While there may be concerns globally about slowing economies after European PMI numbers were lackluster, one analyst believes that trade concerns are not weighing on the outlook, at least for tech stocks. Nomura Instinet released its semiannual CIO survey, and although spending shrank, the outlook was fairly positive.
Chief information officer expectations for 2019 information technology (IT) budget growth fell from 9.0% to 7.9% in the early September survey. The first downtick in years does not immediately appear set to worsen. Findings were most positive for large-cap plays including Cisco, Microsoft, Alphabet and Intel. They were most negative for IBM and Hewlett Packard Enterprise.
Only 8% of respondents in the CIO survey expect trade disputes to lower budgets, 28% expect an above-seasonal close to 2019 and 2020’s spending growth expectation is 7.5% (median 5.0%). Personal computers remain most exposed to a spending decline in a downturn. Security is the top spending driver for the tenth straight survey.
Also, the public cloud houses roughly 30% to 35% of workloads and should hold 40% to 45% in 2021. The 30% to 35% figure is on trend with CIO expectations from two years ago.
Respondents said that they expect the 8% of workloads that use containers today to rise to 18% in a year and 28% in two years. About 30% of respondents use AWS/Azure containers, followed by 19% for Red Hat and 5% for Pivotal. Also, 30% of respondents already have deployed another rising trend in the enterprise—artificial intelligence (AI).
One of the major takeaways was that the results of the survey suggest the downtick in growth should be mild. The second half still may offer above seasonal growth. Again, only 8% of respondents expect trade disputes to lower budgets. Finally, respondents expect 2020 growth to be only modestly lower at 7.5%.