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Goldman Sachs managing director Kash Rangan sits down with Brian Sozzi and Madison Mills at the Goldman Sachs 2024 Communication and Technology Conference to discuss the most recent tech sell-off and the sector's overall outlook.

Rangan argues that there are three important things for software companies at this juncture: interest rates, the election, and generative AI. He notes that Goldman's economists expect the Federal Reserve will likely initiate a 25 basis-point cut at its September meeting, and will likely total between 325 and 350 basis points by the end of its easing cycle. Easing rates will bring down the cost of capital for businesses, and will serve as a "tailwind for existing customers to expand their deployments."

He notes that after the November election, there will be less uncertainty. He explains, "It's not important to nail what the new policies are going to be, but it's more important to have less uncertainty and more certainty about what those policies are." Thus, after November, companies may move forward with projects it put on the backburner during peak uncertainty.

Finally, he believes generative AI will be a long-term theme for the tech sector. "I am very bullish how it unfolds eventually in the long term. But if you're looking for proof points today, there's a scattering of proof points, but not enough to get conviction that this is going to be a thing in '25 or '26.

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This post was written by Melanie Riehl