AI Euphoria Hides Deeper Issues in the Tech Sector
According to some investors, many tech companies are facing a crisis that’s being overshadowed by the AI hype. Problem areas include software development, IT consulting, and even traditional sectors like the auto industry.
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According to some investors, many tech companies are facing a crisis that’s being overshadowed by the AI hype. Problem areas include software development, IT consulting, and even traditional sectors like the auto industry.
Many sectors are still in a recession. The only thing that has been really growing has been AI,
said Tony Kim, head of technology investing in BlackRock’s fundamental equities division.
The main issue stems from reduced capital available to both investors and clients, who are now prioritizing investments in AI. Facebook co-founder Dustin Moskovitz also pointed to economic instability and the struggles of companies recovering from overspending.
Generative AI is masking a cyclical downturn in a lot of other core sectors. Everyone is hoping things get better in the next few quarters, though hope is not an investment strategy,
said Ted Mortonson, a tech strategist at RW Baird.
Even AI-related industries like semiconductor manufacturing are facing challenges. Their heavy reliance on AI developers has led to a risky dependency, with no clear indication of when the market will stabilize.
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