28/02/2024

A-Recovery

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Tech calms down, but still strong as the world goes digital

Technology company stocks are in rest mode this year, but what may seem like weakness as the economy recovers is really just dormancy.

Digital devices, software and even cybersecurity will be the key areas for steady growth as consumers and businesses become more digital in how they operate, analysts say. The virus pandemic made that digital shift much sharper when people were forced to work, shop and stay entertained at home and that trend is only going to become more ingrained.

“Looking ahead there are a lot of trends that accelerated during the pandemic that have staying power even as the economy reopens,” said Kristina Hooper, chief global market strategist at Invesco.


Tech stocks have been quiet most of this year, with a roughly 6% gain, as investors take advantage of growth elsewhere with the economic rebound. It’s a sharp contrast to 2020, when the sector surged 42%. And while 2020’s sharp growth will likely not be repeated, tech companies and their stocks are poised for long-term growth well past the pandemic.

The pandemic tied more people to mobile devices and other technology for work, shopping and leisure. While some semblance of the pre-pandemic normal is returning, many of the habits formed in 2020 will remain. Remote work will likely become more common for many fields and companies will have to spend more to ramp up cloud-computing capabilities and cybersecurity.

Many companies had to pivot from in-person meetings to virtual meetings and companies like Zoom Video Communications Inc. were suddenly household names. That tech is likely now a permanent part of work.

“While employees are returning to the office, they’re not returning full time and we’ll still need significant investments in tech,” Hooper said.

Businesses will be forced to speed up their digital transformation plans by at least five years as more companies permanently adopt work-from-home measures, according to a report from research and advisory firm Gartner. Spending on information technology in 2021 could jump nearly 5% to $332.9 billion.