During the COVID era, the rapid shift to remote work led to a surge in IT spending as companies moved their applications and datacenters to the cloud. This accelerated Big Tech earnings growth in 2020 and 2021, outpacing the overall market. However, as IT spending cooled in 2022, Big Tech's growth slowed even more than the broader market, leading to a significant correction.
Concerns over Big Tech’s slowing growth, valuation, and capital spending continue to weigh on the mega-cap stocks. While these factors may create short-term headwinds, NDR’s analysis suggests that the growth slowdown will not be as severe as in 2022, when IT spending was unwinding from its pandemic-driven surge.
Looking ahead, NDR expects the continued demand for cloud services, particularly driven by AI development, to be a key growth driver for Big Tech. We maintain our AI overweight position, reflecting our confidence in the long-term prospects for these companies, even as they navigate near-term challenges.
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