As the year goes on my smile gets wider. The positive signs at the end of last year turned into measurable growth in the first quarter of 2024, as my Figure above suggests. My research process for the period complete, I want to share my findings on the spending/revenue and net profit changes and some opinions on what they mean.
The total spending on Information Technology and Communications (ITC) offerings in Q1 2024 was $1,771 billion, 3% up on Q1 2023. The total net profit taken by ITC suppliers was $294 billion – a growth of 4%. On an annual basis to the end of the quarter spending was up 3% to $7,227 billion and net profit up 16% to 1,076 billion. I expect this positive movement to continue through the other quarters, putting paid to my prediction of level spending for the year. The only sour point is that total number of employees working in customer-facing ITC suppliers fell by 2% from 21.1 to 20.7 million. partly this is because these vendors are taking broad steps forward in applying Generative AI, which is having a negative effect on their own headcount.
From an ITC offering point of view it’s a mixed picture. We’re at the mid-pint of the move of raw storage devices from massive decline to massive growth, witnessed by big differences between quarterly and annual growth; NAND and DRAM components saw the strongest growth in spending (45% and 34% respectively, although they declined annually by -13% and -6% respectively. Sales of Hard Disk Drives (HDDs) haven’t caught up with their solid state rivals yet, although – even here – their quarterly decline (-5%) was stronger than their annual one (-19%).
Of the other offerings quarterly spending on servers grew by 26%, helped by the Generative AI effect – the two strongest suppliers were Nvidia itself (119%), Supermicro (76%) and Dell (27%). Other x86 server vendors should also enjoy this boost in coming quarters, while IBM is facing the challenge of making its own (Nvida-less) Generative AI servers and solutions more compelling to end-users.
As for cloud services, it’s interesting to see spending growth slow for IaaS/PaaS (16%) and SaaS (14%) in the quarter, although (admittedly) these were both slightly higher than the annual spending growth, which was 14% and 12% respectively.
A bunch of hardware offerings saw a decline in spending in the quarter including PCs (-1%), peripherals (-4%), smart phones and smart tablets (both -6%). The annual decline in spending for all of these apart from smart phones was steeper. The worst performing offering was gaming, where spending declined by -36% in the quarter and -8% in the annual period.
The fluctuation of local currencies against the $US continues to have a significant effect on the changing spending on ITC offerings, some of which I’ve captured in my Figure above. Here I’ve made a selection to show high and low growth markets alongside the largest ones. In Russia, Nigeria and Japan users spent much more in Robles, Naira and Yen than they had the previous quarter and annual period, but when measured in current dollars (applying different rates in each quarter) the growth in their spending appears lower. In EU countries and the UK spending growth measured in current $US was slightly higher than when measured in Euros and Pounds, due to the strengthening values of these currencies against the $US.
As for the 11 strongest performing ITC suppliers – see my Figure above – Nvidia saw the strongest revenue growth in both the quarter (262%) and year ($208%), due largely to its role as the supplier of GPUs for use in Generative AI solutions. Five (Nvidia, SK Hynix, Micron, SDK and Western Digital) of the top suppliers are chip or component suppliers. Nine of the eleven experienced stronger quarterly – than annual – revenue growth – another sign of future growth during n the year. I’ve include a view of the lowest eleven suppliers in terms of revenue growth in my Figure below.
I’ll continue to track these vendors, countries and offerings on a quarterly basis and report back to you my findings in due course. While will still have a number of limiting factors such as Russia’s illegal invasion of Ukraine and Israel’s devastating reaction to the disgusting attack on its citizens by Hamas and potential disruptions caused by a number of political elections across the globe, I’m happy to say there are already strong indications of growth for most of the ITC market in the rest of the year and beyond.
Information Technology and Communications research
