Inflation: Is it tech-soluble?
Inflation will persist in 2022. So, will Tech stocks be hit hard? Will their capacity to raise prices without losing demand – their pricing power – protect them? Will it drive performance? At La Financière de l’Echiquier, we remain convinced of the potential of sectors intersected by Artificial Intelligence (AI) or automation, and confident in the capacity of businesses to innovate. In a world that is irreversibly going digital, demand is holding strong.
AI, robotics, and smart technology are reshaping the economy. They’re rich in solutions and can help meet global challenges. One of these challenges is the search for productivity, as labour shortages stretch all the way to China. What impact will this scarcity have on factory output, with supply chains disrupted or even stopped by material shortages, fuelling inflationary pressures?
One solution is automation, which is becoming a major asset for businesses as they move to digital. Automation and robotics will boost productivity, but they will also soften or absorb wage inflation. According to McKinsey, by 2030, 60% of work-related activities worldwide will have operations that could be at least 30% automated (800 million workers). The resulting gains in productivity will add +1.4% to the global economy each year. This is an especially big deal in a digital world where investment spending is less relevant – with the exception of renewable energy and the climate transition, which call for significant funding. While businesses are redoubling their efforts to increase staffing and hiring – sometimes at the cost of 20% wage hikes – they are also deploying strategies to increase the productivity of employees and working processes. Take the American company ZOOMINFO, whose software automates employees’ sales and marketing work. This AI platform dynamically updates customer information, predicts the best time to contact them, automates follow-up, and much more. This allows sales teams to spend more time on strategic operations. ALTERYX is also worth a look. Data engineers, whose wage inflation is massive, spend half their time cleaning and preparing data before sending it to analysis models. ALTERYX has a powerful platform that can clean these data and free up engineers’ time so they can devote themselves to higher-added-value activities that are more fulfilling.
Lastly, in the current environment where new hires are increasingly rare and employees are leaving their companies more easily, we note the rise of QUALTRICS, who uses its software to give employees a better in-company experience, improving their satisfaction but also their learning and productivity gains.
In a world where inflation is making a comeback, we think technology can be an indispensable tool for businesses. Indeed, as the economy goes digital, these businesses are becoming more competitive, optimising their costs, being more productive, and thus supporting their future growth and solidifying their leadership. For us, then, the forecast is bright for the tech sector, whose products and services continue to proliferate in our economy, and whose potential is… unlimited.
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