GLOBAL MACRO OUTLOOK OF 2024 Q2 — Hive Ventures
US Stock Market Stages Comeback in Q2 Led by Tech and AI Surge
A Tale of Two Quarters — Inflationary Jitters Give Way to Tech Triumph
The US stock market in Q2 2024 presented a tale of two quarters. The period began with anxieties surrounding inflation and the Federal Reserve’s response, only to witness a remarkable comeback fueled by the strength of the technology sector, particularly artificial intelligence (AI).
FIGURE | THE RETURN OF US MAJOR INDICES, H1 2024
Early Jitters: Inflation, The Fed, and Market Uncertainty
A sense of unease marked the first few weeks of 2024 Q2. Persistent inflation, reaching 3.4% in April 2024 according to the Bureau of Labor Statistics, cast a shadow on the market. The Federal Reserve’s hawkish stance on interest rates, aimed at curbing inflation, further fueled anxieties. This is reflected in the market reaction highlighting the initial sell-off in stocks and bonds. Articles like “Q2 2024 Market Outlook: Rocky Road Ahead?” on Leverage Shares echoed these concerns, emphasizing the potential impact of the Fed’s tightening policies on market performance.
However, the market displayed a remarkable ability to adapt. As the quarter progressed, investors seemed to adjust to the evolving monetary policy landscape. The Fed’s actions and future projections likely played a role in the market’s recovery.
FIGURE | MONTHLY 12-MONTH INFLATION RATE IN THE US, MAY 2020 — MAY 2024
Market Rebound and Sector Performance: A Story of Resilience
Despite the initial headwinds, the market exhibited resilience, staging a comeback in the latter half of Q2 2024. The S&P 500 ended the quarter with a modest gain of around 3.48%. A closer look at sector performance, as highlighted by a Nasdaq article in the first half of 2024, reveals a clear story: technology and AI stocks emerged as the key drivers of the recovery.
FIGURE | TECH CONTINUES TO OUTPERFORM INTO JUNE 2024
Tech Takes Center Stage: A Deep Dive into Subsectors and Driving Forces
A deeper analysis reveals the strength of specific subsectors within technology and the driving forces behind their success:
· Cloud Computing: A Booming Market with Scalability and Efficiency: The cloud computing market witnessed explosive growth, surging by a staggering 20.4% YoY in 2024(F) to reach a total market value of USD$675 billion according to Gartner. This translates to significant gains for cloud giants like Amazon Web Services (AWS) and Microsoft Azure, whose dominance is likely to continue. The scalability, cost-efficiency, and flexibility of cloud computing are driving its rapid adoption across industries. Businesses of all sizes are migrating their operations to the cloud to gain a competitive edge. A study by Flexera found that 94% of enterprises have adopted a multi-cloud strategy, highlighting the increasing reliance on cloud infrastructure.
FIGURE | AMAZON (AMZN) STOCK PRICE 1-YEAR PERFORMANCE
· Cybersecurity: A Never-ending Battle with Growing Spending: Cybersecurity concerns remain a top priority for businesses of all sizes. Global spending on cybersecurity solutions reached a record high of USD$219 billion in 2024, as reported by Cybersecurity Dive. This trend benefits cybersecurity firms like CrowdStrike (CRWD) and Palo Alto Networks (PANW), whose stock prices went up in Q2 2024. The ever-evolving threat landscape and the increasing reliance on digital infrastructure necessitate ongoing investment in cybersecurity solutions. A recent IBM report found that the average cost of a data breach reached a record high of USD$4.35 million in 2023. This underscores the importance of robust cybersecurity.
Crowdstrike software update crashes millions of Microsoft Windows Devices
A Crowdstrike software update bug caused millions of Windows devices to crash on July 19th, disrupting businesses and global travel, is estimated to cost Fortune 500 companies US$5.4 billion worldwide. Crowdstrike’s stock price has since tanked 34% since the incident, trading at $258.81 at market close on Jul 30th.
The incident also underscores the critical need for enhanced DevSecOps monitoring, even on top-tier cybersecurity software like Crowdstrike. This incident has highlighted vulnerabilities that can arise in software development practices especially in complex security environments, emphasizing the importance of continuous monitoring and proactive management to preempt and mitigate potential disruptions. Despite its reputation for robust security solutions, this incident serves as a stark reminder that even the most advanced cybersecurity platforms are not immune to failures, reinforcing the necessity for constant vigilance and improvement in DevSecOps practices.
FIGURE | CROWDSTRIKE (CRWD) STOCK PRICE 1-YEAR PERFORMANCE
FIGURE | PALO ALTO NETWORKS (PANW) STOCK PRICE 1-YEAR PERFORMANCE
· Artificial Intelligence: Powering Innovation Across Industries: AI has emerged as a transformative force across various industries. From facial recognition software used in retail settings to AI-powered chatbots providing customer service, AI is revolutionizing how businesses operate and interact with customers. According to a report by McKinsey Global Institute, AI has the potential to unlock USD$5.2 trillion in new value for the global economy by 2030. This vast potential is fueling investor interest in AI companies, with the Global X Artificial Intelligence & Robotics Thematic ETF (BOTZ) experiencing significant growth in Q2 2024. Specific areas within AI, such as natural language processing (NLP) and computer vision, are witnessing rapid advancements and attracting significant investment. Companies like NVIDIA (NVDA), a leader in AI hardware, and Alphabet (GOOGL), a pioneer in AI research through its DeepMind subsidiary, are well-positioned to benefit from this ongoing growth.
Global Tech Giants Boost AI and Software Investments in Southeast Asia
Global tech companies are significantly increasing their investments in Southeast Asia’s (SEA) AI and software sectors. This surge highlights the region’s growing importance in the tech world.
Microsoft is spearheading this movement with major investments in AI and cloud services. The company plans to spend USD$1.7 billion in Indonesia and USD$2.2 billion in Malaysia over the next four years. In addition, Microsoft aims to provide AI training for 2.5 million people across SEA by 2025 and is establishing its first regional data center in Thailand.
Amazon is also making substantial investments in SEA’s cloud infrastructure. The company announced nearly USD$9 billion to expand its cloud computing infrastructure in Singapore over the next four years, adding to its total planned investment of over USD$16.9 billion by 2028. Amazon has further committed USD$5 billion and USD$6 billion investments in Thailand and Malaysia, respectively.
Apple is expanding its presence in SEA, particularly to diversify its manufacturing base. The company is investing over USD$250 million to expand its campus in Singapore and is exploring further investments in Indonesia, Singapore, and Vietnam.
Accenture has strengthened its foothold in SEA by acquiring Jixie, a digital marketing platform based in Singapore and Indonesia. This acquisition is part of Accenture Song’s efforts to enhance its marketing transformation capabilities in the region. Accenture also recently acquired Rabbit’s Tale in Thailand, marking another significant investment.
These investments underscore SEA’s strategic importance as a hub for AI and software development, driven by local market potential and the strategic interests of global tech giants seeking a stronger presence in the region.
