell 3.67 |
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EIBOR |
5.2% o/n |
4.2% 1 yr |
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TASI |
11,963 |
-0.2% (YTD: 0.0%) |
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EGX30 |
30,375 |
+0.3% (YTD: +20.0%) |
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S&P 500 |
5,471 |
+1.2% (YTD: +14.7%) |
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FTSE 100 |
8,271 |
+1.1% (YTD: +7.0%) |
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Euro Stoxx 50 |
4,779 |
+0.9% (YTD: +5.7%) |
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Brent crude |
USD 71.84 |
+1.1% |
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Natural gas (Nymex) |
USD 2.14 |
-1.4% |
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Gold |
USD 2,532.70 |
+0.3% |
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BTC |
USD 57,254.10 |
+5.3% (YTD: +35.2%) |
THE CLOSING BELL-
The DFM fell 0.3% yesterday on turnover of AED 291.3 mn. The index is up 7.4% YTD.
In the green: BHM Capital Financial Services (+5.6%), Salik Company (+2.7%) and Al Firdous Holdings (+1.9%).
In the red: Dubai Refreshment Company (-9.9%), Agility (-4.6%) and Dubai National Ins. & Reins. (-4.0%).
Over on the ADX, the index fell 1% on turnover of AED 949,5 mn. Meanwhile Nasdaq Dubai closed down 1.4%.
