Despite the excitement surrounding artificial intelligence (AI), the technology sector is facing a broad downturn. Many companies continue to grapple with the recession that began in 2022, according to investors and recent financial reports.
While AI-focused companies like Nvidia and Microsoft have seen significant stock price increases, analysts emphasize that many tech firms not primarily focused on AI are struggling to recover. Tony Kim, head of technology investing at BlackRock’s fundamental equities division, stated, “When you look at technology outside of AI, there’s not that much happening.”
Traditional tech areas, such as software, IT consulting, and electronic equipment production for sectors like manufacturing and the auto industry, have faced challenges, including weak demand. These challenges are exacerbated by the aftermath of overexpansion and overstocking during the COVID-19 pandemic. Dustin Moskovitz, Facebook co-founder and current Asana CEO, recently described the situation as an “unwinding of the over-hiring and overspending” seen at the start of the pandemic.
Recent financial reports indicate that most large tech firms have experienced slower growth, while many smaller ones are actively shrinking.
Investor enthusiasm for AI-focused companies has cooled since early summer. This has led to predictions of a prolonged shift in investor attention, moving away from Big Tech stocks and towards sectors like financial services and industrials.
The AI sector has been a hot topic in recent months, with some investors and analysts warning of a potential bubble. However, Goldman Sachs analysts stated in early September that, despite the significant growth and investor interest in AI stocks, the sector is not currently in a speculative bubble, unlike previous technology booms such as the late 1990s internet bubble.
While AI continues to drive innovation and investment, the broader technology sector faces a complex landscape of challenges. The future of the industry will depend on how companies adapt to changing market conditions and embrace new opportunities beyond the AI hype.
