Consumers and corporations ended 2023 more willing to spend on technology as emerging tech such as generative AI and growing threats around cybersecurity pushed buyers to loosen their purse strings.
In the fourth quarter of 2023, S&P Global's US Technology Demand Indicator (TDI) rose to the highest level seen since the second quarter of 2022, when central banks around the world began raising interest rates. The TDI is a survey-backed composite of US intent to spend on technology and typically predicts revenue performance for tech vendors by up to a few months.
"During the pandemic, organizations told us they were shelving some technology projects; now we're seeing those projects pick back up," said Liam Eagle, a research director at S&P Global Market Intelligence 451 Research.
Malav Parekh, a research analyst at 451 Research who contributed to the report, noted that enterprises had been on "a strict diet" for more than a year, ever since interest rate hikes were announced.
In the last three months of 2023, spending intent rose for information security from an already high level. Meanwhile, cloud infrastructure and services, data and analytics, and AI saw declines, although these areas remain some of the top spending categories.
IT companies are the biggest spenders on tech, which is not surprising, given that staying on top of the latest trends in innovation might be an existential issue for many. Public sector corporations, meanwhile, are the weakest spenders.
Spending intent has been increasing in data-heavy sectors such as financial services and software and IT services, Parekh said.
While the indicator has been gradually increasing in recent quarters, there are clear signs that corporations remain cautious, largely due to macroeconomic factors such as the trajectory of interest rates and geopolitical concerns. For instance, the fourth-quarter indicator came at the lower bound of what was expected by 451 Research analysts.
"Tech spending is looking up, but there still is some sort of fear and hesitation among corporations," Parekh said.
451 Research is a technology research group within S&P Global Market Intelligence.