The U.S. technology services industry is flourishing in 2024, capitalising on economic stability and growth despite challenges. Strong market performance, integration of artificial intelligence, and top technology service stocks contribute to the industry’s success.
U.S. Technology Services Industry Flourishes Amid Economic Strength
The U.S. business services sector has demonstrated significant growth, leveraging strong economic fundamentals despite high interest rates and stringent monetary policies by the Federal Reserve. Over the past year, this sector has achieved double-digit returns, driven by the robustness of the technology services industry.
The technology services industry has shown steady demand, with revenues, income, and cash flows expected to return to pre-pandemic levels. This resurgence is leading to stable dividends for many industry players, contributing to the sector’s success in 2024.
The pandemic’s aftermath has accelerated the number of remote workers, prompting enterprises to seek hybrid solutions that blend on-premise and cloud infrastructure. The business software segment has particularly benefited from enhanced demand for multi-cloud-enabled solutions, transitioning from legacy systems to modern cloud-based platforms.
Key industry players have been integrating artificial intelligence (AI) and machine learning into their applications, making them more dynamic and efficient. Market.us reports that the global AI market, valued at $177 billion in 2023, is projected to reach $2.75 trillion by 2032. PricewaterhouseCoopers forecasts AI could add up to $15.7 trillion to the global economy by 2030, with $6.6 trillion from productivity gains and $9.1 trillion from consumption-side effects.
Performance-wise, the Zacks Defined Business Services sector has delivered a 16.5% return over the past year, while the Technology Services industry has surged by 43.9%. Year-to-date, these sectors have advanced by 7.3% and 18.6%, respectively. The Technology Services industry ranks in the top 28% of Zacks Ranked Industries, suggesting further market outperformance in the coming months.
Five technology services stocks identified as top picks for 2024, based on Zacks Rank #1 (Strong Buy) and recent earnings estimate revisions, include:
- AppLovin Corp. (NASDAQ:APP): Specializes in software platforms for mobile app developers, achieving an expected revenue growth of 31.7% and earnings growth of over 100% this year.
- Duolingo Inc. (NASDAQ:DUOL): Offers a mobile learning platform with an expected revenue increase of 37.8% and earnings growth exceeding 100%.
- Spotify Technology S.A. (NYSE:SPOT): Provides global audio streaming services with a projected revenue growth of 17.3% and earnings exceeding 100%.
- SPX Technologies Inc. (NYSE:SPXC): Supplies HVAC and detection equipment with anticipated revenue growth of 14.7% and earnings growth of 24.4%.
- Aptiv plc (NYSE:APTV): Focuses on the automotive sector, poised to benefit from electrification and connectivity trends, with projected revenue growth of 5.2% and earnings increas of 23.7%.
These companies are expected to continue thriving as the U.S. economy and technology services industry advance in 2024.
