Israel’s Tech sector Likely to Face Setbacks After Attacks – Investors

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Israel's Tech sector Likely to Face Setbacks After Attacks – Investors
Israel's Tech sector Likely to Face Setbacks After Attacks – Investors

Tech businesses in Israel improve security as they expect to face huge disruptions due to attacks.

Investors and analysts expect tech businesses operating in Israel to improve their security as the Israeli military shifts to a war footing that might involve a full-scale assault on the Gaza Strip.

Gaza-based Hamas gunmen killed hundreds of Israelis and kidnapped an unknown number of others, sparking a new confrontation in the region.

High-tech industries have been the fastest-expanding and most important industry in Israel for several decades, accounting for 14% of jobs and about a fifth of GDP.

Israel reacted with air strikes on Hamas targets in Gaza, killing hundreds.

“It’s a huge disruption to business as usual,” said Jack Ablin, Cresset Wealth Advisors’ chief investment officer and founding partner. In the short term, he warned, resources might be diverted if the conflict escalates, such as tech workers being called up as military reservists.

Israel has previously stated that it will activate in excess of 300,000 reservists, many of whom could be from US-based computer companies.

“We’re preparing for this to take a while,” said Noam Schwartz, the Israeli-born founder and CEO of ActiveFence, a “tech firm that specialises in online threats with headquarters in New York and Tel Aviv.”

Even though he plans to return to Israel for military duty, he said his company will continue to serve customers during the crisis. “We have enough people worldwide to make sure everyone is in check.”

Because some technology expenditure is related to the military, Quincy Krosby, chief global strategist at LPL Financial in Charlotte, North Carolina, believes there will be a “tremendous effort” to protect physical locations for corporations operating in Israel against assaults.

US technology stocks were broadly down, including bellwethers with significant operations in Israel.

Intel, Israel’s largest private employer and exporter, said in a statement that the business was “closely monitoring the situation in Israel and taking steps to safeguard and support our workers.”

The representative declined to comment on whether the issue has had an impact on chip production. On Monday, Intel’s stock slipped 0.5%.

Nvidia, the world’s leading maker of artificial intelligence and computer graphics chips, announced the cancellation of an AI summit planned for Tel Aviv next week, where its CEO Jensen Huang was scheduled to appear.

Tower Semiconductor, based in Israel, said it was continuing to serve customers with analogue and mixed-signal semiconductors, primarily for the automotive and consumer industries. Its stock on the New York Stock Exchange plummeted 4.9%.

Big Tech, including Meta Platforms, Alphabet, and Apple, did not respond to calls for comment. Microsoft did not respond to a request for comment.

In 2023, Israel’s technological sector was already slowing, compounded by internal political strife and riots. An increasing number of Israeli tech businesses have established themselves in the United States.

SPENDING ON MILITARY AND AI IS UP.

The Israeli tech industry dates back to 1974, when Intel established a presence, but the start-up scene took up in the 1990s, establishing Israel as the world’s second-largest tech center outside of Silicon Valley, with hundreds of companies and a major ecosystem.

From Intel through IBM, Apple, Microsoft, Google, and Facebook, there are now 500 global corporations working in Israel, mostly as research and development centers after purchasing Israeli start-ups.

In June, Prime Minister Benjamin Netanyahu said that Intel planned to invest $25 billion in a new factory in the southern city of Kiryat Gat, which is 42 kilometers (26 miles) from Gaza.

He termed it the largest-ever overseas investment in the nation, which is due to open in 2027, and said it will add to the country’s chip facilities and design centers.

Longer term, the tech and AI sectors, in which Israel has been a leader, might see more investment due to the industries’ close relationship with military spending, according to LPL’s Krosby.

“They will probably increase the investment in AI,” Krosby said in an interview. “When a country is caught literally off guard, the first thing they look at—aside from the obvious problems with intelligence—is what was missed within the security systems.”

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