This Week in Earnings – Q4’24

The Tech sector is seeing broad momentum entering 2025, fueled by AI-driven demand, stable software spending, and expectations for a supportive U.S. policy environment. However, not all pockets of the industry are benefiting equally — while semiconductors, cloud, and enterprise software continue to see strength, some areas, including consumer electronics and legacy IT services, remain challenged.

AI remains the dominant growth driver, particularly for semiconductors and hyperscale cloud providers. Companies highlight increasing demand for compute power and AI-driven applications, but also acknowledge the rapid evolution of AI models — exemplified by China’s DeepSeek — could reshape the global competitive landscape. Some argue that lower cost, more efficient LLMs will act as another tailwind, accelerating adoption and making AI “more ubiquitous”.

Trump 2.0 policy uncertainty, particularly tariffs, remains a hot topic on earnings calls. Executives emphasize that while the situation remains highly fluid, companies are leveraging past experiences — such as navigating tariffs during the first Trump administration — as well as lessons learned from COVID-era supply chain disruptions. Businesses underscore proactive measures, including potential pricing adjustments and efficiency improvements to help absorb any headwinds, while highlighting mitigation strategies developed during prior tariff rounds, such as the benefits of reshoring efforts.

Looking ahead, Tech executives generally remain constructive on their 2025 outlooks compared to other sectors, though they are maintaining a degree of caution given ongoing macro and geopolitical uncertainties. While AI and cloud adoption continue to drive secular growth, the pace of enterprise investment, potential trade policy shifts, and China’s evolving role in the global tech landscape remain key areas to watch.

Key Themes

• Outlook and Macro – Industry Gains Momentum with Growth Expected in 2025, Driven by AI Investment, Stable Software Demand, and Expected U.S. Policy Support; However, Global Uncertainty is Leading to Mixed Customer Trends Elsewhere
• Demand – AI and Cloud Expansion Fuel Growth, While Stabilizing IT Spending and 5G Transition Support Recovery; Consumer and Legacy Tech Businesses Remain Mixed
• Tariffs – Companies Remain Largely in Wait-and-See Mode, Avoiding Offering Prescriptive Measures to “What If” Questions; In General, Expect to Mitigate Impact through Regional Production Shifts, Pricing Strategies, and Operational Efficiencies
• CapEx – Big Tech Execs Justify Outsized CapEx Commitments Tied to AI-Infrastructure Buildout Amid Overspending Scrutiny in Wake of DeepSeek Announcements; On the Other Hand, Semis Moderate Spend and Highlight Benefits from Prior Investments 
• DeepSeek Impact – AI Model Innovation Accelerates as Cost of Inference Drops; Tech Leaders See Opportunity in Expanded AI Adoption and Application Development, While Some View China’s Advances as a Competitive Wake-Up Call