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Public Equities

The Turning Tide in Technology

December 2023 – 6 min read

With all the headlines surrounding OpenAI’s recent management turmoil and nVidia’s exceptional earnings, is the market paying enough attention to the signs of recovery in the core bedrock of technology? Is this a harbinger of even better times for the tech sector?

Signs of Renewed Vigor in Tech

For good reason, artificial intelligence (AI) has captured the public’s attention—with equity markets continuing to be dominated by stories such as the recent debacle surrounding OpenAI’s sacking, then re-hiring, of their CEO, as well as nVidia, the dominant supplier of AI semiconductors, reporting another massive beat to consensus expectations. While it should come as no surprise then that the technology sector has recently achieved yet another relative high compared to the broader global equity markets, the question that is emerging is whether the technology sector—beyond the current AI headlines—is in a healthy state today?

Emerging generative AI tools including ChatGPT and Google Bard offer compelling pathways to accelerate the realization of powerful, secular growth trends that include the popularity of online media and retail, the shift of computing infrastructure into the cloud, and the digitization of the analog world. While these developments grab headlines, several major mature technology markets are showing renewed signs of life following a Covid hangover in 2022 and early 2023. Has the technology market, effectively, already had its recession?

Is the Tech Recession Over?

The mechanics behind the 2022–23 slowdown and expected recovery in growth can in large part be explained by the strength in spending through the pandemic and the subsequent slowdown during the economy’s re-opening, which saw companies deal with issues ranging from excess inventories to lingering disruptions in global supply chains. These factors resulted in very rocky spending on information technology in 2022 and 2023 and likely contributed to IT spending’s declining share of U.S. private fixed investment.

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Matthew Ward

Managing Director, Global Equities—Technology

Colin Moar

Director, Global Equities—Technology

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