Although the field of artificial intelligence (AI) is booming, the editor of Downcodes found that the overall situation of the technology industry is not optimistic. Many companies in non-AI fields are still struggling in the post-pandemic economic downturn, or even experiencing recession. While giants like Nvidia and Microsoft have seen their share prices soar due to AI, this has masked a bleak performance for the tech industry as a whole last year. This article will delve into this phenomenon and analyze the technology industry dilemma behind the AI boom.
Although artificial intelligence (AI) is in full swing recently, the real situation of the technology industry is actually somewhat disappointing. Many companies that have not been involved in AI are still struggling in the post-epidemic economic downturn, and can even be said to be "still in decline."
Investors and some analysts point out that while soaring share prices of major companies like Nvidia and Microsoft on AI have masked last year's dismal performance, many companies in the industry are still struggling to recover.
Picture source note: The picture is generated by AI, and the picture is authorized by the service provider Midjourney
Tony Kim, head of technology investment at BlackRock, mentioned that except for AI, there has not been much development in other technology fields. "Many sub-industries are still in a period of decline, and the only growth point is AI." He emphasized. In fact, traditional technology sectors such as software, IT consulting, and companies that provide electronic equipment to the manufacturing and automotive industries are facing weak demand. Coupled with over-expansion and inventory backlog during the epidemic, many companies are feeling stressed. Even some companies have limited customer budgets due to the rise of AI, leading to investment diversion.
Dustin Moskovitz, co-founder of Facebook and now CEO of Asana, echoed this sentiment. He said at the analyst meeting that the technology industry is now experiencing the "sequelae" of excessive hiring and spending in the early stages of the epidemic, and the uncertainty of the economic environment has made this more difficult. With the rise of AI, the future of the industry has become even more confusing.
Growth has slowed for many large tech companies, while smaller businesses are in even worse shape, according to recent financial reports. Bloomberg data shows that the average revenue growth rate of companies in the S&P 500 information technology sub-index over the past 12 months was 6.9%, well below the 10% rate in the past five years. Among the Russell 2000 index of small companies, technology is the industry with the second worst revenue growth, with revenue in the second quarter falling 6.1% year-on-year.
While most technology companies are still hoping that AI will bring about a turnaround, Ted Mortonson, technology strategist at RW Baird, points out that generative AI masks cyclical declines in other core areas. Investor enthusiasm appears to be fading, and the market is beginning to look towards other sectors such as financial services and industrials.
Still, some investors still believe an industry bottom is forming and hope the economic environment will improve. Tony Wang, investment manager at T Rowe Price, said that while AI is the only bright spot at the moment, he is not sure whether this will continue to be the case in the future.
Highlight:
?The boom in the AI industry has masked the overall downturn in the technology sector, with many companies still struggling with the recession.
? The traditional technology industry faces weak demand and excess inventory, and has a long road to recovery.
? Investors are less enthusiastic about AI and are beginning to focus on opportunities in other areas such as financial services and industry.
All in all, the rise of AI has brought opportunities to some technology companies, but it has also exposed challenges facing the entire industry. The future direction of the technology industry is still full of uncertainties, and it is necessary to continue to pay attention to market changes and technology development trends. The editor of Downcodes will continue to bring you more analysis and reports on the technology industry.