S&P Global – Technology Credit Outlook, 2024

According to S&P Global's Technology Credit Outlook, it is predicted that IT spending will experience a rebound in 2024, with a forecasted growth rate of 8%, surpassing the global GDP growth rate and exceeding the 4% growth expected in 2023. This growth is expected to be driven by the recovery of the PC, smartphone, and server markets, which will, in turn, improve the outlook for the semiconductor industry. Additionally, software is projected to grow by approximately 10%, while IT services are expected to remain healthy. In terms of key assumptions for 2024, the semiconductor industry is anticipated to grow at a rate close to the mid-teens. After experiencing a decline of nearly 10% in 2023, the industry is poised for a strong rebound as memory fundamentals improve, and the artificial intelligence (AI) investment cycle generates robust growth for certain issuers. However, lower-rated issuers are likely to face continued pressure as borrowing costs remain elevated, potentially leading to an increase in debt restructuring and default activities. There are also key risks surrounding the baseline outlook. Supply chain diversification, driven by rising U.S.-China tensions, may lead to lower profit margins for manufacturers. Additionally, higher interest rates and business conditions are factors that issuers rated 'B-' or lower need to closely monitor. On the upside, an end to rate hikes is expected to fuel an increase in mergers and acquisitions (M&A) activity, as the removal of uncertainties is likely to stimulate deal-making after two quiet years.