The last 48 hours have seen a trove of negative tech articles. With headlines about the stock market dips from last week, several pieces of coverage then focus on the tech industry after effects.
Axios, for example, highlights the coming impacts on smaller companies. Quote
Smaller companies with business plans that involve burning venture capital to seize market share will scramble.
In a recession:
- Frothy investment fads — think meme stocks, NFTs, and flavor-of-the-week startup ideas — would likely fade in appeal, at least for a while.
- Big firms typically go on buying sprees — but the current antitrust climate could put a damper on that.
- Many companies will rewrite their plans around business-to-business concepts, which often promise a steadier income than consumer-aimed efforts.
- Everyone will be keeping their eyes peeled for what the next platform will be since the next platforms have emerged during recessions in the past.
A second piece from Axios notes how streaming, e-commerce, and social media are facing particularly steep declines. I’ll highlight from that piece that Year to date, Software firms are off 17.2 percent, IT off 12 percent, and hardware off 6.5%.
Business Insider focuses on a brace for a quote “historic slump amid VC pullback, looming layoffs, and plummeting share prices.”
Of course, let’s note that when looking at sectors, the story is different too. Professional and business sectors have seen job recovery – beyond their pre-pandemic numbers.
Why do we care?
The flip side of my position that Wall Street is not the market is that it’s true in a positive way too. All of the noise from Silicon Valley and those small tech startups has less to do with IT services. As Axios noted, big companies will do just fine, particularly the large cloud providers.
I’d be more worried about recession and inflation trends on customers than I am about the technology itself when I consider the IT services space. Note that even the related markets to services – Software, IT, and hardware – are off less than streaming, eCommerce, and social media. That’s good news.
Keep an eye on the broader economy more than specific technology stocks. For example, I’m watching consumer credit, which is more dangerous than I might like. I’m still cautious; I’m just observing that the imminent doom of most tech coverage right now isn’t appropriate for services.