Last year, the Fed’s seven interest rate hikes had put the tech industry under immense pressure, with the tech-heavy Nasdaq Composite entering a bear market. Software stocks struggled as the demand outlook weakened amid high inflation and the rate hikes.
However, the software industry is well-placed to benefit from the rising demand for cloud-based software solutions and rapid digitalization. Bank of America’s Rick Sherlund is bullish on the software industry’s performance this year.
He said, “2022 was a terrible year for software stocks. We’ve seen tremendous compression in valuation. The good news is that downturns are ultimately followed by upturns. So, we’ve just got a lot of crosscurrents near-term.”
The application development software market is estimated to reach $1.16 trillion by 2031, growing at a CAGR of 23.5%. According to Gartner, worldwide IT spending is expected to rise 2.4% year-over-year in 2023, with the software segment rising 9.3% from the prior-year period.
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