Financial News Agency, September 9 (Editor Xiaoxiang) Buffett has a famous saying: "When the tide goes out, you will know who has been swimming naked." Now, as the crest of the AI ​​wave gradually passes, people can’t help but find that there seem to be many “naked swimmers” in t

Financial News Agency, September 9th (Editor Xiaoxiang) Buffett has a famous saying: "When the tide goes out, you will know who is swimming naked." Now, as the peak of the AI ​​wave gradually passes, people can’t help but find that there seem to be many “naked swimmers” in the technology industry.

Recent analysis of second-quarter financial reports by industry insiders shows that enthusiasm for artificial intelligence actually masks the weak industry performance of most technology industry companies. After a slowdown in performance starting in 2022, many companies are "still in recession."

over the past year and a half. Nvidia and Microsoft Sharp gains in the stock prices of major companies expected to be early beneficiaries of artificial intelligence have helped erase horrific memories of 2022, when the tech-heavy Nasdaq Composite dropped nearly three percent. one part. However, beneath the surface, many technology companies that are not focused on artificial intelligence have actually been struggling to regain momentum for development.

Tony Kim, investment director of the fundamental equity department of BlackRock , said that when you look at technology fields other than artificial intelligence, you will find that they have not made much progress. Many (sub)industries of are still in decline. The only thing that's really growing is the artificial intelligence sector.

ai Under the surface

For example, more traditional technology fields such as software, IT consulting and the production of electronic equipment for other industries such as manufacturing and automotive are still facing difficulties. The challenges they encounter include weak demand. , as well as the sequelae caused by over-expansion and inventory backlog during the new crown epidemic.

Some businesses are even suffering the negative impact of the AI ​​wave as customers with limited budgets redirect their investments. Dustin Moskovitz, co-founder of

and now CEO of Asana, summed up the situation for many companies last week when the business software group scaled back its forecast for the second half of this year. "What we're seeing in the tech space is still a legacy of over-hiring and over-spending from the early days of the pandemic," Moskovitz said. "I think it all has to do with the huge uncertainty in the economic environment. And also, how exactly is artificial intelligence going to develop?" .”

Recent financial reports show that most large technology companies are growing more slowly than in the past, while many smaller technology companies are actively shrinking.

Industry data shows that the average revenue of companies in the S&P 500 Information Technology Index increased by only 6.9% in the past 12 months, while the average growth rate over the past five years was 10%. About three-quarters of companies are growing slower than recent averages. Earnings per share for companies in the index have grown an average of 16% over the past 12 months, down from 21% over the past five years.

(S&P 500 Information Technology Index)

In fact, the signs of weakness in technology companies in the small-cap index are even more obvious, because the rise of large-cap technology stocks has hardly brought any boost to small-cap technology stocks. Among the Russell 2000 index, technology stocks had the second-worst revenue growth in the second quarter: revenue fell 6.1% year-over-year, and profits fell 2.8% year-over-year, according to lseg. Ted Mortonson, technology industry strategist at

rw Baird, said generative artificial intelligence (AIGC) masks cyclical declines in many other core industries.

Even in sub-sectors such as chips that have been attracted by enthusiasm for artificial intelligence, some business lines are struggling. For example, Brice Hill, chief financial officer of Applied Materials, a traditional chip equipment supplier, said last month, "We are seeing particularly strong pull related to artificial intelligence and data center computing, but the automotive and industrial end markets are facing weakness. ".

needham funds portfolio manager John Barr also pointed out that in the industrial field, the situation is similar everywhere. He has invested in several semiconductor companies, including Applied Materials. “The current growth momentum is not very good, so what we are looking for are companies with stable business and are developing new things."

Can a "small rotation" emerge?

It is worth mentioning that some investors' enthusiasm for investing in AI-focused companies has waned since early summer, leading many commentators to predict that investors' Attention will gradually shift away from large technology stocks and towards areas such as financial services and industrials, which may bring some relief to some companies in the technology industry that have struggled in the past few years.

Some technology industry experts are hoping for a similar market turn this summer. It’s the kind of “small rotation” within the tech industry that’s moving away from the largest artificial intelligence stocks and toward previously relatively unloved corners of the industry.

And while few companies have achieved the triple success that Nvidia has in recent quarters. digit growth, but there are indeed signs that some of the worst-performing areas of the technology industry are indeed turning a corner.

In response, Tony Wang, portfolio manager of Trowe Price Technology Fund, said, “I think we are seeing a kind of turnaround. Stable trends: In areas that are more sensitive to macroeconomics, things are no longer getting worse, and if interest rates fall, that will help. "

" I think that over the past two years, people have been thinking that artificial intelligence is the only technology worth investing in. But I'm not sure that will be the case in the next two years.”