How The Tech Sector Drives The Economy

In the space of a few decades, tech has moved from the preserve of a small group of specialists to driving growth in the economy. Here’s why it’s more relevant than ever.

Today, the tech sector generates $1.8 trillion, some 10% of U.S. GDP, growing year on year. Considering that the sector barely existed a few decades ago, this is immense. It is one of the most desirable sectors to work in, famous for great working conditions and higher salaries. This, in turn, provides a massive boost to the economies in which they are based.

There are currently more than 11.8 million people employed in the tech and IT sector in the United States alone, and this figure is projected to grow 13% from 2016 to 2026, faster than the average for all other occupations. It is a global sector with its heart in America, which was, where the internet was born, and where the Big Five (Facebook [NASDAQ: FB], Amazon [NASDAQ: AMZN], Apple [NASDAQ: AAPL], Google [NASDAQ: GOOGL], Microsoft [NASDAQ: MSFT) were created and are based. 

Driving forces

Innovation has long been the driving force of the U.S. economy and for no sector more so than tech. This means more than simply upgrades to technology in terms of technical performance, but how American companies anticipate and capture peoples’ needs and match them with technological offerings.

This has been seen in the way that companies like Facebook have changed how we communicate, how Amazon has changed how we shop, and so on. In this sense, each of the Big Five have had and continue to have a profound impact on our lives. The strength of the American tech sector is precisely this capacity to identity and further to shape the needs of people everywhere.

Weathering the storm 

As the world sits on the verge of a possible global recession triggered by the COVID-19 pandemic,  people are turning to the digital world perhaps more than ever. This is true both in terms of getting through the day and staying in touch with loved-ones under lockdown conditions, but also in managing to continue working from home. All over the world, millions of meetings that would normally happen in person are taking place by media such as Zoom (NASDAQ: ZM), whose share price has jumped as much as 50% in the past month at its height.

In sum, it is now impossible to imagine the economy without tech, and undoubtedly this trend will only continue. Under the conditions imposed by the current COVID-19 crisis, it is a sector whose products are more in demand than ever. Production, particularly for companies providing software as a service (SaaS) is likely to be less disrupted by the crisis than other sectors, given employees’ natural capacity to work from home.

Three companies driving growth and digital innovation in the US in 2020

  1. Zoom: a company that is already helping millions worldwide keep working, who, as we have seen, have experienced growth during this challenging downturn in the markets. In the space of three months, they went from having ten to two hundred million daily active users. Given the potential of the Covid-19 pandemic to cause lasting change to our ways of working, all companies offering solutions for working remotely, project management, and collaborative tools are well worth your attention.

2. Roku Inc (NASDAQ: ROKU): Roku is a highly profitable content-streaming aggregator, posting a revenue of $1.1 billion in 2019 (up from $512.76 million in 2017). It has already established dominance over Apple TV and Amazon’s streaming service. Its unique selling point (USP) is its capacity to offer consumers a single platform to manage numerous digital subscriptions in a fragmented marketplace. Another stock currently in growth, it is likely to further benefit from the explosion in streaming fueled by social distancing measures affecting millions of Americans. In 2019 alone, nearly one in three smart TVs sold in the U.S. were Roku TVs.

3. Amazon: Amazon is the dominant player in online shopping, with an overall revenue of $280.522 billion in 2019, but what makes it a driver of growth and digital innovation is not its dominant position, but rather its appetite for expansion and innovation. Acquiring Wholefoods in 2017, Amazon signaled that it was not to be confined to the computer screen. Since then, it has made forays into publishing and film & TV production, disrupting long-established sectors. Their stock has experienced growth of more than 10% in the very volatile period from March 7th to April 7th 2020.

MyWallSt operates a full disclosure policy. MyWallSt staff currently hold long positions in companies mentioned above. Read our full disclosure policy here.