Photograph by Franck V.
Technology stocks have plunged in recent months and maybe for good reason.
Goldman Sachs told its clients the firm's latest survey of 100 corporate technology buyers revealed spending plans have deteriorated to the worst level in four years.
"Our December 2018 IT Spending Survey reflects a significant downtick in IT spending sentiment among CIOs," analyst Heather Bellini wrote Tuesday. "Spending intentions weaken significantly...We see the results as potentially indicative of a more guarded stance from CIOs coming off a very strong baseline of spending in 2018, and given ongoing macro issues including cross-border trade disputes, commodity price fluctuations, and Brexit."
The Technology Select Sector SPDR Fund (XLK), a widely followed technology industry ETF, has declined about 16% since the end of September amid concerns over slowing global growth.
Goldman's IT spending index, which measures spending plans, fell to 66.5 in December from June's 80 level, its lowest reading in four years.
The results by category weren't uniform. Cloud computing spending plans were higher than previous surveys. Goldman said Microsoft Azure and Google Cloud Platform were both gaining traction over the past six months.
Companies are shifting huge sums of their technology spending there because the cloud offers better reliability, an easier path to scaling up, and greater cost-efficiencies than on-premises computing equipment.
On the flip side, budgets for legacy hardware and networking equipment were deteriorating. Nearly 40% of respondents said server spending will fall over the next year. Plans to buy storage and networking equipment also fell compared with the June survey.
Although spending intentions were at their lowest level in years, Goldman said its IT spending index remains in expansionary territory, meaning spending intentions will still increase, though at a slower pace.
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