Commentary: Can tech stocks ride out inflation and the Ukraine war?

According to Arvind Krishna, IBM’s chief executive, IT demand is running at 4 to 5 percentage points above the rate of gross domestic product growth. Barring “something much more catastrophic”, he predicted that it would continue at that rate, even through a mild recession.

The optimistic view is that the shock of the pandemic has, if anything, led companies and governments to accelerate plans to digitise their operations. 

IT buyers started out this year with plans for bigger spending growth than they did at the start of 2020 before the pandemic, even though the economic outlook is now more uncertain, according to John-David Lovelock, the chief forecaster at Gartner.

The year 2020 turned out to be a bust. But it was followed by a near 10 per cent surge in IT spending last year, and Gartner is predicting that the US$4.3 trillion global IT market will expand at a faster rate than in the years leading up to the pandemic, with a growth of 4 per cent this year rising to 6.6 per cent in 2024.

The effects of this growth will be very unevenly felt. Spending on new tech has always been channelled disproportionately into areas where companies see the biggest impact on their business.

In recent years, that has meant things like cloud computing, analytics and security, which they hope will make them operationally more resilient and more responsive to both customers and new market opportunities.

The forecasts, if correct, point to a solid backdrop for the industry as a whole, and a springboard for continued very high growth rates in the hottest corners of IT. Whether investors will accord these growth rates the same high multiples that they did before the recent stock market correction is another matter.

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