An abstract, closeup image of computer chips

A digital transformation is underway in the tech industry, revolutionizing business and creating a unique environment for investors. At the firm’s recent Global Consumer, Technology & Services Conference in New York, Baird sat down with a small group of institutional investors to discuss the macro environment and sector-specific trends.

If you look at digital transformation, we’ve got 10-15 very, very powerful macros that are driving tech innovation for the next decade, whether it be cloud, 5G, AI, next generation software, basically the digitization of every industry.

Ted Mortonson, Technology Desk Sector Strategist, Baird
Headshot of Ted Mortonson

The panel featured insights from Tom O’Halloran, Partner & Portfolio Manager, Lord Abbett; Nate Mahrer, Associate Director & Senior TMT Analyst, Macquarie; and Wyan Yarbrough, CFA, Investment Analyst, VP, BlackRock. Following are highlights from the discussion:

Market Backdrop

“I think tech is in a bear market,” said O’Halloran, “like a ‘73/’74 bear market, or a 2000-2 bear market at this point.” Looking toward the next bull market for the industry, he said for investors, “The key thing is readiness,” in order to be positioned to take action when the next bull market begins.


“We’ve had a ton of supply shocks in terms of Covid, China lockdowns, etc. that have prolonged the cycle, and who knows what it will look like coming out the other side,” said Mahrer. “Even though the industry has consolidated and looks fundamentally better, to think there aren’t going to be some issues coming out the other end is a little naïve, I think.”


“Software, I think, are the very best businesses of any on the planet, but the stocks are all going down,” said O’Halloran. “Ecommerce names have been just obliterated,” he continued. “We’re camped out in Visa and Mastercard, and American Express. We call that defense.”


“A lot of SaaS is driving efficiency and productivity gains, and AI can help deliver that,” said Mahrer. While some AI companies have underperformed, users of AI are compelling to investors. “The companies that are using [AI] to drive another growth engine in their business look pretty interesting.” Yarbrough concurred: “It’s a new feature more likely than it is a new product.”


Considering the potential of a recession in the coming year, Yarbrough highlighted a potential opportunity: “The thing that keeps me optimistic is what happened in March of 2020+, and [that’s] the fact that people will continue to shift toward automation, which would benefit software.”