The tech sector has been through a wild ride of a year and that looks set to continue in 2024.
The tech sector has been through a wild ride of a year and that looks set to continue in 2024.
Opinion
OPINION
As 2023 draws its last gasps the technology sector, which at times seems to exist in a dimension of its own with no or completely different rules, has shown itself to be as vulnerable to what goes on in the real world as everything else.
The inflation and highinterest rates hangover really kicked in after the bizarre pandemic purchasing party when those who could upgraded their gear and services as they desperately set themselves up to work from home.
Reconfigured global supply chains started shifting tech products again, with container rates dropping but market demand had been strangled as financing costs for distributors had gone up along with mortgage payment rises chewing up consumers’ disposable incomes.
Not that the tech sector was short on cash. Several big mergers and acquisitions, the size of the GDP of small countries took place. Microsoft completed the buy of Call of Duty developer Activision Blizzard, and infrastructure companies Broadcom and VMware amazingly got regulatory approval worldwide to grow even bigger and more dominant.
Watch that space next year, as those hundreds of billions of dollars spent have to be recouped somehow. It’s a safe bet that 2024 will bring bad news for customers. Already, Broadcom has killed off perpetual user licences for VMware customers who are now looking at subscriptions only.
Something had to give in that scenario, so chief executives put the squeeze on workers with waves of redundancies in which tens of thousands of people were let go. Big names with trillion-dollar market capitalisations like Microsoft and Amazon have jettisoned techies.
There have been local job losses too, with Xero receiving a share market fillip for culling 15 per cent of its workforce. We’ll see if the tech job market downsizing continues next year, what with artificial intelligence coming onstream, but maybe the industry “peak bodies” could dial down the volume of skills shortage media releases for the next bit of time?
If you’re comparing the huge amount of money that’s still being spent on mergers and acquisitions despite weak economic conditions with companies cutting costs by laying off workers and scratching your head, you’re not alone. Add to that, tech-adjacent businesses like WeWork finally filing for bankruptcy this year, after burning through billions of dollars, and bald patches will appear on many people’s pates as the scratching intensifies.
We can’t talk about bankruptcies without mentioning the spectacularly failed cryptocurrency exchange FTX. This year Sam Bankman-Fried, who founded FTX, was found guilty on all seven charges of fraud, to the tune of US$8 billion.
Prior to that, the other key executives of FTX had pleaded guilty to fraud, and “SBF” himself faces a second trial in March next year, while awaiting sentencing for his first case which could bring decades in prison for him.
FTX’s fraudulent failure dragged the American Silvergate and Signature banks with it, and those collapses were large. Signature Bank was the third-largest such failure in United States history.
Despite that reports in August suggested that FTX would restart cryptocurrency offerings, after bankruptcy restructuring the exchange’s token is still being traded. Mindblowing, really.
Intimately linked to Bankman-Fried is Changpeng Zhao or CZ, founder of the biggest cryptocurrency exchange in the world, Binance, which operates in New Zealand as well.
Sam Bankman-Fried, chief executive officer of collapsed cryptocurrency exchange FTX. Photo / Stefani Reynolds/Bloomberg via Getty Images
CZ pleaded guilty to US criminal charges, and was fined US$50 million in November. He had to resign as the Binance chief executive with the exchange itself copping a whopping US$4.3 billion in fines.
All is going as expected in crypto-land in other words. Amazingly enough, crypto looks set to carry on next year, and that includes the silly non-fungible token (NFT) speculation in Bored Apes and what have you, with regular scams and rug-pulls.
Next year might also tell us if artificial intelligence is a huge exuberant bubble, or The Next Big Thing that will cause major restructuring of the IT industry. Neither of those options will be painless but if the former happens, it’ll be time to grab your ankles for sure as the tech industry is totally over-invested in AI currently.
Don’t get me wrong - AI can do genuinely useful stuff like tirelessly finding valuable patterns in vast amounts of data. This is what computers are good at after all. However, AI going beyond being a tool and displacing the workers that it has learned task and process completion from could be a poisoned chalice for all of us.
Think of it as dramatically devaluing entire chains of production all the way to output, without necessarily getting better quality, just something good enough. What happens then? Next year, we’ll continue to faff around with AI and find out.
