The late Queen Elizabeth’s declaration of an “annus horribilis” would not be enough of a description for tech stocks’ journey in 2022. The S&P 500 index’s SPX, +1.75% information-technology sector is down more than 28.8% so far this year, on track for its worst year since 2008, while the communications-services sector — home to some of the internet’s biggest names, including Alphabet Inc. GOOGL, +2.82% GOOG, +2.88%, Meta Platforms Inc. META, +4.01% and Netflix Inc. NFLX, +5.
“All tech is not going to be the same in 2023,” said Brendan Connaughton, founder and managing partner of Catalyst Private Wealth in San Francisco. “I think it’s going to be much more of a stock picker’s market.
One sector that bears watching for an upturn is semiconductors. This year, as many companies began to have inventory issues, initially signaled by memory-chip maker Micron Technology Inc. MU, +3.11%, the semiconductor industry is poised to enter official downturn territory. Wall Street is forecasting semiconductor revenue to fall 1.65% in 2023, down from estimates of growth of 7.53% this year. That compares to 22.41% revenue growth in 2021.
“If you start to see those guys pick up in the second half of 2023, that will bode well for overall spending in the tech space,” Connaughton said. Some of that growth is expected to come from cloud-based software companies like ServiceNow Inc. NOW, +3.67% and Salesforce.com CRM, +3.17%, which have seen revenue decelerate as cloud spending slows down, but with forecasts of 22% and 11% growth respectively, these companies are helping the software sector. Cybersecurity company Fortinet Inc. FTNT, +2.82% is still forecast to see revenue growth of around 21% in 2023, but its growth has dramatically slowed too, from 36% estimated in 2022.