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In the past few years, technology companies have been driving the boom in the financial markets. The FAANG companies (Facebook, Amazon, Apple, Netflix, and Google) have seen their valuations increase by leaps and bounds. However, COVID-19 is causing a worldwide stock market collapse. It would be fair to say that the pandemic is not affecting all the sectors in the world equally. Some sectors are seeing a rapid decline in their valuations, whereas some others are even benefitting from this crisis. In this article, we will explain the impact that COVID 19 is having on the technology sector.
The technology sector can be divided into three sectors viz. hardware, software, and IT services. The impact of COVID-19 on each of these three sectors has been described below:
The big technology companies are already aware of this fact. This is the reason that they have delayed the launch of their products, such as smartphones. Companies do not have the logistics to manage the supply side even if the demand for these products does exist. The raw materials such as copper, aluminum, etc. are in short supply, and companies will not be able to get their hands on the products at least in the next quarter.
Organizations, as well as people, will buy hardware products in huge quantities. This is because they would want to develop business continuity practices, which would allow them to operate unhindered even if such a crisis were to strike again.
Private organizations such as schools and small businesses will also invest heavily in hardware products that allow fast and effective work from home.
For instance, a company called Zoom, which provides software that allows teleconferencing for up to a hundred participants, has seen the number of downloads skyrocket. As a result, Zoom has seen its shares skyrocket, even as the entire stock market is plummeting.
Zoom currently has a valuation of over $19 billion, which is more than the valuation of big airlines such as Delta Airlines and United Airlines. Unlike the hardware industry, software companies are facing fewer supply-side hurdles, which is why they are able to take advantage of this crisis.
The bottom line is that technology is one of the few sectors which is poised to gain from the COVID-19 crisis. Some companies with the sector will gain, whereas others will lose. However, the sector is a whole is going to face a positive impact because of this crisis.
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