2019 business outlook: Technology industry

Technology industry pressured by global issues in near-term

THE REAL ECONOMY  |  December 13, 2018

BY: Kurt Shenk

Macroeconomic indicators signal slowing growth in 2019, and the tech industry is likely to follow suit. Adding to concerns is the future of the trade spat between China and the United States, which remains unclear. As a result, some U.S. technology verticals, such as semiconductors, will be forced to absorb margin pressure by adjusting their pricing structure or shifting their supply chains out of China.

Record low unemployment, which has remained below 4 percent, may leave some technology verticals that provide platforms characterized by implementation or ongoing service finding the service side of their business struggling to keep up with orders. To mitigate this trend, middle market tech companies will continue to expand into newer technology urban hubs cropping up across the United States where labor shortages are less acute.

Despite volatility in the NASDAQ during the fourth quarter of 2018 characterized by steep share declines in tech giants such as Apple, we still find ourselves in the midst of an era of digital transformation. This industrywide trend is requiring companies to think innovatively about how to leverage technology in new ways. Many companies are willing to invest in technology and pay high M&A premiums for technology companies in order to absorb technologies that allow them to remain competitive.

Many technology unicorns have been born from the digital age, and we expect high valuations for tech companies in 2019, especially those focused on cloud, security and data analytics. The equity markets eagerly anticipate the public offerings of companies, including Uber, Lyft and Airbnb, in what could be a record-breaking year for IPOs, with valuations in excess of $100 billion.


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