As US tech stocks suffer in response to rising inflation, interest rates and general economic uncertainty, the UK tech sector – or what’s left of it – is doing worse.
UK research firm Techmarketview said the technology-focused NASDAQ fell 4.6 percent in August, or 24.5 percent year-to-date.
This is not the worst month in 2022, but by any means [it’s] It’s disappointing after a strong showing in July,” commented research director Tania Wilson.
The decline followed a meeting of world monetary policy leaders in the US in late August. But instead of calming the markets, the Federal Reserve signaled [PDF] A “temporary” increase in interest rates may be necessary to control inflation.
“Technology growth stock prices are particularly vulnerable to rising interest rates because most of that value is in future earnings, and higher interest rates mean a greater reduction in earnings,” Wilson explained.
Still, tech’s Big Five — Apple, Amazon, Google/Fidel and Microsoft — saw a relatively stable period post modest share losses, while only Facebook/Meta posted small gains. Netflix lost to Twitter and Tesla.
But there were some losers in the continued turmoil in tech markets. These include education technology specialist RM, outsourcing and systems stalwart Unisys, and consulting and services firm DXC Technology and CRM sales force giant.
On top of macro-trends, higher interest rates make it harder for tech markets — and startups in particular — to raise capital. Historic lows since the financial crisis have sent investors reeling. But this represents a correction, not a shortage, in the way tech companies access capital. They were simply returning to pre-financial crisis standards, said John-David Lovelock, Gartner’s eminent research vice president. The record In July.
As US stocks worsened as expected, there were signs of a more systematic decline in the UK, Techmarket’s View Wilson noted. A few takeovers are on the cards for major UK tech companies, including Avast, Microfocus, Darktrax and Aveva. While the market’s reaction to M&A activity led to a rise in FTSE tech shares, diverging from the NASDAQ, it did not bode well for the long term.
“If AVEVA goes completely private and Avast continues to merge with Norton LifeLock, there will be only one software and IT services company left in the FTSE 100: accounting software provider Sage.
“The UK’s lack of major tech players is not good news for the UK economy. Apart from the current inflation crisis, we know that this country needs to improve its productivity if we want to improve our living standards. Tech is a big part of that productivity debate,” said Wilson. ®
