Hardman & Co Insight | Tech sector outlook
In our latest Insight, written by Richard Jeans, technology analyst at Hardman & Co, we examine a challenging year for UK technology stocks. The sector has diverged from buoyant UK blue chips amid perceived threats of AI-driven disruption, with this underperformance occurring despite generally positive trading news. Notably, larger-cap software and services companies have fared significantly worse than their smaller peers. Ongoing takeovers have continued to pick off the remaining companies while the IPO market has been effectively shut, leading to a sharp contraction in supply. Since the start of the COVID-19 pandemic, ca.£38bn has been removed from the software and services sector—roughly equivalent to the market capitalisation of the companies that remain.Given the broadly positive trading backdrop, generally healthy balance sheets, supply reductions and the fact that many small-cap software and services companies are now trading near their pandemic-period lows, we believe the sector warrants closer attention.
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