John Chambers, who has guided Cisco Systems through multiple recessions as a former CEO, said the companies’ strengths and deep pockets would give them the opportunity to take risks that would be impractical for smaller competitors. During the 2008 recession, he said Cisco allowed ailing automakers to pay for technology services with credit at a time when competitors were demanding cash. The company threatened to write off $1 billion in inventory but emerged from the recession as the dominant supplier to a healthy auto industry, he said.
“Companies break out during recessions,” said Mr Chambers.
Excelling requires ignoring the gloom of the broader market, said David Yoffie, a professor at Harvard Business School. He said previous recessions had shown that even the strongest companies were prone to profit pressures and prone to pullback. “Companies are getting pessimistic like everyone else,” he said.
The first test for the biggest companies in technology will be contamination of their peers. Amazon’s shares in electric vehicle manufacturer Rivian Automotive are down more than 65 percent, a $7.6 billion paper loss. Sales of Apple’s services are likely to be hampered by a slowdown in advertising by app developers, who rely on venture capital funding to fund their marketing, analysts say. And start-ups are examining their spending on cloud services, which is likely to slow growth for Microsoft Azure and Google Cloud, analysts and cloud executives say.
“People are trying to figure out how to spend smart,” said Sam Ramji, chief strategy officer at DataStax, a data management company.
Regulatory challenges on the horizon could also obscure the prospects of the big tech companies. The European Digital Markets Act, which is expected to come into force shortly, aims to increase the openness of technical platforms. Among other things, it could reduce the estimated $19 billion Apple is collecting from Alphabet to make Google the default search engine on iPhones, a change Bernstein says would erase as much as 3 percent of the company’s total gross profit.
But the companies are expected to challenge the law in court, potentially stalling the legislation for years. The chance of it crashing makes analysts stick to their consensus: “Big Tech is getting more powerful. And what’s being done about it? Nothing,” said Mr. Kramer of Arete Research.
